GARDEN GROVE – Chapman University offered Tuesday to buy the financially ailing Crystal Cathedral’s property in Garden Grove for $46 million for a health science campus.

The proposal comes two days after reports that Crystal Cathedral founder Robert H. Schuller was ousted from the church’s board.

The university filed its proposal in bankruptcy court Tuesday. Chapman University’s Board of Trustees authorized the proposal to buy the megachurch June 27, said President James Doti. Chapman’s plan, backed by the cathedral’s creditors committee, is to house its new Health Science programs on the church’s property, Doti said.

“We’re looking at embarking into … programs such as dentistry, veterinary medicine and pharmacology – programs for which there is a growing need in Orange County,” he said.

Chapman eventually would sell back the buildings it doesn’t need, including the cathedral, for $23 million.

The Chapman plan counters one submitted in May by the cathedral and Newport Beach developer Greenlaw Partners LLC. Greenlaw proposed to buy the campus for the same $46 million price, build hundreds of apartments and sell the remainder of the property back to the cathedral for $30 million.

The creditors committee delivered the Chapman plan with a stark warning to cathedral insiders: Go along or face millions of dollars in personal losses. If Schuller family members vote against the plan, creditor attorneys wrote, the committee will object to $2 million in claims it estimates the family has lodged in the bankruptcy. On top of that, the committee will try to claw back an unspecified payment to the elder Schuller’s pension fund from the May 2010 sale of the Rancho Capistrano property.

Cathedral attorney Marc Winthrop said the cathedral would evaluate the proposal. He said Chapman’s proposal is a good one for the creditors because they will get paid right away.

“The Crystal Cathedral’s board has not had the opportunity to evaluate it just yet,” he said.

The Chapman proposal has touched off a battle between church insiders, the Schuller family members who are running the ministry, and the creditors committee comprising individuals and entities who are owed millions by the church.

The creditors committee filed a motion Tuesday asking the judge to hear the Chapman plan. The committee finds Chapman’s proposal “far superior” to Greenlaw’s because it offers the church a projected annual savings of $1.7 million the first year and about $3.5 million over two years, according to the documents.

Under its proposal, Chapman would purchase the church’s core buildings for $46 million and allow the church to lease back those buildings at $150,000 a month for a 15-year term. The university is offering the 137,000-square-foot Family Life building for a two-year lease term at $65,000 a month. Chapman would also allow the church to repurchase the ministry buildings at $23.5 million.

Greenlaw proposes a similar sale and leaseback, but with a $30 million buyback price and a leaseback for $307,000 per month with 3 percent annual rent increases. In addition they plan to put hundreds of apartment units on a portion of the church property.

“In light of the clear benefits to the ministry presented by the Chapman University proposal, the committee is simply baffled by the debtor’s position (supporting Greenlaw over Chapman),” the creditor committee attorneys wrote.

The university would take over the Welcome Center right away and the Family Life building in two years, Doti said. That means the church would have to move its school to another location within two years. Most importantly, Chapman would provide a loan to the cathedral to pay off unsecured creditors in full on the date the plan becomes effective, Doti said – something that’s not in Greenlaw’s proposal.

The creditors committee also demands that church insiders should be paid only when the church stops losing money and when Crystal Cathedral Ministries maintains a year-end cash balance of at least $1.5 million.

Doti says he agrees with the creditors committee that the university’s proposal would work in the church’s best interest and that a college campus use is much more compatible with the property than an apartment complex with hundreds of units.

“We plan to work very closely with the city of Garden Grove to develop a campus facility in a park-like setting with aesthetic appeal,” he said.

Garden Grove City Manager Matthew Fertal said he finds the Chapman proposal to be “more beneficial to the city.”

“Any time there is a higher education facility in the city, it adds to the prestige as well as creates opportunities for growth and employment,” he said. “It’s a positive thing for the city.”

Since the Family Life Center already has a school that is operating, it appears to be zoned for educational use and will not require a zoning change, Fertal said.

Doti said Chapman’s proposal aims to save the ministry, for which he and the trustees have abundant regard.

“The ideals of positive thinking and courage, exemplified by Schuller and his ministry, are also what our university stands for,” he said.

Doti said he and the university’s board members have the “greatest admiration for Dr. Schuller.”

“He started his drive-in ministry in 1955 and Chapman moved to Orange County in 1954,” he said. “We’ve been neighbors since. I have great respect for his teachings about courage and positive spirit.”

Doti said he also admires Arvella Schuller, Robert H. Schuller’s wife.

“She is underrated in terms of everything she has done for the church and the family,” he said. “There was sentiment on the part of the trustees that this community church needs to continue in a more positive way.”

Contact the writer: 714-796-7909 or dbharath@ocregister.com