Jackson — Churches today build big buildings, and they need big money to do it. But what if the local bank says no?
That doesn’t happen in the Bible Belt very often, where most banks are only too happy to loan money to their local churches, but in other parts of the country, it can be a different story.
That’s why independent trust veteran A.J. Braswell started Jackson-based Foundation Capital Resources (FCR) five years ago. Braswell’s idea was to create a REIT (real estate investment trust) that would offer churches and faith-based organizations another place to turn for loans.
It’s a unique niché, but a comfortable one for Braswell thanks to his years with Reliance Trust Co., an independent trust company in Atlanta. Braswell founded Reliance in 1975, and during his two decades there made numerous religious contacts working with all the major denominations and serving on the boards of many church-related foundations.
Braswell sold his interest in Reliance in 1996. He retired to beautiful St. Simons Island, Ga., but another business opportunity beckoned.
“There are approximately 440,000 churches in the U.S., and there is somewhere between $30 billion and $40 billion in church building and improvement every year,” he said.
While at Reliance, Braswell had seen one church foundation managing $6 billion in loans, and another denomination’s foundation making over $200 million in loans a year to churches. The catch, however, is that the approximately 400 active church denomination foundations in this country can only make loans within their denominations, and they are also often limited to $1 million or $2 million for a loan.
It seemed apparent to Braswell that someone ought to be able to make loans to all denominations, so he founded FCR with a group of equity investors representing several religious foundations.
When he started putting together his REIT, Braswell chose Jackson as the headquarters because of a rich labor pool full of experienced, displaced bankers who were swimming around, looking for jobs. Luckily for Braswell, these were the turbulent years of 1999 and 2000 when Mississippi banks were being bought, merged or closed down.
“I did business for a lot of folks in Jackson, and I was well acquainted with the banking personnel in Jackson,” he said. “There were lots of good, quality people who wanted to not be a part of a big bank.”
Working outside the South
Not surprisingly, FCR’s clients are not in Mississippi, but scattered outside the South.
We don’t have much of a presence in the states of the Deep South because bankers are members of their local churches,” said Bobby Ray, FCR’s CFO. “In other places in the country, many banks choose not to make loans to churches.”
In the South, however, banks make loans to churches all the time because it’s good business for the bank, which gets the deposits while helping build a stronger community. When Ray’s church, First Baptist of Jackson, renovated the sanctuary and built the Christian Life Center, Trustmark National Bank was the primary lender and other banks stepped in as well with more than $30 million in loan money.
Churches like First Baptist that are tackling a large building project have a couple of choices when it comes to borrowing money. They can go the route of First Baptist and borrow from local banks or go to a credit union, a bond company, their denomination’s fund, or to a company like FCR.
Sometimes, churches choose a combination. They borrow the limit from their denomination’s fund — United Methodist, Pentecostal, Southern Baptist, etc. — and ask FCR to help with the difference.
As a REIT, FCR pools money from its investors to make mortgage-backed loans. There are now about 30 foundations investing in FCR, said Braswell.
“They want to invest money in places where it goes back into churches,” he said. “What better place than a REIT? We’ve been paying 6.3% to 6.7% every quarter since we started, and that’s a good return for anybody.”
Last year, the FCR staff went to Wall Street to educate banks about FCR and why it would be a good investment. After several trips, FCR secured a $125-million line of credit from a group of banks led by Key Bank in Cleveland, Ohio.
“The line of credit helped us a lot,” said Ray. “We had a lot of loan demands, and it gave us the cash availability to make those loans. Now we’re earning on those loans.”
First quarter 2005 was FCR’s best, and the company is continuing to grow, said Ray. With approximately $380 million in loans under management right now, the company is on target to have $515 million in loans outstanding at the end of the year.
Contact MBJ Staff Writer Kelly Ingebretsen at email@example.com.