Through ChurchLoan, developing Catholic communities find financing for expansion.

by Gerald Korson

St. Mark the Evangelist Catholic Church in Birmingham, Ala. (Photos by Joseph DeSciose)

Msgr. Bill Schooler’s parish had a problem. St. Pius X in Granger, Ind., was located in a rapidly developing community and desperately needed to expand its facilities to include a new Catholic school and catechetical center. When all the studies and surveys were completed, it was determined that the land purchase and building project would cost around $12 million.

The Diocese of Fort Wayne-South Bend gave permission to build, but the diocese itself didn’t have the liquid cash available to offer a long-term loan for the construction.

That’s when Msgr. Schooler called the Knights of Columbus about ChurchLoan, the Order’s mortgage-lending program designed to help Catholic parishes and institutions thrive, grow and meet their ministerial goals.

“We were referred to the Knights and were absolutely delighted,” said Msgr. Schooler. “We got a great rate. If it hadn’t been for the Knights, we couldn’t have done this.”

In Birmingham, Ala., Father (now Msgr.) Pat Cullen and his finance council also turned to the Order for the funds necessary to construct a new church and parish center for St. Mark the Evangelist Parish. When all was said and done, ChurchLoan provided nearly half of the project cost at a very competitive rate.

“We felt we got a good price, and we gave the Knights some visibility in this part of the country,” said Msgr. Cullen, now pastor at St. Aloysius Parish in Bessemer. “We have plenty of Knights of Columbus councils in the various churches, but in terms of their loan program, this was the first funded project for this area.”

A CENTURY-OLD PROGRAM

St. Pius X and St. Mark are just two of the hundreds of parishes, schools, hospitals and other Catholic institutions in the United States and Canada that have benefited from the ChurchLoan program. The program has its origins in an informal loan tendered by the Supreme Council to St. Rose of Lima Church in Meriden, Conn., in 1896. Since that time, the Knights of Columbus has approved about $600 million in loans. The ChurchLoan name was branded in 2000, at which time the mortgage initiative — always for capital projects, never for operating budgets — took on a more official capacity under the K of C investments umbrella. Today, there are nearly 100 accounts active on the ChurchLoan books, financing more than $100 million in Catholic capital projects across North America.

ChurchLoan offers competitive terms for secured loans (those backed by assets as collateral) and unsecured loans with fixed rates that last anywhere between five and 20 years. These loans don’t directly finance construction, but are designed to replace all or part of a construction loan once the building project is completed. The loans may also be used to consolidate or refinance existing debt, to purchase property, or to make capital renovations.

ChurchLoan comprises part of the investment strategy of the Knights of Columbus in support of its policyholders. The loans benefit Church institutions through their attractive terms while at the same time helping to maintain the solid growth of the K of C investment portfolio, which backs the company’s life insurance and annuity products. The K of C never sells off these loans but retains them on its balance sheet as assets of the Order’s insurance program. All ChurchLoan requests are underwritten because they are commercial transactions and are entirely separate from K of C philanthropic initiatives.

At St. Pius X, the $2 million ChurchLoan in 2009 replaced the short-term bridge note tendered by the diocese. The balance of the project was funded through a successful capital campaign and a parish deposit account.

“Our parish is now at 3,000 families, and our facilities were designed for 1,400, so we were bursting at the seams,” said Msgr. Schooler. “We couldn’t accommodate even our present catechetical program, so we had to do something.”

A parish committee study confirmed the need for a catechetical center. Meanwhile, a separate committee determined that the parish should also establish a Catholic school.

Robert J. Andrews Sr. of Father Stephen T. Badin Council 4263 in Granger, assisted then-Grand Knight Joseph F. Stazkowicz and field agent Robert Baloun in facilitating the loan process.

“Our position as Knights of Columbus was to bring together members of the parish and to be helpful to the church community in order to get this project off the ground,” said Andrews, now grand knight of Council 4263.

The parish conducted a massive capital funding drive that greatly reduced its initial ChurchLoan request, he added. After officials from the Supreme Council conducted a site survey, the loan was underwritten at the competitive interest rate of 3.5 percent. ChurchLoan often is able to offer a better rate than most other commercial lenders because of its lower cost of capital. (By comparison, commercial building loan rates in mid-summer 2011 ranged from approximately 4 percent to about 6.5 percent, according to one major business lender.)

St. Pius X Catholic School in Granger, Ind. (Photo by Scott Leonard)

The project became an overwhelming success. Just three years after the school opened its doors, it is operating at capacity with 625 students — “And we’re out of room again,” said Msgr. Schooler. The parish is now examining options for further expansion of its facilities to meet the increasing need.

“Our goal is to educate people from cradle to grave,” he added. “Now we have an education center that meets the needs of a parish of a few thousand families, and we have a Catholic school, too.”

For Andrews, support for the project was a natural extension of the Knights’ mission.

“We’re supposed to be the protectors of the Church, and we try to be that,” he said. “The best place to start is with Catholic education.”

THE NEW ST. MARK

Back in Alabama, St. Mark the Evangelist Parish is in effect the new incarnation of an older church by the same name that closed in 1997. The newer parish was established in Birmingham in 1999, and building plans commenced almost immediately. Msgr. Cullen continued the building project when he was named pastor in December 2000 after the founding pastor, Father Patrick Murphy, had passed away earlier that fall.

St. Mark was among the more ambitious building projects in the diocese, with plans calling for a church and a combination office-and-catechetical building situated on 19 acres to allow for the option of later establishing a school.

“The church was probably high-end because the driving force for the people was that they wanted something that looked like a church and felt like a church. They were reacting somewhat against the idea of an auditorium-style church, so that certainly increased some of the costs of the building,” said Msgr. Cullen.

The eventual plans called for a Gothic design with high ceilings and a large sanctuary around the altar. The final price tag? Just over $13 million, of which ChurchLoan financed about half.

The Knights were skeptical at first that collections could support such loan payments in the usually cash-strapped South. The ChurchLoan site study and underwriting of the loan application, however, confirmed that the parish was more affluent than average and that St. Mark qualified for the loan.

The grand new church, dedicated in 2003, was furnished in large part with items from closed or renovated churches. Stained-glass windows along the nave were purchased from the old cathedral of Crookston, Minn. Clerestory windows of the sacraments and the furniture in the day chapel had been saved from the old St. Mark Church in nearby East Thomas. Another set of larger windows remains in storage, still to be installed when the funds become available.

LONG-RANGE PLANNING

In 2008, two years after Msgr. Cullen’s transfer to Bessemer, Father Joe Culotta was pastor of St. Mark when the parish found itself staring at a huge balloon payment. The original ChurchLoan was structured as a five-year loan with payments based on a 20-year amortization, which would have required substantial additional principal-only payments in order to avoid a formidable payoff balance at the end of the five-year term. The parish had committed to making these additional payments out of its typically generous Christmas collections, but these end-of-year donations had fallen drastically due to the economic downturn. What’s more, the parish had already swelled from 700 to 1,000 families and had been forced to expand its physical plant with the help of a diocesan loan.

The parish went back to the K of C seeking ways to refinance its ChurchLoan in favor of more manageable terms with fixed monthly payments, taking advantage of historically low interest rates.

“We just felt it was more beneficial to be able to predict what our debt would be as we planned long-range,” explained Father Culotta.

Jon Gaston, a parishioner and certified public accountant who oversees the parish budget, developed a proposal for a 15-year refinanced loan, which the Knights accepted.

“The Knights of Columbus were very gracious and very eager to refinance our loan,” Gaston said. “They gave us great terms, terms that we wanted. It’s good to do business with them — that’s the way we felt.”

Father Culotta, who was one of the diocesan consultors at the time of the original loan, also expressed enthusiasm over his experience with ChurchLoan officials.

“Whenever I had questions and called the Knights of Columbus office, it was as easy as can be,” he said. “They took as much time as we needed to feel comfortable with the entire process.”

At St. Pius X in Indiana, Msgr. Schooler echoed these sentiments over his experience with ChurchLoan in assisting with his own parish church and school projects.

“It’s been extraordinary,” he said. “We couldn’t have done it without the Knights, and I’m extremely grateful to them.”

Gerald Korson writes from Fort Wayne, Ind.