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Nonprofits: To Buy or Not to Buy, That Is the Question…

By David Lebenstein and Carri Lyon, Co-Leaders, Not-For-Profit Practice Group 
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Nonprofit organizations are unique real estate users. Many struggle not only to find locations that can accommodate their need for office and program space, separate entrances, conference facilities, and tolerance for client and traffic issues, but also find space at a price they can afford in an appropriately zoned property in the right area. And gaining approval from the various internal stakeholders, well that’s another process that often makes an already-challenging initiative even trickier.

At some point in their space search, many not-for-profit organizations explore the purchase of a building or a commercial condominium/cooperative as an option for their use. So is buying a property the answer to mission success? Maybe, maybe not.

Yes…. buy!

  • Control over the use of your space
  • Generally predictable/stable monthly, yearly costs. If costs are equivalent to or less than likely rent, that’s even more of an advantage
  • Exemption from real estate taxes ($5-$8 per sf savings in commercial condos, even more for an entire building, but not applicable to commercial co-ops)
  • Good vehicle for capital fundraising
  • Favorable financing/low interest rates — no longer limited to tax exempt bonds
  • Long-term ownership = asset appreciation
  • Ability to make the property a reflection of the organization and image

But then again, buying means…

  • A time-consuming and potentially fruitless acquisition process — limited inventory, strong competition, high prices (especially in markets like New York City and Washington, DC), and uncertainty surrounding the availability of appropriately sized and efficient floor plates
  • Property value dependent on unpredictable, uncontrollable market dynamics
  • Issues relating to expansion/contraction: You own the WHOLE place, and while leasing the surplus is possible, it means you become a landlord and front funds for marketing and broker commissions
  • The need to expend time and capital to build-out space (and potentially change occupancy, zoning, etc.) or cope with a major assessment in a condo/co-op
  • Financial and organizational/staffing responsibility for running and maintaining the building
  • Illiquid investment — immediate financial challenges cannot be solved immediately. Selling takes time

The decision to either buy a property or find another real estate solution depends on each nonprofit’s particular situation and goals, and the current environment of the preferred market. To understand your options, give us a call or e-mail. We’ll help you look at the needs of your organization, how your real estate serves your target community, and the best way to ensure you have the best location to complete your mission, every day.

 

David_Lebenstein_HeadshotDavid is co-leader of Cushman & Wakefield’s national Not-For-Profit Practice Group and has closed hundreds of transactions during his real estate career, which began in 1985. Previously, he served as an executive at Time Equities, Inc. and was co-founder of Interface, a public policy group. He also worked for Mayor John V. Lindsay’s administration.

Carri_Lyon_Headshot

 

As a broker, attorney and site selection specialist, Carri has over 30 years of broad-based real estate experience. She currently serves as co-leader of Cushman & Wakefield’s national Not-For-Practice Group and is regarded as one of the leading nonprofit brokers in New York City.

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