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Real Estate Ownership For Non-Profits

Non-profit organizations that think of real estate as out of reach and a liability, when there is rent to pay, may be missing out on a chance to strengthen their organization through real estate ownership.

The growing trend toward non-profits becoming real estate owners and landlords responds to two major needs:

1. Reliance on government funding has left some non-profits scrambling to stay open or forced to close their doors when political or economic shifts suddenly reduce or eliminate funding. Real estate ownership and tenant income ensure financial resilience for non-profits.

2. Small businesses and non-profits are squeezed out of urban areas as developer competition drives real estate prices and leasing costs out of reach for small organizations. Shared spaces operated by non-profits combine affordability and coworking support for tenant ventures with rental income to cover core costs for non-profit landlords.

Shifts in thinking for management, board directors, and everyone involved are essential for success since each real estate transaction is unique and that is even more true for non-profits. One recent transaction by the non-profit Centre for Social Innovation (CSI), with offices in Toronto and New York City and an expanding list of global coworking partners, illustrates how flexible decision-making and how focused creative thinking must remain during the strategizing and buying processes. CSI has successfully adopted a different way of thinking about money and has made real estate ownership a core strategy.

On October 31, 2014, this conviction culminated in CSI closing on their second building after raising $1.4 million in under 4 months against their first building and, over 8 months from 60 community investors, the $2.3 million they needed for the purchase, according to CSI co-founder and CEO Tonya Surman. The beam-and-brick 64,000 square-foot commercial property in downtown Toronto will replace the original CSI location, which is a rental. This building was recently sold and the new owners have increased rents. This pattern of rising urban rents is why CSI advocates ownership for non-profits.

Back in 2010, CSI was a small non-profit organization working on a business model that involved owning their own building.

In a recent phone interview, CSI co-founder and CEO Tonya Surman explained their original real estate strategy, which included a funding push that generated results in less than 8 months: “What we did was partner with the City of Toronto and got a loan guarantee, then we got an advantageous mortgage through Alterna Credit Union, and then what we did—we had another $2 million to raise—was ask, ‘What if we were to turn our social capital into financial capital?’ In doing this and pushing on this idea, we created something called the community bond, which allows every-day, unaccredited investors to be able to buy a bond, which is secured against the building, where we not only return the money [invested], but also offer a 4% interest rate return over a five year term.”

CSI continues to build on its ownership momentum in purchasing their second building: “We have successfully launched a campaign to raise $4.3 million over the next 6 or 8 months—we hope to be able to do it even sooner,” said Surman, “In under 45 days we have raised $1.8 million from our community investors.”

 

When I asked Surman what shift in thinking would be necessary among staff and board members of an established non-profit to transform their view of money and real estate to a grounded, proactively financial one, Surman explained the importance of an entrepreneurial board and organizational outlook: “I work very hard to ensure we have a really entrepreneurial board—a board that is very based in the community, but understands the power of entrepreneurship. You know one of the problems is that too many boards of directors are really very risk adverse. They think that their mission is to protect instead of to actually solve.

“The shift in thinking is to ‘money is not bad,’ ‘money is just energy.’ If we keep thinking of money and sales & marketing as bad things, [money] will never come to us. Instead we embrace the energy that money gives us to inform, to flow, and to enable, and we stop using that old thinking—money is bad, capitalism is bad. Instead the question is, ‘What is capitalism in service to?’ Harness the energy, vitality, and entrepreneurism which is actually inherent in our community and apply this to solving community-based challenges.”

Armed with the ownership vision and followers committed to bringing this goal into reality, CSI braved new real estate ground and has ended up, ten years later, providing shared spaces for more than 800 organizations at 5 locations.

If you are intrigued by Surman’s comments on the power of community bonds and the role of real estate ownership in non-profits, the Centre for Social Innovation (CSI) provides a wealth of information and resources through their websites, and they are always ready to share knowledge and ideas:

  • CSI HQ www.socialinnovation.ca Includes three insightful publications (free as PDF downloads): Proof social innovation impact report, Rigour a how-to manual, and Emergence an outline of how CSI was created.
  • www.communitybonds.ca Also available is the do-it-yourself guide, “The Community Bond —An Innovation in Social Finance” (PDF and hard copy), which explains how to “help your organization leverage its most important asset—its social capital—to pursue its mission, build its resiliency, and create more vibrant communities.”RESOURCES:1. Social Finance 101 ” The Agenda TVO Includes interviews with Tonya Surman and two other social financers. (24:39 min)
    2. “Thinking Differently About Money” in the “Shared Experience” stream of my blog: What’s Your Point?. Listen to the Podcast of my entire interview (17 min) with Tonya Surman, co-founder and CEO of the Centre for Social Innovation.

Written by PJ Wade for www.RealtyTimes.com Copyright © 2014 Realty Times All Rights Reserved.