Less than 30 minutes from Disney World, Celebration of Praise Church of God has 1,200 members and a 47-acre campus. The Clermont, Florida, church boasts an Olympic-size swimming pool, a spa, a gym, and the county's largest auditorium. It also has a $7 million "balloon" payment due on its mortgage. All the church lacks is the funds to pay it.
It looks like Celebration's story will have a happy ending of sorts—it's currently selling its property to the city for $6.3 million, and will be able to rent the property for Sunday and Wednesday meetings.
But things haven't been so good for nearby Lakeland's Without Walls International, once the fastest-growing church (and among the 10 largest churches) in the country. The Evangelical Christian Credit Union (ECCU) foreclosed on the church in 2008 over a $13.9 million loan default. That case has been in the courts ever since, with claims, counterclaims, and the church founded by Randy and Paula White sitting dormant.
The 5-year-long dispute and the empty 9,600-seat sanctuary symbolize the state of church-building finances during that time period.
Hundreds of congregations have filed for bankruptcy or defaulted on loans. University of Illinois law professor Pamela Foohey, who tracks church bankruptcies, says more than 500 congregations filed Chapter 11 between 2006 and 2011—and the pace hasn't slowed since. About 90 congregations filed for bankruptcy in 2012, even as the overall rate of bankruptcy filings declined 13.4 percent.
Meanwhile, the church bond market, once a refuge for cautious investors, is now a black hole, says Rusty Leonard, CEO of Stewardship Partners, a Christian investment management firm.
Before the 2008 economic crash, church bonds had strong investment appeal due to a decades-long safety record. Now, "the market has disappeared," said Leonard. "The options for a new church trying to build a building are significantly reduced. We'll see fewer buildings."
In fact, Capstone Church Bond Fund—a mutual fund that invests almost entirely in church bonds—closed to new share sales earlier this year, saying that it doubts it can grow its assets or generate cash reserves in the current climate for church bonds. Several churches the fund invested in embarked on capital campaigns at the high point in their membership, the fund told shareholders in 2012. And even those churches that want to sell their properties to pay off debts have been unable to do so.
Scott Rolfs, managing director of the religion finance division at Ziegler Investment Group, agrees that it's been a hard several years. But he thinks the outlook has improved since early 2013.
"The church bond market is healthier now," he said. "Our requests for new construction loans are up 50 percent this year over last year. It's meaningful growth"
Similarly, ECCU spokesman Jac La Tour said the credit union has ended its two-year hiatus on new loans. In fact, for the first half of 2013, the ECCU ranked second among all credit unions in the country for the amount it lent in business loans, according to Thomson Reuters Bank Insight.
The ECCU says its foreclosures declined 30 percent between 2011 and 2012. Although it initiated a dozen foreclosures in 2013, by August 31 only three remained active—a tenth of the foreclosures it was dealing with at the peak of the recession.
"The trend is going opposite of doom and gloom," La Tour said. "One of the metrics is capital. Our net worth went to $91.9 million at the end of August, compared to $88.6 million at the end of 2012."
John Walling, president of the Christian Community Credit Union, says delinquencies are likewise down at his company. He doesn't expect to deal with any foreclosures or defaults this year. His company's assets have increased from $473 million to $569 million since 2008. Its $100 million in 2012 loans were 35 percent higher than for 2008.
"Nine out of ten churches owe nothing," Walling says. "I go to a church that has no debt and $1 million in reserves. There are a lot of churches like that."
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