May 18, 2006 | Read Time: 4 minutes
When Washington Parks & People decided to buy a building to house itself and other local charities, it took an
approach befitting its mission as a grass-roots organization that has revitalized parks and neighborhoods across the nation’s capital. It found a historic mansion, and enlisted thousands of volunteers to help prepare it for its new tenants.
The effort was born of economic necessity. The charity paid $876,000 for the 1927 Renaissance revival building it acquired in 1999, after about $1-million in donated equity and forgiven debt and back taxes from the building’s previous owner. But when the group received bids of $1.3-million or more from contractors for renovations to the former embassy’s façade, it balked.
“We didn’t have $1.3-million, and even if we did, we would be spending that on parks,” says Steve Coleman, Washington Parks & People’s executive director.
Instead, the charity paid a total of $400,000 to buy materials and pay for a team of professionals, including a conservator, who trained and supervised more than 7,000 volunteers to do the exterior work on what was to become the Josephine Butler Parks Center. The work was completed in about 20 months.
Washington Parks & People has taken on interior renovations gradually. Mr. Coleman estimates that more than 10,000 volunteers, including the 7,000 who aided the renovation effort, have helped improve the building over the past eight years — and more work remains. The group plans to add an elevator and a café, and expand office space to make room for fledgling nonprofit organizations.
Steep Learning Curve
Buying, renovating, and managing a building — even for those not harnessing the efforts of thousands of volunteers — is not quite as simple as it sounds. But scores of nonprofit groups are now becoming landlords, building centers that house their own organizations and rent to others.
Jonathan Spack, executive director of Third Sector New England, a Boston organization that offers training, consulting, and other services to charities, says that his group has had to learn a great deal about real estate now that it owns the NonProfit Center, a multi-tenant facility in a historic downtown building, which opened in 2004.
Establishing the center, he says, involved several years of planning, bids on multiple buildings, and cost disputes with the for-profit developer that split the building with Third Sector New England.
Through the process, Mr. Spack consulted a bevy of experts, including lawyers, architects, real-estate professionals, and financial advisers. But, he says, nonprofit managers face a steep learning curve even when surrounded by specialists. “They don’t even know what you don’t know,” he says. “The challenge is, whose advice do you rely on?”
Charities that are considering opening a multi-tenant nonprofit center should think hard about how a building will be used before they buy it, says China Brotsky, executive director of the NonprofitCenters Network, a national membership organization in San Francisco for multi-tenant nonprofit centers. “Start with your vision, not some building you fall in love with,” she cautions.
The building needs to fit the mission of the center and the types of activities that will take place in it, says Ms. Brotsky, who is also vice president of special projects at the Tides Network, which founded San Francisco’s Thoreau Center for Sustainability in 1995.
“Have your big picture of where you want to be. You can always bring in an architect later,” she says. “A real-estate broker, real-estate project manager, or real-estate developer will give a better all-around view.”
Paying the Mortgage
When it comes to financing the purchase, renovation, or construction of a building, Ms. Brotsky counsels organizations to think broadly.
“A lot of nonprofits immediately think, ‘Well, we’re just going to have to do a capital campaign,’” she says, but they shouldn’t stop there. “Look at both commercial and nonprofit financing options,” she says, from foundation grants to tax-exempt bonds, real-estate loans, and tax credits available to owners of historic buildings.
Once they have bought and renovated — or constructed — their centers, nonprofit landlords should consider hiring a facilities manager, says Diane Vinokur-Kaplan, associate professor at the University of Michigan School of Social Work, in Ann Arbor, and author of several studies of charities that share space. “That way, the nonprofits can focus on their missions,” she says, leaving leaky roofs and clogged toilets to professionals.
Third Sector New England has followed that advice. After grappling with the issue of whether to hire a building manager for its NonProfit Center, says Mr. Spack, the charity “accidentally fell into the right decision,” using the same facility-management firm that had taken care of the building before Third Sector bought it. The firm provided a building engineer and security guards. Says Mr. Spack, “It would have been foolhardy for us to do it any other way.”
