Banks help religious groups finance new uses for old properties.

For years, the Wilshire Theatre in Beverly Hills looked like a dilapidated relic on Wilshire Boulevard, just another old, rundown movie house that seemed destined for demolition.

But the theater is poised for a $20 million makeover by Temple of the Arts, a Jewish reform congregation that recently bought the art deco vaudeville house-after arranging financing from First Bank of Beverly Hills, one of the few banks in the country that has a unit that specializes in lending to religious groups.

The move is part of a small, but growing, trend in which churches, temples and mosques are buying up old supermarkets, theaters and strip malls, and they are turning to banks for much-needed capital.

Rabbi David Baron, of Temple of the Arts, spent three years negotiating with the Nederlander Organization, the parent of the Los Angeles-based concert group that owns the Pantages Theatre, to buy the theater.

"It was so timely that it was meant to be," said Baron, sitting in a tiny office that he moved into last month in the Wilshire Theatre.

Temple of the Arts was able to obtain a commercial real estate loan for more than $5 million from Community First Financial Resources, a First Bank subsidiary in Lake Forest, Calif.

Though lending to a synagogue or church may seem like a fairly safe investment, many banks avoid it for fear they may have to repossess a property in the event of a default. Some banks even refer to religious lending as 'leap of faith' loans, because of the perceived risk that a church or temple's cash flow is based on voluntary donations.

"It's very rare for a church to default," said Michelle Seukunian, a vice president and area manager at First Bank. "But if you lend to a hospital, a school or a church and they had to close, it would look very bad for the bank's image."

Community First is one of just a half-dozen banks nationwide that specialize in lending to churches, mosques and synagogues.

Therese DeGroot, senior vice president at Community First, said many banks don't really understand the special needs of different religious groups, including the differences between churches and temples.

Temples typically require that members pay annual dues, while donations to Christian churches are usually voluntary, which can make it tough for a lender to determine bow much money is coming in.

"We don't want to overburden a congregation with too much debt, where they will have to cut back on ministry and outreach programs in order to service the debt," she said.

Though Temple of the Arts had leased Wilshire Theatre for the past 13 years, primarily for high holy days, it bad no previous building. That presented problems for securing a loan. DeGroot tweaked the bank's lending model to allow Temple of the Arts a bit of leeway, since the synagogue planned to take over as property manager of the theater's eight-story office tower and three ground floor retail stores.

Progressive approach

Temple of the Arts drew attention when it invited Sen. Hillary Rodham Clinton to Yore Kippur services last October that featured celebrities Jason Alexander, Larry King, Mary Hart and Leonard Maltin.

Baron said he wants to turn the theater into a cultural arts center similar to the 92nd Street Y in New York, but with a community focus that would allow religious groups to gain a better understanding of each other.

"Our main business is not the theater, but part of our mission is for people to understand religion through the performing arts," said Baron, who is the author of "Moses on Management." "We'd like to make this a place where different ethnic groups and religions can experience each other."

For the next three years, the Nederlander Organization will continue to present events and concerts at the Wilshire Theatre under a lease-back provision. In the meantime, the temple is starting to promote the auditorium as a unique meeting place for corporations and non-profits to hold events.

"Los Angeles really needs a Westside-based venue that can handle not just Jewish events, but outreach to the community," said Geoffrey Gee, a retired lawyer and a professional fund-raiser, who is heading the Temple of the Arts $20 million fund-raising campaign.

The temple is even selling naming rights to the theater, as well as to various lobbies and stages, in the effort to raise money. Fundraising will help pay off the bank loan and allow for renovations of the 1,953-seat auditorium.

Theresa Loker, underwriting manager and vice president at Bank of the West, which began its religious lending program 20 years ago, said churches, synagogues and mosques are expanding, particularly in Southern California, and they need large open spaces with lots of parking.

"We see religious groups purchasing old supermarkets, strip malls and movie theaters, and it just seems to be very popular at this time," she said.

In the past year, Bank of the West completed 50 loans to religious groups and has the largest portfolio of outstanding loans to religious groups in the United States, approaching $1 billion.

Among the recent loans were a $12 million loan to Maranatha Chapel, a non-denominational evangelical church in Rancho Bernardo, a $7.3 million loan to Calvary Chapel in San Diego, and a $3.4 million loan to New Philadelphia AME Church in Philadelphia.

Loans typically range from $1 million to more than $30 million, though the average size tends to be about $3 million.

Bank of the West pays particular attention to the contribution history, attendance statistics and leadership structure of any religious borrower. It requires three years of financial and attendance records. Many groups conduct internal audits before they even attempt to get a loan.

"We don't suggest to a church that they should build it and they will come," said Loker, half-jokingly. "We've never taken a church back in our 20-year history, and we've never had to foreclose on a property."