Every Nonprofit Can (and Should) Take a Mission-Based Approach to Nonprofit Real Estate
A nonprofit’s mission can and should underpin all of the organization’s significant decisions. In applying for funding or recruiting executive leadership, nonprofits are acutely aware of the competitive landscape before them and the impacts of these processes’ outcomes. However, when navigating a critical moment in nonprofit real estate, such as initiating a major renovation or deciding whether to buy or lease property, a mission-aligned approach may not seem plausible.
Real estate projects are costly and time-intensive, and it can be tempting to rush the process or simply take the option with the most attractive short-term impacts. Despite prevalent expectations to the contrary, any nonprofit can take a thoughtful and mission-first approach to its real estate if the organization is appropriately prepared.
Before making new real estate commitments, a nonprofit should truly understand its needs and capacities in three key areas: physical, financial and organizational. Clarity and consensus in all three is necessary for ensuring that mission is driving the real estate. This type of multi-faceted assessment requires more than just crunching numbers to determine square footage needs or an ideal range for occupancy expenses.
From a physical perspective, the adjacency of certain programmatic elements often becomes a non-negotiable factor. There may be very specific relationships required between patient waiting areas, clinical spaces and staff break rooms, as an example. Additionally, a nonprofit should always analyze its financial capacity before initiating a major real estate project. To empower smart financial decision making, there must be clarity about debt capacity and debt tolerance, the timing of potential project funding and more.
Organizational preparedness is often the most overlooked aspect in a comprehensive self-assessment. In the short-term, it is important for an organization to determine whether its executive staff and board have the capacity to champion a real estate project to its successful conclusion. In addition, a long-term perspective on organizational impacts must be embraced.
For example, the control that comes with owning a building may be very appealing for a performing arts group, but the burden of generating income by renting space when the theater is dark may detract too much from mission-critical programs. Delving into your nonprofit’s unique physical, financial and organizational attributes will sometimes fuel challenging conversations, but the process will ultimately ensure that any real estate decision is well-informed and mission-aligned.
Moreover, nonprofits would be wise to take a selective approach to seemingly appealing bargains that surface during the course of a real estate project. While lawyers, real estate developers, and investment bankers may make for excellent board members and highly valued contributors to an organization’s operations, their offerings of pro bono services can be a double-edged sword. Even when an advisor has the best of intentions, his or her firm’s availability for a pro bono client may be very limited, which can lead to delays and frustration.
Similarly, nonprofits should be wary of “free space” and other donated items, such as furniture and equipment, as the complications they cause may outweigh their benefits. Such opportunities routinely detract from an organization’s plan and will undermine the thoughtful effort made to date.
Making a real estate change, big or small, can be transformative for a nonprofit. In considering the numerous ways that real estate can either bolster or hinder an organization, it becomes clear that such projects warrant careful decision-making. It may seem like tough love, but failing to implement a thoughtful and mission-first approach to real estate will hamper an organization’s ability to succeed. By taking the time to carefully consider itself and the real estate opportunities presented, a nonprofit will be much better-positioned to advance its mission in the short- and long-term.
Paul Wolf is co-president of Denham Wolf, a real estate services firm serving New York City nonprofits since 1998.
Paul is an established leader in the field of real estate and nonprofit consulting, with over 25 years of development, brokerage and consulting experience. Paul’s expertise has been shaped by his long history and deep experience in New York City real estate, and is proven by his strong record of successfully realizing complex projects. As a principal of Denham Wolf, Paul’s projects have included providing guidance and financial expertise for a range of arts, cultural, community development and educational organizations. He has advised nonprofits on major development projects, represented tenants in acquiring and developing property, helped to finance projects through both traditional and less conventional routes, and represented developers and property owners to secure commercial tenants.
Jonathan Denham is co-president of Denham Wolf, a real estate services firm serving New York City nonprofits since 1998.
Jon is an industry leader in the field of real estate consulting, with over 25 years of experience in planning, design and construction in New York City. Guided by his complementary background in civil engineering and urban planning, Jon co-founded Denham Wolf with Paul Wolf to provide integrated real estate services to nonprofit organizations as a means towards sustainable and dynamic urban development. Jon has successfully managed a multitude of urban development projects, including planning and feasibility studies, building and facility assessments, and the design and construction of a diverse range of building projects for educational, health care and cultural organizations.