The Church of England and the property market boom

Many people may not be aware that the Church of England is actually one of the largest property owners in the UK. As of the end of 2007 total assets managed by the Church Commissioner amounted to nearly £6 billion although this included stock market and other investments as well. This will surprise many people who see a number of fundraising activities and donations carried out in and around churches in England and Scotland.

We will now take you through the history of the Church Commissioners, how it was created, what it does and the often controversial church views as opposed to its investment activities.

The Church of England

The first mention of the Church of England can be traced back to the third century with many people suggesting that Christianity arrived in the UK via Ireland and Iberia some years before. While obviously a main part of the UK in the olden days many people will be surprised to learn that the current Church of England setup does not receive any direct funding from government although there are a number of taxation benefits which have been in place for some time.

As the Church of England began to become a larger part of everyday life in the UK there was a need to put the organisations finances on a more firm footing and take away the day-to-day financial management from local parishes – hence the creation of the Church Commissioners.

The Church Commissioners

Prior to the creation of the Church Commissioners organisation finances for the Church of England were raised and managed on a local parish basis and the payment of local clergy actually depended upon the wealth of their parishioners. However in the mid-19th century it was agreed that all central funding for Church of England would be transferred to the Church Commissioners who were put in charge of paying the employees of the Church and managing incoming and outgoing fund flows.

Historically the Church of England was the largest landowner in the UK and while this asset class has been reduced over the years the church still has a massive of exposure to the direct property market in the UK. In order to facilitate the management of the church investments a number of major investment companies have been brought in to advise the Church Commissioners about long-term investments and increasing the long-term benefits to the organisation itself.

Outgoings

It is estimated that the Church of England spends around £1 billion a year across a number of areas which include payment of employees, restoration of churches throughout the UK and a number of charitable commitments. When you consider that the annual generated income from the church investments is only around £200 million a year you may then realise why the Church depends so much upon local fundraising and donations.

Income

As we touched on above the Church of England receives no direct funding from the government of the UK although there are a number of tax incentives which had been in place for many years. Income from investments is around about the £300 million mark although this varies from time to time and is not set in stone. When you consider the Church has investments totalling around £6 billion this is not a bad return as there will be opportunities for capital gains on top of that.

Asset management

The Church Commissioners run the investment portfolio “to help sustain the nationwide ministry of the Church, without undue risk and in line with their ethical investment policy”. The £6 billion portfolio consists of stock market investments as well as property assets from the commercial, residential and agricultural sectors. Indeed many people may not be aware that the Church of England is one of the largest tenants in the UK.

The long-term goal of the Church of England Church Commissioners organisation is a return of 5% over and above the RPI index which is required to cover expenses and spending plans. This is a fairly adventurous targets but one which appears to have focused the minds of the Church commission’s investment advisers over the years.

Commercial property

Through the Church Commissioners the Church of England has exposure to many areas of the property market including offices, shops, factories and warehouses in all areas of England and Scotland. The office property investments are mainly situated in the U.K.’s larger cities and the retail properties are traditionally located in city centre developments. However, it is interesting to note that the Church has direct ownership and part ownership of a number of shopping centres throughout the UK including the MetroCentre in Gateshead and the Bluewater development in Kent.

Residential property

While the bulk of the Church’s residential property exposure is situated in the Hyde Park estate there are number of other investments of a residential nature throughout England and Scotland. The church itself is committed to providing a variety of housing types and standards, with good local amenities, to a number of groups of society. However, when all is said and done these are investments and are treat as such by the Church Commissioners.

Agricultural property

In total the Church Commissioners own 112,000 acres of agricultural land in England and Scotland and again while they are conscious of their duty as long-term landlords much of the land has historically been used for new out-of-town developments. So not only do the Church Commissioners receive rental income from their agricultural property portfolio but they have benefited enormously from the growing number of planning applications and out-of-town developments.

Conclusion

It will come as quite a surprise to many people to learn that the Church of England is so heavily involved in both the UK stock market and property throughout England and Scotland. Even though this property exposure has been reduced over the last few years it is still significant and has often put the investment division at odds with the moral high ground often taken by a number of Church of England employees.

However, with no direct funding from the government the Church of England is left to rely upon fundraising activities, donations and income from its ever-growing investment portfolio. This portfolio of investments has been built up over the years without the vast majority of the UK population ever realising how wealthy the Church of England actually is.