A bankruptcy court judge approved the first major sale of real estate belonging to the Archdiocese of St. Paul and Minneapolis on Thursday, and the church's three remaining properties are expected to be sold in the months ahead to pay creditors.
Judge Robert Kressel approved the $4.5 million sale of the Monsignor Hayden Center, which now houses most archdiocese offices, to its neighbor the Minnesota Historical Society.
The archdiocese also asked the court Thursday to approve a purchase agreement for the archbishop's residence and the chancery building, across from the St. Paul Cathedral. The $2.75 million deal with United Properties Development is already generating criticism.
The sales come about a year after the archdiocese declared bankruptcy following a flood of clergy abuse claims. The buildings and property are its chief assets, with a combined value of at least $10 million. Those assets will be tapped to compensate more than 400 individuals who have filed abuse claims against the church in the past year.
Kressel was critical of the length of time — more than six months — that the Hayden property was on the market. The center is a desirable piece of real estate, he said, located just outside downtown St. Paul. "I feel like a lot of time and money went into marketing this," he said.
Attorney Jeff Anderson, representing the abuse victims in the case, questioned the offer on the chancery building and the archbishop's residence on Summit Avenue in St. Paul.
The chancery property was valued at $6.3 million "based upon the Archdiocese's review of Ramsey County public records, which reflects the estimated market value of the Property for tax purposes," according to the archdiocese's court motion. However, a 2013 analysis by the archdiocese's real estate brokers put the value at $2.5 million to $3.5 million, the motion said.
The United Properties bid falls somewhere in that range, the archdiocese wrote.
"It's suspiciously meager," said Anderson. "That property is out on a bluff, overlooking the city, and is a premier piece of real estate."
Other interested buyers, however, can still submit an offer on the chancery and other church properties because bankruptcy rules allow for continued offers to be made until the judge makes a final approval of the purchase agreement. That can take roughly 30 to 60 days.
Acting Archbishop Bernard Hebda said the closing on the chancery could happen as soon as April if the proposed sale is approved.
The United Properties agreement also includes what is called a "view easement" — which will limit the height of any new construction and preserve the unique characteristic of the neighborhood, Hebda said in a media statement.
In an effort to ensure that the money garnered through the sales is used for the archdiocese creditors — namely victims of clergy abuse — Kressel ordered the funds held in a separate account that cannot be tapped for archdiocese expenses. The archdiocese has spent more than $5 million on lawyers and professionals' fees in the past year.
No one packing yet
The archbishop and archdiocese employees won't need to start packing yet. The sale provisions for the properties permit the archdiocese to remain in the buildings for up to a year after closing. The archdiocese has said it is looking to consolidate its offices, but has only hinted at where those offices and the archbishop home might end up.
"It is our commitment to find property in an area where the Church's presence can be an integral part of a neighborhood revitalization and renewal effort," archdiocese CFO Tom Mertens wrote in the church's November 2015 annual report.
In addition to the chancery and Hayden building, there are signed purchase agreements for the archdiocese's two other key real estate holdings — a historic office building at 244 Dayton Av., adjacent to the St. Paul Cathedral, that now houses the Catholic Spirit newspaper and other offices, and a private residence outside of Northfield that had been donated to the archdiocese years ago, said Paul Donovan, executive director of Cushman & Wakefield, the real estate brokers involved.
The archdiocese has not yet submitted those purchase agreements to the bankruptcy court judge.
The value of the combined properties was estimated as at least $10 million by the archdiocese last year.
The buildings up for sale have been symbols of the archdiocese for decades. For more than 50 years, its leadership headquarters and archbishop's home have been in the chancery building, just steps from the towering St. Paul Cathedral.
The Hayden Building, built in 1914, was the Cathedral School until 1979 and now houses most of the archdiocese offices.
The 244 Dayton Av. building, just next to the cathedral, served as the archdiocese chancery until the current one was built in 1961. It was built in 1922 and is on the National Register of Historic Places.
Duluth's day in court
As the archdiocese sorted out its real estate holdings, the Duluth Diocese made its first appearance in bankruptcy court Thursday.
The diocese filed for Chapter 11 bankruptcy Dec. 7, a month after a victim of priest sex abuse there was awarded $8 million in damages by a Ramsey County jury. The diocese was found responsible for $4.8 million.
Kressel approved the diocese plan to begin placing advertisements in northern Minnesota publications to inform abuse victims of the right to file a claim.
Those victims have until May 25 to do so.