The children ' s worship space at Grace Community Church
“ It ’ s a humbling experience , but I feel like I ' m called to do this at this season of my life ,” he adds . “ I ’ m involved in so many different areas of strategic thinking and planning with our team ; it really just brings me to life to be working in the ministry .”
A focus on smart debt management
Key to this planning and expansion has been undertaking substantial building programs and , in doing so , acquiring some debt . As a result , Petz and his team sought to refinance the church ’ s debt in 2011 . Westover was in a 10-year interest rate swap agreement with its lending institution at the time , with five-plus years remaining on the note . As Petz explains , part of the difficulty of an interest rate swap arrangement is “ trying to explain it ” — in particular , to a board of directors who might not have financial backgrounds like his own . “ Here ' s how I put it : we , as a church , would prefer a fixed interest rate for as long as we can get it ,” Petz says . Of course , this is because fixed rates provide predictable payments , whereas variable interest rates cannot . “ But banks want variable rates , and they don ’ t want to give long-term rates ,” he says . “ So , they offer these interest rate swaps that ‘ sit in the middle ’ between the bank and the church as an intermediary .” If interest rates rise to a certain point , the church sees a gain on its interest rate swap . If interest rates fall , the church sees a loss . “ All this is to say that we were seeing wild fluctuations in our interest rate swap ,” Petz concludes . He and his team aimed to take advantage of the lower-interest-rate environment in another 10-year fixed-rate note , but without using an interest rate swap . So , when Westover leadership began to look for a financial partner , it sought a credible lending institution that would not only have strong financial capacity but also operate as a true church lender that understands how churches work . Thrivent Church Financing offered a refinance package that ideally suited the church . Westover was seeking a new lending partner for several reasons . Petz says he wanted to make sure the church partnered with a lender that could not only provide competitive loan terms and rates , but also one that understood a church ’ s unique operating model and offered flexibility regarding future requests and potential sale of property . Thrivent ’ s demonstrated 115-year history of serving churches , combined with their cost saving proposal and flexible loan structure that addressed the church ’ s future plans , all pointed to a lender that understood churches . “ Most compelling , was Thrivent ’ s ability to offer a simple long-term fixed rate fully amortizing loan with no balloon , thereby eliminating the need to incur renewal costs at a future date ,” Petz adds .
Nuts-and-bolts , dollars-and-cents
As noted above , Westover ’ s previous long-term debt was coupled with an interest rate swap agreement , which — based on the prevailing market rates at the time — was in a significantly unfavorable position . As such , Thrivent was challenged to provide a refinance package that not only secured a favorable payback , but also offset penalties to exit the swap agreement and secured long-term debt refinancing at a lower rate . “ They put together an aggressive package that essentially lowered our interest rate significantly in a climate where interest rates were at alltime lows ,” Petz says . “[ Thrivent ] came in with a 10-year fixed rate with no interest rate swap , just a pure fixed rate at a rate that was substantially lower than our previous rate .” But it wasn ’ t that simple . “ We weren ' t going to make a poor financial decision just to get out of the swap ,” Petz explains , adding that it ’ s impossible to simply “ exit ” such an agreement . “ You ’ re literally tied into it ,” he emphasizes . “ The only way to exit it was to pay it out , since the church was sitting at a significant loss based on the interest rate at the time .” However , the savings over the 10-year refinance period offered by Thrivent was substantial — enough for the church to not only exit the swap but also realize above-and-beyond savings over the remaining life of the note .
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