Karen Ansis
New York Landmarks Conservency
Common Bond May 1997
Low-Interest Loans for Religious Properties in New York City
The New York Landmarks Conservancy administers the Historic Properties Fund (HPF), a revolving loan fund to help finance restoration work to historic properties that are located in New York City. The Fund has provided over $5 million in loans with interest rates as low as three percent.
While most of the HPF's loans are used for facade restoration work on smaller residential properties, many have gone to religious and other not-for-profit institutions. Often, congregations undertake a capital improvement plan and fundraising campaign that is phased over several years. The loans that the HPF makes to institutions generally range between $100,000 and $150,000 and may finance all or a portion of a scope of work that can then be repaid over a period of years. The general requirements are:
Building Eligibility -- Eligible buildings may be individual landmarks or properties located within historic districts that are designated by the New York City Landmarks Preservation Commission; or buildings listed in the State or National Register of Historic Place Demonstrated Ability to Repay a Loan -- Organizations must be able to show through past financial statements that they have the capability to repay the loan through annual revenues or some other acceptable means. Acceptable Collateral for the Loan -- All HPF loans must be collateralized in a traditional manner.
Holy Trinity Lutheran Church in Manhattan received a $150,000 low interest loan for roof work.
The issue of collateral is central to HPF loans to religious institutions. For residential buildings, loans are usually secured by a mortgage lien on the property itself. As with most conventional lenders, the HPF does not allow mortgages on properties such as churches and synagogues which are used to promote public purposes. The reason for this exclusion is that, in the event of a default (as remote as it may seem), the lender would not want to foreclose on a house of worship.
If an institution owns a residential or commercial property that is ancillary to its public purposes, then it may be possible to secure a loan by perfecting a mortgage there. Generally, the HPF accepts other forms of collateral for loans to institutions: assignments of cash, certificates of deposit, Treasury bills, and securities that an institution has in its reserves; letters of credit; or personal guarantees.
For assignments of cash, a ratio of 1:1 (loan amount:cash) is required. That is, a $100,000 loan would necessitate a $100,000 cash collateral account. For assignments of securities, a ratio of 1:1.5 (loan amount: value of securities) is required to account for any market fluctuations. In this case, a $100,000 loan would need a collateral account of $150,000 in securities.
In most investment assignment cases, an arrangement is made with the borrower's bank or investment house to make sure that the collateral cannot be decreased or withdrawn without the consent of the HPF. All interest and dividends inure to the borrower, and portions of the investment assigned can be released as loan principal is repaid.
When assignments of cash accounts are used as collateral, there is no direct increase in the amount of funds available for the restoration project, i.e. the organization needs $100,000 in the bank to collateralize a $100,000 loan. However, there can be a substantial benefit in the interest rate differential between the investment return and loan charge that constitutes a direct grant to the institution that can be used for the restoration project.
A loan of $100,000 at three percent interest for five years will cost approximately $9,150 in interest; earnings on $100,000 at an average rate of nine percent for five years will amount to about $28,500. The result would be a grant of over $19,000 ($28,500 less $9,150) that can be incorporated into the project.
Some recent projects that were funded in this manner are:
First Unitarian Church in Brooklyn Heights ($150,000) for brownstone and stained glass window restoration. St. Mary's Manhattanville in Harlem ($99,175) for clapboard restoration, new windows, and roof replacement on the rectory. Church of the Holy Apostles on Ninth Avenue in Manhattan ($200,000) for rebuilding of a portion of a new slate roof and ($100,000) for stained glass window restoration. Church of St. Mary the Virgin in Midtown Manhattan ($150,000) for roof and drainage work. Holy Trinity Lutheran Church on Manhattan's Upper West Side ($150,000) for roof and drainage work.
For further information, call the Landmarks Conservancy and ask for a representative of the Historic Properties Fund at (212) 995-5260.