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Holy Real Estate
by Betsy Schiffman, Forbes.com
October 2003 http://www.forbes.com/2002/12/06/cx_bs_1206home.html
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.
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