First United Methodist Church in Bloomington is moving toward selling a downtown parking lot to a developer for $8.8 million, potentially clearing the way for hundreds of new student-oriented units.

The church has signed a letter of intent with Chicago-based developer Core Spaces for its roughly 1.6-acre South Lot, located between Third and Fourth streets and Lincoln and Washington streets.

The church's governing board unanimously approved the letter of intent Aug. 17.

Under the proposal, Core Spaces would pay $8.8 million for the property and construct a housing development with roughly 350 to 400 bedrooms.

The church would also receive ownership of 100 parking spaces in a garage incorporated into the development, with a separate entrance for church users. The existing surface lot contains 144 spaces.

Church leaders say the sale would help address long-term financial challenges. Proceeds would be invested in the church's endowment to help pay for building maintenance and ministries.

The agreement is not yet a final sale.

The letter of intent gives Core Spaces and the church 120 days to negotiate a purchase agreement. A final agreement would require another formal approval under United Methodist Church rules.

Core Spaces expects the development's housing to be market rate.

The company expects to pay into Bloomington's affordable housing fund rather than including income-restricted units within the project.

The property is currently zoned Mixed-Use Downtown University Village.

Core Spaces already has two large student housing developments approved elsewhere in Bloomington. Its Hub Bloomington projects north of downtown have been approved for a combined roughly 1,600 bedrooms.

If the two sides cannot reach a purchase agreement within the 120-day negotiating period, the proposed sale will not move forward.