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Like many churches, the buildings of Emerson Unitarian Universalist Church in Houston were sorely underutilized during the week. So when the church built a new, 23,000 sq. ft. educational building in 2004, to accommodate its own growth, it aggressively marketed rental availability to both charitable and for-profit organizations. The efforts yielded a lot of activity but only modest revenue from a small non-profit pre-school and occasional community groups.
In early 2006, the church went back to the drawing board. The building use committee, under Laura Emerson and Jerry Wendelin, decided that instead of marketing broadly, it would identify and target ideal tenant candidates.
The criteria were:
- Facilities to be used as they are.
- Higher charge for nighttime rentals to pay for evening staff, so probably a for-profit enterprise.
- Long term, frequent use (daily or weekly).
- Weekday and weeknight usage.
- Synergies of values.
- Adults, rather than additional children.
- Positive and effective marketing exposure in the community.
- Possibility of new church members resulting from the tenancy.
The committee decided that an adult education program would be ideal and contacted Leisure Learning Unlimited (LLU), a well known and regarded, for-profit company that offers non-credit courses to adults in Houston. Timing was serendipitous, since LLU wanted to wrap up its current lease. On the other hand, this tenant appeared to be one of those "be careful what you wish for" lessons: it would require far more rooms, hours, and people (12 rooms for 100 people on Monday-Thursday nights from 5-10 p.m., with fewer rooms on Friday night and Saturday day) than the church had originally contemplated, but would also generate greater revenue, exposure, and name recognition than previously conceived. In other words, this tenant appeared to fit all nine of the church's criteria.
The complex set of negotiations (both within the church and with the tenant) over four months resulted in a $100,000+/year rental for a two-year term, with renewal options, unanimously supported by the congregation and staff. Overall, the process was a smooth one, which we regard to be the result of several judicious steps.
- The project leaders promised both rapid response to the tenant and time consuming coordination within the congregation. Jerry focused on financials; Laura on communicating with the tenant and the congregation.
- Early informed input from the personnel committee, building and grounds, and members who were attorneys, insurance agents, and commercial realtors validated preliminary concepts and assessed such aspects as costs for additional janitorial services, increased water usage, trash pick-up, and maintenance; the impact on our 501C3 status, mortgage, and insurance; and comparable commercial rental rates and availability.
- Early presentation to the board covered the preliminary research above, identified potential positives and negatives, solicited approval to proceed with negotiations, and ascertained any parameters/deal breakers.
- Frequent communication by several methods informed the congregation. In addition to the newsletter, Jerry and Laura continually updated documents on the Intranet (a member-access section of the website), emailed all committee chairs to invite consideration of issues pertinent to their interests and activities, and lead an adult education session on the potential rental.
- Deal terms were negotiated before the contract was written. The leaders met several times with the co-presidents of the school and their realtor to develop a terms sheet. Email and phone conversations were frequent and fluid. Lawyers and contract language came into the picture only after all components of the transaction had been agreed to by both sides.
- Congregational vote: Since the rental fee would top 10 percent of the church budget, the board solicited a congregational vote for or against the contract. Because of all the previous disclosures and broad member involvement, attendance was high, questions were few, and the vote was unanimous.
Emerson Church knows that a tenant of this size will change the feel of our campus from a very quiet place on weekdays to something more analogous to a bustling community center. We are even negotiating with caterers to offer cold meals in the evenings.
Note: Laura Emerson says the agreement won't affect the church's non-profit status since it is not sharing in a tenant's profits and because the contract is a license agreement rather than a lease. Congregations considering agreements with for-profit firms should always check first with a real estate lawyer, she notes.