Megachurch Crystal Cathedral Ministries, founded by Robert H. Schuller, is selling its church and 40-acre campus to a real estate developer in Orange County for $46 million, to repay hundreds of creditors.
The property is being purchased by Greenlaw Partners of Newport Beach. The ministry can still lease the cathedral and core portions of the property for $212,000 monthly, the LA Times said.
Crystal Cathedral also has a 15-year guarantee of exclusive leasing rights in accordance with the Chapter 11 exit plan. The ministry wants to continue to broadcast Hour of Power, and other leased properties will be used for church administration, the LA Times reported.
Most of the $46 million paid by Greenlaw will go to some of Crystal Cathedral’s 550 creditors, the Orange County Register said.
Buy-back option
Under the agreement, the Schullers have a buy-back option within the next four years for the cathedral, most of the buildings and parking lots at $30 million, the Orange County Register reported.
Whether or not they can do that remains to be seen. In the last three years, out of total revenues of $70.8 million, the Cathedral lost $16.8 million, Orange County Register said. From January-April 2011, the church had a net loss of $1.4 million, the LA Times said.
Construction of apartments
What may be pivotal for the Schullers is the fact that Greenlaw has the right to construct apartments on areas that are now low-slung buildings, lawns and parking lots near the corner of Dawn Avenue and Lewis Street, Orange County Register said.
Greenlaw plans to build hundreds of apartments, and each one would knock off $20,000 from the $30 million that the ministry would have to pay to recover its cathedral and main buildings. This means some 400 apartments would slash off $8 million from its repurchase price, Orange County Register said.
Creditor approval required
The agreement requires approval by the Crystal Cathedral’s creditors, which number about 550. However, most of them do not qualify as eligible for full repayment, the LA Times said.
There are six categories of creditors who qualify payment from the proceeds of the sale. The first priority will be county tax authorities, followed by Farmers & Merchants Bank, which has a $36 million mortgage on Crystal Cathedral, LA Times reported.
The properties under mortgage are two campus buildings ( the Welcoming Center and the Family Life Center), a parking lot expansion, neighboring properties they acquired and refurbishments, the Orange County Register said.
The church owes $7.5 million to unsecured creditors including vendors who participated in Crystal Cathedral’s two major annual pageants—Glory of Christmas and Glory of Easter. Most vendor debt will be paid through sale proceeds, and the remainder will be repaid within the next 42 months, according to Orange County Register.
A statement filed by creditors to the U.S. Bankruptcy Court said that if Crystal Cathedral were not protected by the rules of bankruptcy, it would have “burned through $2 million in cash in the past six months,” Orange County Register said.
Condominium
Crystal Cathedral will also sell a Laguna Beach condominium valued at $999,000, the LA Times said. It may also lose its Family Life Center on Chapman Avenue, because its leasing rights are only for two years, and if Greenlaw finds new tenants, it has the right to terminate the lease, Orange County Register reported.
Reorganized church leadership
There will also be an internal reorganization of church leadership and control, with some financial power turned over to an independent board. The elder Schuller and Arvella, his wife, will sit on the board, but it will be controlled by outsiders who will control the budget and appoint a chief financial officer, Orange County Register said.
Under the bankruptcy plan, the chief financial officer will have an annual salary of $300,000, and he will be charged with revitalizing the church’s earnings which, in the last six months up to April 30, decreased by $4.6 million compared to the same period the year before, the LA Times said.
The plan will retain Sheila Schuller Coleman, daughter of Robert H. Schuller, as CEO, but her salary annually will be $69,525, the LA Times said. It will continue to hold services, conduct outreaches and broadcast Hour of Power weekly.
Filed for bankruptcy
Crystal Cathedral filed for bankruptcy on Oct. 18. It had by then sold several assets, downsized its staff and cut its air time in half. Its present congregation is now less than 5,000, Orange County Register said.
Robert H. Schuller stepped down from Crystal Cathedral in 2006, with the intention of turning over to his son, Rev. Robert A. Schuller. However, things went amiss and by 2008 the daughters of the founder and their husbands took over the church, LA Times said.
A financial statement showed that Crystal Cathedral lost $6.4 million in 2006, followed by $7 million lost in 2007, then $11.5 million lost in 2008 and $8.6 million in 2009 (with a 24 percent fall in donations that year). In 2010 it had a surplus of $141,000, but filed for bankruptcy in October with over $50 million owed to creditors, Orange County Register said.
In a statement, Schuller Coleman said, “We are pleased that we are able to honor the debt that we have incurred and to honor the creditors who are due their payment. We are thankful to the vendors for their patience and we are so sorry for any pain that they have incurred. To pay them back 100% has always been a top priority and we are grateful to God for providing the resources to be able to do just that,” LA Times reported.
