Published: May 27, 2011
Updated: 9:20 p.m.
Crystal Cathedral plan: Lease its way out of debt
By DEEPA BHARATH and RONALD CAMPBELL
THE ORANGE COUNTY REGISTER
In a bid to rescue itself from bankruptcy, the Crystal Cathedral plans to sell and lease back the landmark to an Irvine real estate partnership
Crystal Cathedral Ministries filed a reorganization plan late Friday, seven months after it filed for protection from its creditors under Chapter 11 of the federal bankruptcy law
Greenlaw Partners would pay $46 million for the cathedral and surrounding buildings, leasing back the cathedral to the ministry. Most of the cash would go to creditors.
After four years, the ministry would have the right to buy back the cathedral, parking lots and most other buildings for $30 million. Greenlaw would get the right to build apartments on some of the 30-
The plan is subject to approval by the cathedrals' creditors.
They've been skeptical. Just days ago, a financial consultant to the creditors said in a statement filed in U.S. Bankruptcy Court that if the ministry hadn't been protected by bankruptcy rules, it would have burned through $2 million in cash in the past six months.
The key to the plan is real estate development. Greenlaw wants to build apartments– potentially hundreds of apartments– on what are now parking lots, low-
The deal is critical to the ministry's precarious financial health. Each apartment Greenlaw builds would knock $20,000 off the price the ministry pays to get back the cathedral and its core buildings. In an example cited in court papers, 400 apartments would reduce the repurchase price by $8 million.
The ministry appears ready to give up the Family Life Center, the four-
Greenlaw plans to buy the Family Life Center for $16 million and the cathedral and core church buildings for $30 million.
The family of founding Rev. Robert H. Schuller would give up some of its financial power over the cathedral to an independent board. Although the elder Schuller and his wife, Arvella, would sit on that board, an executive board controlled by outsiders would set the ministry's budget and would also appoint the chief financial officer.
In addition, the bankruptcy plan limits the salary of the ministry's chief executive officer, Schuller's daughter, Sheila Schuller Coleman, to $69,525 a year.
The church owes about $7.5 million to unsecured creditors including many longtime vendors who provided services for its annual Christmas and Easter pageants. Church administrators say the cathedral will continue its local worship services, community outreach programs and its weekly "Hour of Power" broadcasts. Also, the plan will immediately eliminate both the church's mortgage and the majority of its vendor debt, they say. Any remaining vendor debt will be repaid over the next 42 months, officials say.
The Crystal Cathedral over the past three years has been torn apart by a family feud that saw the exit of the founder's son, Robert A. Schuller. In the year leading up to its bankruptcy filing Oct. 18, the church sold many of its assets, cut about 150 of its staff members and slashed air time by 50 percent. Its congregation has shrunk to fewer than 5,000.
The cathedral's court filings' blame its financial troubles partly on "unsettled leadership" but mostly on the recession.
However, a financial statement filed Friday shows that the ministry's losses predate the recession. The ministry lost $6.4 million in 2006, a prosperous year for most Orange County businesses and nonprofits, an additional $7 million in 2007, $11.5 million in 2008 and $8.6 million in 2009. It managed a $141,000 surplus in 2010.
By then, however, donations were falling faster than the church could cut expenses. Donations fell by 24 percent in 2009.
Court filing also showed that during this time, a total of $832,940 in housing allowances were handed out to the families of all five children of Robert H. Schuller and a few top executives. More than $2 million was paid to 23 insiders, mostly family members of the Schullers, over the 12 months leading to the bankruptcy filing.
The church owes money to about 550 creditors. Among the unsecured creditors are vendors who provided their services to the megachurch's popular "Glory of Christmas" and "Glory of Easter" pageants – both of which have been suspended as a result of the church's financial troubles. The cathedral lost $16.8 million over three years on total revenues of $70.8 million.
The mortgage includes the cost of two more buildings on campus the Family Life Center and Welcoming Center – that were added in 1990 and 2003, respectively. The mortgage also covers the cost of other refurbishments on campus and a parking lot expansion, as well as funds to acquire neighboring properties.
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