Most Unique Transaction

James B. Wootton
Standard Corporation, REALTORS®

Jim put together this unique transaction with a Bargain Sale Proposal and a creative reuse of an existing facility.

One of the church prospects that Jim had been working with was searching for the right piece of land in the suburbs to build a brand new facility. They were looking to net $1,500,000 from the sale of their existing very old 3-three story brick building. Conceptually, if they had found land for $500,000, they would have $1 million dollars to build a 10,000 square foot facility at $100 per square foot and have no debt.

Their existing church located near the University district had 27,000 square feet and a 300-seat auditorium. So 10,000 square feet in a new building did not seem adequate.

Because the net cost of the worship space would be about 1/3 of the cost of new construction, this church seemed to be an ideal candidate for the 27,000 square feet of vacant space in a suburban shopping center inside the City of Columbus corporation limits. The shopping center had 77,000 square feet of space, of which 27,000 square feet were vacant. It was not listed for sale; just lease, but Jim was advised that he could develop a proposal for a transaction comprising part gift and part purchase.

Based upon the seller obtaining an independent qualified appraisal that the shopping center was worth $8 million, Jim submitted a Bargain Sale Proposal that, if accepted, the owners would accept $5.7 million in cash and donate a $2.3 million dollar gift. Under IRS rules for bargain sales, partial gifts of real estate can be given to nonprofit organizations.

The $5.7 million loan for the buyer would be secured solely by a new first mortgage on the shopping center and 100 percent of the loan payments would be paid out of the rent from the tenants currently leasing the 50,000 square feet. The remaining 27,000 square feet of vacant space would more or less be "free".

The church, which already had a willing buyer at $1.5 million for the old worship facility, needed just over $1 million in cash to adapt the space for a 600-seat sanctuary. The owners accepted the proposal and the transaction closed.