1. Why do we need a new conference office building?
The current building was constructed in 1975 on land that is owned by Aldersgate and not the Conference. The building is 42 years old and in need of extensive repairs. It is challenging for conference members and constituents to travel to the current location.
2. Who is involved in making this recommendation?
The Board of Trustees proposes this recommendation. The Cabinet and The Council on Finance and Administration also voted to support the recommendation.
3. Why not repair and fix the current building?
Over the past five years, approximately $1.3M has been spent on the current building. It is estimated that to bring up to safety, environmental and building code requirements, an additional $500,000 to $1M could be spent. These funds would be spent to a facility in which the conference does not entirely own as an asset (the land belongs to Aldersgate) and can never sell. The Trustees and Cabinet believe that investing those dollars in a new structure is far more prudent and practical.
4. What are the costs of the new building? How will they be financed?
The plans are to construct a 29,250 square foot, 2-story edifice at a total estimated cost of $5,820,716. This includes the land already purchased with designated funds. The conference has funds in hand of $1.5M designated for a new building and an additional $1M would be taken from reserves. This leaves a need for financing of $3,320,716 which the conference has an offer from the United Methodist Foundation of WNC Development Loan Program at a preferred interest rate of 2.5%, amortized over 20 years. A loan of this amount would require annual debt service of $211,158.84
5. Will the costs of the new building raise apportionments?
The Trustees are not asking that costs of the new building, nor the debt service, be passed along to the conference through apportionments. Rental income from spaces in the new building which the conference will not use will more than offset the debt service requirement. We are projecting annual rental income to be in excess of $304,000 at full occupancy. Once the debt is fully retired (projected in five years or less), the rental income may be used for building maintenance or missional causes which in turn would have a positive impact on apportionments by lowering them.
6. Will the conference incur debt, who will finance the debt and what is the repayment strategy?
It is projected that the initial cost of construction will incur debt. The United Methodist Foundation of WNC will carry the debt through its Development Fund program. Plans are being formulated to design and develop a Capital Campaign to retire the debt as quickly as possible.
7. How many sites were investigated?
The trustees explored eight other potential locations outside and north of Charlotte, in addition to The Park, the site of the proposed new building. Additionally, leasing office space was explored but proved less desirable than ownership.
8. Huntersville is still in close proximity to Charlotte, why is the new building not more centrally located in the annual conference?
The Park is located just off Interstate 77 and convenient to Interstate 85. It is also 30 miles from Interstate 40 in Statesville. It is 15 minutes from Charlotte Douglas International Airport, which is a major consideration. The geographical center of our conference has been determined to be Claremont and thus this location is much closer to the center than the current Memorial Center but also with the conveniences of car and air travel. Accessibility to The Park will be vastly improved over the Memorial Center as many conference meetings and events are now held at the United Methodist Foundation Offices, located in The Park and next door to the proposed new conference building. Furthermore, if we move outside of the Charlotte area, we would be forced to lose our entire administrative support staff, as many do not wish to move beyond the Charlotte / Huntersville region. To lose their experience and expertise would be detrimental to conference operations.
9. What offices will be located in the new building?
The offices of Ministerial Services, Treasury Services, the Episcopacy, Missional Engagement and Connectional Relationships, Information Technology, the Conference Resource Center, Church Development, the Metro District office, and multiple size conference rooms and media space will be incorporated.
10. What is the time frame for construction and opening?
As the conference acts on the Trustee proposal, construction can begin as early as summer of 2017 with occupancy slated for spring of 2018.
11. What is the process for approval?
The Trustees and the Cabinet make the recommendation as formulated in the proposal and actual motion. The annual conference, in its regular meeting June 23-25 will be asked to act on the recommendation. The annual conference is the final authority in undertaking this project.
12. Will leasing parts of the building to external tenants impact or jeopardize our non-profit tax status?
Page 20 of IRS Publication 1828 indicates that churches are allowed to receive rental income from their real and personal property. However, if such property is debt financed, Unrelated Business Income Tax may be required on such income. This requirement makes it all the more imperative to retire the debt as quickly as possible.
13. How feasible is the market for external leasing? What happens if we have extended vacancies?
Careful analysis has been conducted by respected real estate marketing researchers for The Park and the surrounding area. Class A office space, of which our building would be considered, is currently at 10% vacancy and projected to decrease to between 7% and 9%. Of course, there are always risks associated with such a project but the Trustees and Cabinet are confident in the information. If the annual conference approves the project, pre-leasing will begin immediately as potential tenants look in advance to their current lease expirations. Potential leases will be sought that are not in conflict with the Conference’s mission and purpose.
14. Will the new building be environmentally conscious?
Absolutely. The trustees and cabinet place a premium on as “green” a building as can be constructed economically. Priorities will be focused on using recycled building materials, designing environmentally sensitive systems and constructing as energy efficient a structure as possible.
15. Given the current status of the denomination, is a move prudent for our conference and why?
We must do something. The current state of the Conference Memorial Center on Shamrock Drive is in dire need of repairs and upgrading. While the future of The United Methodist Church in its current form may change, we believe that the Western North Carolina Conference will certainly continue even if in an altered configuration. Our conference has belonged to four separate alignments of the Methodist faith since its inception. We are a viable conference with many strong congregations and an efficient and effective organizational structure. The Trustees and Cabinet both intensely believe that our mission and our ministry as an Annual Conference under the Lordship of Jesus Christ will endeavor for many generations to come. Thus we will continue to need a center of operations form which the conference can resource and support local faith communities in making disciples of Jesus Christ for the transformation of the world.
16. If the projected rental income does not bring in sufficient income to service the debt payments as well as maintenance costs, what is the contingency plan? Will such costs have to be included in future apportionments?
The trustees are very insistent and diligent that these costs are never passed on in the form of apportionments. Of course, no one can dictate the future, but for the immediate present, the conference has reserves that could cover up to five years of debt service payments and at this point, most probably further. There is also a $300,000 in every year’s conference budget, that for the most part has never been touched these past several years, that could also be used if necessary before any increase in the apportioned budget.
We are very hopeful that such will not be the case and the Trustees are very mindful that if within a year or two, leases are not obtained, the conference will have to make adjustment. Yet, the overriding contingency is that we will have an asset that is owned by the conference and can be disposed (sold) if absolutely necessary with a most assuredly positive return of investment. Finally, the current projected funding does not require that 100% of the available space even be leased in order to meet the debt service.