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Adaptive reuse of sacred buildings and schools

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					                       Adaptive Reuse Of Saints Peter and
                             Paul Catholic Church
                            into Residential Condos
                              South Boston, MASS

                                    By Robert Simons



Introduction

       The former Saints Peter and Paul church and adjoining rectory at 45-55 West

Broadway in Boston, Massachusetts was a Catholic church in the predominantly Irish

section of South Boston, and was built in 1844. The Catholic Diocese of Boston divested

itself of the 35,600 SF property, with 28,000 SF built space, selling it “as is” to West

Broadway LLC, headed by Developer James McFarland, in 2001. The McFarland firm

selectively gutted the 60 foot high building, and redeveloped the former Catholic Church

into six stories of upper-end residential condos. The smaller rectory was kept mostly

intact, and was developed first. The end project included 44 units, with 8 in the adjacent

rectory, 36 in former church building itself. The market at that time of redevelopment in

2002 to early 2004 was growing and firm, with prices for the average 1,100 SF units

ranged between $230,000 to $790,000 ($285 to $415/SF). 25% of the units were set

aside as affordable. Two separate outside realtors handled the transactions. The project

absorption averaged about 3 units per month, and the rate of project rate return was about

5% on overall development revenues of $11.7 million. Features of the case included

maximizing space in a large Church, limited issues with neighbors, constructing a new

multi-story building inside an existing statuesque and dignified structure, retaining as

much architectural detail as possible as they worked their way up through the building,


                                              1
hitting the market window, and winning a profit by using a vertically integrated

management structure.



Site history

       Date built 1844, the Saints Peter and Paul Catholic Church was for decades a

mainstay in the religious life of Irish Catholic South Boston. The facility included a

church, rectory and small garage on 0.82 acres near I-93 and I-95, on a main commercial

street just south of downtown Boston, a stone’s throw from the Broadway Red Line T

subway station. At the time of redevelopment, the building was surrounded on all sides

with non-residential uses, including retail and service uses. The project has been catalytic,

however, and now two adjacent multifamily residential projects with over 100 units are

under construction.

       The gray granite main church building built in 1844 was 17,800 SF with a full

basement and worship space on the 60 foot high first floor plus the organ and choir space.

The rectory was 12,000 building square feet (SF) on five residential floors. There was

also a small service garage. Distinctive church features included stained glass windows,

a bell tower steeple, and 3 foot thick grey granite walls, and vintage handcrafted

stonework over the Broadway entryway. The red brick rectory had nice woodwork inside,

and was in very good condition, add Years of major remodeling/additions and other data

from (see offering brochure) ,

       The building had been a Catholic church from 1844 to 1995. The rectory was

always occupied with church personnel. The church building been carefully closed, but

sat empty for 5 years between 1995 and 2000. The Boston Catholic Diocese sold



                                             2
building in an open bid format, but before the binge of church closures and sales which

occurred in Boston a few years later.



              Map of area, city, neighborhood insert. 2-3 pages plus map.



Market Area Demographics at time of redevelopment

         According to the 2000 U.S. Census, Boston MSA had a total population of

5,819,101 making it the 11th largest MSA in the nation. The Charlotte Chamber website

estimated about 0.8% increase in population in the MSA from the year 2000 to 2006. The

St. Peter and Paul Church is located predominantly white and historically Irish South

Boston, in a census tract where 43% of the population is in the 22-39 age group and 17%

of the residents are 60 years and over. The census tract is located in City of

Boston/Suffolk County, which is the 3rd largest in the state of Massachusetts with a

population of 0.6 million according to the 2000 Census (US Department of Commerce,

Bureau of the Census 2000). By 2005, the population of the county was up to 676,299

(www.citydata.com)


         The tract-median household income in 1999 was $37,188, lower than the County

($39,355) and much lower than that of the MSA ($52,792). The tract population was

predominantly White (95%) with rest of the people being African American (1.0%) and

others Asian (3.0%) in the year 2000 (Source: www.census.gov). The racial mix in the

county in 2005 (according to “City Data) was as follows: African-American 22%; White

68% (of this Hispanic whites comprised 16%) and people of Asian and other races was

10.0%.

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       About 19% of the people of age above 25yrs, hold a Bachelor’s degree or higher,

which is about the same for the County (19%) as well as the MSA (20%). About 26% of

the above 25 yrs age group are high school graduates, being slightly less than the

averages of the County (27%) and the MSA (28%). The tract has a low unemployment

rate of 4.0%, same as the County (4.0%) but slightly higher than that of the MSA (3.0%)

(Source: US Census 2000).


       In the year 2000, there were 963 households in the census tract, of which 43 %

were one person households. That figure is higher than for the Suffolk County (36.2%)

and the Boston MSA (27.2%). The residents’ median age is 31.7 years. There are

approximately 295 schools, both public and private, in or near the Suffolk County and

nearly 164 public libraries (Source: www.citydata.com).

       The multifamily housing market in the County (including condos and apartments)

is dominated by structures with 20 or more units. They total to about 60,574. Three/four

unit structures (73,731) are also well represented. The median selling price of a condo in

December 2007 was $270,000 which remained unchanged from December 2006 and the

median selling price in May 2008 for single-family homes fell 9.2% to $322,500,

compared with $355,000 in May 2007 (Source: www.boston.com).

       In general, market timing was good. All property markets were stunned by the

events of 9/11, about the time that the deal was coming together. The condo market

started to heat back up in late 2002, was fine through the project’s marketing window in

2004, and started softening up in 2005 and 2006.



Redevelopment process

                                            4
       The controlling entity for disposal of the Church-Rectory complex was the

Catholic Diocese of Boston. They put up the buildings for a packaged competitive bid in

2001. James McFarland was the successful bidder. McFarland, along with and sons

Bernard and John, became the developer/owner, and builder of the project.

       James was an Irish immigrant, arrived in Boston as a young adult. He opened a

property development firm in the late 1960s, and started buying and rehabbing houses

and doing general contracting for Boston Housing Authority and the Boston

Redevelopment Authority (BRA), and generally doing structural repairs to housing.

McFarland also had a redevelopment business. Prior to this project the McFarland Family

Firm had done about 50 separate housing-related development and redevelopment

projects, including one church rehab, but not into residences (James McFarland 2008).

This project was their first venture into rehabbing a church into housing. They were to

wear several hats: developer, owner and builder: this was a vertically integrated project.



Getting the property. With respect to property acquisition, McFarland had time on his

hands between jobs in early 2001 when the RFP to acquire the church “as is” came out.

This meant he had time to develop a thoughtful and comprehensive proposal, which was

very time-consuming. About 20 firms submitted bids to the Boston Catholic Diocese to

get buildings. McFarland won the bid competitively and straight up, partly because of his

experience, but also because of the 25% affordable housing units he was willing to set

aside. The price ($2.4 million), having housing as the end use, promising no demolition

of buildings, and having financing lined up as part of bid package were also keys to

winning the bid.



                                             5
       His construction lender was Andover Bank, where he had a successful 10 year

relationship, and his approach was to minimize risk in cost over runs, along with a credit

history that resembled a Swiss clock. Some presale agreements were agreed to.

McFarland had market comparables.

       McFarland selected the Architect: Wendell Phillips Architects, who had

substantial restoration experience. The architect prepared persuasive several renderings

for the proposed project, which were helpful later in public meetings.

       The plan was to redevelop the buildings into for-sale housing. The 1st floor and

basement were generally combined into 12 two story duplex units, averaging @1200 SF

average. Floors 2 and 3 had 9 and 8 units each, respectively. These were flats, averaging

@700 SF. The affordable units were among these two groups of flats and duplexes. Floor

4, the penthouse level, had seven units, all duplexes. Their average size was @1,800 SF.

The biggest one was 2000 SF. Many had excellent church roof features, such as structural

arches and painted ceilings. They also had little pocket balconies with views of the City.



Process . Once the bid was won, the developer had business risk because the building

was owned outright, without being able to resort to the usual property option approach.

The public agency spearheading the redevelopment was the Boston Redevelopment

Authority (BRA). The BRA process includes public vetting and BRA rezoning, design

review and plan approval first, followed by a then a trip to the zoning board. The project

was vastly simplified with no city money, no tax credits, and only an advisory role for the

Historic property commission.




                                             6
       James McFarland said that “the hardest and riskiest part of this deal was buying

the buildings without having planning approval or building permits”. The project

required rezoning: the area is generally zoned industry, and had to be rezoned to

residential multifamily.

       The BRA process required public input. The architect prepared renderings and

floor plans, and they went with the developers and BRA to 3 neighborhood public

meetings over 3 months. Over these meetings, there were no substantial changes to their

original proposal. Because this was among the very first churches the Diocese sold in

Boston, it was somewhat of a novelty. Also, the fact that the Diocese had boarded up the

church building windows after extracting most stained glass windows gave the project the

benefit of appearing to “unblight” the neighborhood.

       Community reaction to the project was generally positive. Due in part to the lack

of any residential property abutters, no opposition emerged, and thus the project was an

INBY (in nobody’s back yard). The sparsely attended meetings generated only a dozen

folks, and few local residents.

       The public process was reasonably quick and smooth: only one delay glitch and 8

months overall. After the public meetings, BRA rezoning and design review went fine.

Because the buildings were not in a historic district, not on the historic register, and not

asking for historic preservation tax credits, the Boston Historical Commission was

involved as a non-binding advisory body. Their input was still required as part of the

BRA review, but “best efforts” was sufficient: Cutting utility dormers and pocket deck

(balconies) for example, and an ADA handicap access ramp were minor issues. The BRA

approved, and the Historic Commission went along.



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       The next and the last step before pulling permits was the Boston Zoning Board.

The case was heard, but the Boston Zoning Appeals tabled it initially. One city councilor

objected, and wanted more consideration of the parking ratio (one on site surface space

per unit). Another reading was scheduled for a month later. McFarland’s attorney did

some lobbying, mostly along the lines of pointing out the opportunity lost of having the

building remain empty, desolate boarded up and abandoned. The next zoning board vote

came back with unanimous approval of preliminary plans. It then required about 6 more

months for detailed plan approval from the BRA. The developer pulled permits just after

Christmas of 2001, and started construction on January 2, 2002 (James McFarland 2008).



Construction

       As set forth in the winning proposal to the Diocese, the guiding concept was to

retain the keep the outside of the two buildings intact. This was accomplished except for

taking out the little service garage, and adding several small utility dormers, and some

cut-in balconies for the penthouse units. Some windows also had to be added for light

(more on this later).

       The rectory building went first and was straightforward: it was kept largely intact.

McFarland demolished and relocated several interior partition (non-load bearing) walls,

to create the legal and market-ready entrances to the units, and meet building code. The

Rectory had been set up as one residence, so had be reoriented toward 8 unit

configuration.

       Redeveloping the church was next. Prior to selling property the Diocese had

religiously decommissioned the buildings, a but left about ten smaller and more ordinary



                                             8
stained glass window, mostly little arches. The empty windows were boarded up. These

features were retained. The church pews and organ were sold off at minimal prices or

disposed of.

       The main construction challenge was cutting in six 25 foot high windows into

south (back) side of the church, to add light. The church exterior wall comprised of

granite stone 3 feet thick. It took 3 contractors before one could figure out how to do the

job right (Bernard McFarland 2008).

       The church basement was a generous height of ten feet to start with. McFarland

added footings for new load bearing walls and laid in plumbing stacks. A new basement

floor had drain lines set in. The church was 60 feet high inside, and there was an existing

basement and first floor level. This meant adding 4 new stories to the project, all built

inside the church existing structure. This was accomplished, efficiently, with the focus

being functionality. The front door entryway was done in a similar vein, with little

inking of the structure’s past grandeur. A bell and clock tower were preserved, but not

restored. It will always be 12:15 at the top of 45 West Broadway. Gutting the structure

was incremental: build up, then gut. As Bernard McFarland said “we were gutting the

church building from day one until we were done”.

       The main challenge and value-added opportunity occurred at the top of the

building. The McFarland Team was able to save columns, upper archways, some stained

glass, and crown moldings in the premium upstairs units. These units also have cutout

balconies with sweet views of the city skyline.




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       The project was completed in early 2004, after a construction period of 27 months.

Total construction costs totaled $7.1 million, not counting marketing sales expense or

acquision cost.



       Insert Site development layout rendering or sketch map and 2-3 photos.




Project financing

       The developer acquired the project with $1 million of his own funds, plus a

private line of credit secured with other projects. The balance of the development funds

came from a construction loan from Andover bank. No historic credits were used, despite

the fact that the building could have been made eligible.

       Michael Ecker was a senior loan officer at Andover Bank at the time the deal was

struck in 2001. The construction lender had known James McFarland since about 1990,

and they had a highly satisfactory professional relationship. It was known that the

McFarland team had done lots of housing rehab projects in Boston’s South End, and that

the builder had the skill set and reputation as a low-cost builder. The banker said “if I had

to rank McFarland on a scale of 1-10, he would be a 12”. When McFarland was putting

together the bid package, the lender toured both buildings. The rectory seemed an easy

play, but the Church was overwhelming, with its big empty space. A vision was needed.

The need to cut through the 3 foot granite wall for windows also seemed daunting.

       In terms of business risk, the lender was confident McFarland would bring in the

rehab cost numbers low, and that the units could compete well based on that. The lender



                                             10
also saw considerable upside in the premium penthouse units, and was comforted. The

market risk was not so clear. Boston’s Big Dig was going on. However, the project’s

proximity to the city, highways, and Subway “T” station was persuasive. McFarland also

had done his homework with some appraiser comps, showing market demand at about

$300+ per square foot. The bank wanted no input into project design, and stayed by the

numbers.

       In terms of project phasing, the lender and builder both agreed that the easier

Rectory project should go first. The bank would not advance funds to start the Church

building itself until 75% of the rectory inventory (6 units) were under a purchase and sale

agreement, accompanied by a 5% deposit. McFarland was free to start redeveloping the

church with his own money, if he chose. With respect to loan payback, the bank’s release

fee was based on about 85% of sales price, payable on each sale (Ecker 2008). The

interest rate varied between 9% and 6%, averaging 7%. Total financing costs were

$800,000, or 7.5% of project costs.



Marketing and absorption

       The developer initially determined that the project could not support apartments:

market rents were too low. Therefore, he went the residential condo route. As part of the

bid process, an appraiser provided outside sales comps, showing support at about $300-

$350 per square foot.

       Two real estate brokerage firms handled marketing of the project. Gibson Domain

Domain (now Sotheby’s) was the firm that marketed the bulk of the market rate units.

Theresa O’Neill sold the 11 affordable units. Both arrangements were exclusive



                                            11
representation, with a 5% commission: thus there was no developer overhead. All sales

occurred as presales during construction. Marketing/ sales commission costs were 5% of

the $11.7 million project revenues, or $585,000.

         Unit absorption was brisk: they sold all units in 18 months, most in the last 9

months. Sales amounts were between $225,000 and $725,000 , with values at $285-415

SF. The buyer profile: 10% young families with small kids, 45% Yuppies couples and

45% Yuppie singles. Religion was not a factor at all. The location and stone building

was the main feature. The majority of buyers came from outside the Boston Metro area.

         Project condo fees now average $350 month, exclusive of property taxes. This

includes landscaping, cleaning public areas, all heating and cooling public electric,

maintaining parking lot, and replacement reserve. There is a master meter for gas (for

heat).


Financial outcomes: Sources and Uses of Funds, and Developer profit

         With respect to uses of funds, total property development costs were $10.6

million, excluding sales expense of $585,000. Property acquisition costs were $2.4

million (23% of project cost), or about $83 per the existing 29,000 building square feet,

but only $46 per final building square footage of 52,000SF. Site prep, including a bit of

asbestos remediation, demolition, parking landscaping, etc, was $115,000, or 1% of

project cost. Gutting the building cost $300,000, or 3% of project cost. Construction hard

costs (excluding acquisition cost) totaled $7.1 million (67% of project costs), or $137 per

building square foot. Soft costs including legal, planning, property appraisal, and

architectural fees were $1.1 million, or 10% of project cost. All in development costs,




                                              12
excluding marketing, were $204 per building square foot. Including marketing, gross per

square foot costs were $215 per building SF.

       The project cleared $515,000 in net profit, a project rate of return of 5%. The

developer also got builder profit on hard costs, and kept two units for investment

purposes. Overall, this deal was excellent for all involved.



Lessons learned

The following lessons can be learned from this successful project.



      Neighborhood approval was not problematic. No residential abutters (INBY)

       meant easy public approval. In the medium run, the Church and rectory rehab was

       a positive catalytic project. The area went from no residential abutters to a

       considerable amount of residential abutters. This is a good public outcome.



      No historic designation meant less red tape, quicker public approvals, fewer

       hassles with regulators, and a quicker entry into the market. The project was

       timed right, and hit the market window.



      Cutting in 3 foot deep windows through solid rock for light was a challenge, but

       could be overcome.



      Despite the big ticket acquisition cost of $2.4 million (about 23% of project cost),

       and need to buy with cash to seller and no option, the market could support the


                                             13
       price. Because McFarland bought a two story building and was able to develop 6

       stories, by constructing a building within the Church shell, he essentially bought

       @22,000 SF of internal development air rights.



      Financially the project was a success, even without the historic preservation

       subsidies. The business strategy exemplified vertical integration, with developer,

       builder and owner profit available for the winning. The developer still retains

       some upside buy owning and renting out a few units.



On their home turf, the Luck of the Irish was with the McFarland team. Since they are

now bringing the six story Allele residential condo project to market on an abutting

parcel south of 45 West Broadway, let’s hope the it holds out a wee bit longer.




                                            14
References

Archdiocese of Boston, 2000. Invitation to developers and letter of interest

Ecker, Michael. 2008. Executive Vice President and Senior Lending Officer at River
Bank, North Andover, Mass. Telephone interview, July 1, 2008. (formerly Senior
Lending Officer at Andover Bank).

McFarland, Bernard. 2008. Construction manager, McFarland Development Team.
Personal interview in Boston. MA, June 27, 2008.

McFarland, James. 2008. Lead Developer and Pater Familias, McFarland Development
Team. Personal interview in Boston. MA, June 27, 2008.

U.S. Department of Commerce, Bureau of the Census 2000

www.boston.com

www.citydata.com


Mary Kelleher 617 777 4547. Realtor maryk@gibsondd.com . still waiting to hear back.

BRA Valerie Gingrich 617 722 4300, still waiting to hear back




                                            15
View of Boston from a penthouse deck




                                       16
Table 1 Saints PETER AND PAUL Church Project Development Costs


0.82 acre former Church and
Rectory site
Boston, MASS
Development date 2002-4                FACTORS          DOLLAR       PERCENT OF

                                                        AMOUNT       PROJECT COST
lot size (land square feet)               35,700
Floor /area coverage                      146%
gross building area                       52,000
net usable space (95%)                    49,000
# current owners                            44
# parking spaces                            44


DEVELOPMENT COST
INFORMATION                           Per Building SF
land/site acquisition (including
option), includes buildings               $46.15        $2,400,000      22.64%
acquisition cost per original
building SF                               $82.76
site preparation
Remediation: removal of asbestos                         $10,000        0.09%
other site preparation incl parking                     $100,000        0.94%
demolition garage building                               $5,000         0.05%


construction costs
gutting and building prep                               $300,000        2.83%
new construction 52,000 SF               $128.56        $6,685,000      63.07%

total building hard & acquisition
cost                                     $182.70        $9,500,000      89.62%

soft costs
Architect, planners, legal,
surveying,                                              $305,000        2.88%
market analysis/ appraisals                              $5,000         0.05%

                                           17
subtotal before construction loan         $188.65               $9,810,000         92.5%
construction loan/carry 27 months
term, variable rate                     7%, int. only            $800,000           7.5%
TOTAL DEVELOPMENT COST                    $204.04               $10,610,000       100.0%


                                                                average sales     total sales
REVENUES                                   units                  price/unit      revenues
affordable units in Church @700SF
each                                         11             $           104,218      $1,146,400
Market units in Church @1000 SF
each                                         18             $           230,444     $ 4,148,000
premium units in Church @1700SF              5              $           582,000     $ 2,910,000
market units in Rectory @1400SF              8              $           365,300     $ 2,922,400

retained penthouse units @1900SF             2              $           286,600       $ 573,200
Total Gross sales                            44                                     $11,700,000
Sales expenses fee @5%                                                              $ 585,000
net sales proceeds                                                                  $11,115,000

PROFIT                                      5%                   $515,000

                                    gross project profit,
                                    before builder
                                    profit, etc.




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