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Text File | 2003-10-06 | 6KB | 96 lines

Forbes.com: Holy Real Estate

        Holy Real Estate
      Betsy Schiffman




      If the Vatican allows the Archdiocese of Boston to file for bankruptcy in
      connection with the lawsuits it faces over sex abuse scandals, one thing
      is certain: Its vast real estate holdings will be used to make the
      settlement.

      Since its early days, the Christian church has been one of the largest
      landowners in the world. This property traditionally includes not just
      churches and related structures, such as convents, bishops' palaces and
      schools, but also non-related structures and real estate.

      It is unlikely that the Boston Archdiocese would literally go broke in
      connection with the $100 million sex abuse settlement. According to a
      report in The Boston Herald last August, it has about $160 million worth
      of income-producing commercial real estate and total property worth
      between $1.3 billion and $1.4 billion. As of 2001 the diocese boasted
      2.069 million members. According to the Center for Applied Research in the
      Apostle (a national Catholic research center), each household puts an
      average $438 every year into the collection plate, which could generate
      hundreds of millions a year in total donations.

      The threat of a bankruptcy filing could easily be a tactic to force
      lawyers for the accusers to accept a smaller settlement. In a similar
      case, the Archdiocese of Dallas, for example, managed to reduce a $100
      million-plus settlement to $31 million after threatening to file for
      bankruptcy.

      Given the huge influx of Catholics from Ireland and Italy that began in
      the 19th century, Boston is one of the biggest--and most
      land-rich--archdioceses in the U.S. However, because religious
      institutions are not compelled by law to divulge their investments or
      income, it is difficult for church outsiders to know with a great degree
      of accuracy the details of the church's finances.

      Similar to charities and most nonprofit organizations, churches are
      tax-exempt, which means that unlike other residential landowners, they are
      not required to pay property taxes on their many mansions, retreats or
      land parcels. That doesn't apply, however, to commercial property not used
      for church purposes, nor does it apply to income that may be generated by
      commercial property (unless that income is used for church purposes, it
      gets taxed).

      If the Boston Archdiocese is forced to settle, it seems likely that in any
      settlement the commercial property will help pay the costs. Those
      responsible for guiding the diocese's finances may be less likely to
      liquidate its real estate than to refinance or even issue mortgage-backed
      securities to pay its bills. Given the church's ties to local communities,
      and the recent scandals notwithstanding, it is likely that many local
      lenders will be able to provide the church the money it needs on favorable
      terms.

      If the Vatican consents, the Boston Archdiocese would become the first
      American Roman Catholic diocese to file for bankruptcy. However, it is
      hardly alone in its cash crunch. Dioceses across the country, all of which
      may be land-rich and cash-poor, are counting pennies in order to pay sex
      abuse settlements.

      Even dioceses that aren't in as much legal and financial trouble are
      sitting on large piles of real estate. The Archdiocese of Miami, for
      example, owns the titles to more than 100 pieces of property and has
      established several nonprofit real estate companies to manage the
      properties. Mary Ross Agosta, a spokeswoman for the Archdiocese of Miami,
      tells this anecdote: "In 1958, when the Archdiocese of Miami was first
      created, the Bishop [Coleman F. Carroll] would literally get into a small
      plane, fly around the state and say, 'We need to buy land there and
      there,' depending on where he felt the population would grow." (Agosta
      adds, however, that many of those properties are schools, nursing homes
      and so forth.)

      Similarly, the Archdiocese of Providence in Rhode Island reportedly
      operates more than 220 corporate subsidiaries and $44 million worth of
      real estate, including the Aldrich Mansion, where the Brad Pitt movie Meet
      Joe Black was filmed. The Aldrich Mansion, built in 1896, sits on 75 acres
      on Narragansett Bay and was the setting for Abby Aldrich's 1901 wedding to
      John D. Rockefeller Jr.

      In May, Cardinal Francis George of the Archdiocese of Chicago publicly
      said he might consider selling his mansion, a luxurious brick estate
      located in the upscale Gold Coast neighborhood, in order to raise funds to
      help pay for sex abuse lawsuits. The well-preserved property, built in
      1885, is said to be worth well over $10 million, and it includes large
      landscaped gardens, 19 chimneys and a coach house, and has two entry
      facades. An archdiocese spokesman says the cardinal was just expressing
      his wish for a simple life and was not serious about actually selling the
      property.

      In Boston it's not known whether Cardinal Bernard H. Law will be putting
      his mansion on the market. If the archdiocese declares bankruptcy, the
      property's fate will lie in the judge's hands.