Church halls: be hard-boiled about these golden eggs

by
02 November 2006

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Our church hall is surplus to our needs and very run down. We are working on a deal with a developer to create housing on the site, and this would make a good contribution to the cost of repairing the church itself. What guidelines apply?

AT moments like these, many churches are so relieved that someone will come up with a golden egg to sort their financial problems that they forget that they own the goose, albeit one that seldom lays any kind of egg.

The hall and its site have a considerable capital value. Most developers will want to demolish the hall and simply use the land for commercial or residential property. They usually start by tut-tutting over the cost of demolition. It is most important that you ensure that you are being paid a good price for your golden egg, the one-off payment that your hall might produce.

The best way to do this is to get the advice of both national and local commercial property surveyors. In today’s property markets, the values are volatile, and any individual or company may get it wrong. I have more than once found excellent pro bono advice from professional surveyors through Business in the Community, which is one of the Prince’s trusts.

Also, as you have been approached by a developer, you can be pretty sure it will be trying not to offer you the top value. It is worth putting the sale on the open market. My own church received bids that varied from £0.8 to £1.6 million on the open market.

But before taking action, consider whether in taking up an offer to purchase the hall and site, you are in fact disposing of an asset that would earn you more if you continued to own it. Have you got a goose, not just an egg?

Can the value of the hall be turned, in some way, into a means of endowing the church with income in the future? You could sell the hall and invest the money, to produce annual interest or income. Over 20 years, would this produce enough income to cover repairs and alterations to the church? At the end of the time, you would still have an appreciating asset.

This compares favourably with the action of selling the hall and disposing of the capital in one big spend, leaving you with no asset and no income.

Alternatively, if you are located in an area where there is high demand for a community hall, the highest return on your asset could be to repair the hall to modern standards and set up an active letting programme.

A projected schedule of use, realistic letting rates, and a good cash-flow projection will tell you whether this is a worthy target. A simple business plan would address the issues of maintaining the hall at its optimum level in order to sustain the income level.

So, it’s a question of assessing several potential ways forward. Whichever you choose, it is better to have done considerable investigation beforehand

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