Building ownership can be a powerful strategy for not-for-profits looking for greater financial flexibility in a post COVID-19 world. Yesterday, VCIB hosted a webinar on “Building Back Better”, exploring themes around non-for-profit property ownership and building financial resilience with key leaders in the space. Watch the event recording at the bottom of the page, and learn about the top three takeaways for not-for-profits considering ownership:
There are many benefits to owning your space, from increasing organizational resilience to investing more deeply in the community you serve
While the context and goals of individual non-profits may differ, many reap similar rewards from building ownership. For Ryan Collins-Swartz, Co-Executive Director at Tapestry Community Capital, building organizational resilience is the primary motivator for ownership: “Groups come to us because they believe that community ownership builds resilience. It allows not-for-profits to better serve the communities they operate in.” Asset appreciation makes building ownership an attractive long-term investment, reduces operating expenditures, and prevents organizations from being at the mercy of rental prices. Owning property can also serve as a hedge against inflation and can help secure a line of credit. As a result, non-profit organizations gain increased financial flexibility and organizational resilience in a way that is not possible through renting.
Many non-profit organizations are also considering owning their own space because it supports program development. This was the case for Margaret Hancock, Board Member at the Ontario Nonprofit Network: “We had very poor programing space for counseling program participants who were dealing with issues of violence and abuse, and we ended up building a beautiful space that made people feel energized and respected.” While some landlords may be amenable to structural changes to a rented space, most are not willing to grant not-for-profits the flexibility they need. In owning their space, not-for-profits can ensure their space meets the needs of the community they serve. Aside from creating space for new programming options, there are many social enterprise opportunities to create community spaces in Toronto; “There was a feasibility study in our community of close to 1000 people,” said Michelle Francis, Communications Manager at Toronto Community Benefits Network. “Approximately 90% of the participants asked for a pool, 50% were interested in a community kitchen and 80% were asking for spaces to address mental health issues. It was astonishing the number of people that ask for these things.”
Finally, social purpose real estate ownership can serve as a way to challenge structural inequalities; “Social purpose real estate is also about equity, it is a way to address injustice and power imbalances” said Hancock, “Space as an equity issue motivates us to think about our spaces with intention and energy rather than just a place to hang our hats.” Collins-Swartz continued explaining that when a not-for-profit owns the space it operates in, it is able to make decisions that benefit the community without compromising for outside influences; “The pandemic has really shown the power imbalances that exist when the spaces that benefit communities are controlled by groups that are outside of those communities.”
Building ownership can serve as a launchpad for growth if executed successfully
Building ownership has brought significant benefits to the non-profit organizations that have worked with the panelists. Collins-Swartz explains; “Looking back on the past 10 years and the projects with which we’ve been involved, it is clear that ownership of space can be a strong foundation and launchpad for growth.” The panelists typically see organizations come into a stronger financial position after owning their first property. An example of this is the Centre for Social Innovation; “Something that really struck me when we were preparing our latest community bond campaign for CSI, is that when they bought their first building in 2010 they grew from $400,000 in annual revenue to just over $9,000,000, and from one location to now four locations”, explains Collins-Swartz. As a coworking space that relies on in-person revenue, owning their space provided CSI with flexibility throughout the pandemic and underpinned much of their growth.
Organizations that are pursuing a building ownership strategy should meet four key success factors:
1. Clarity of vision and space:
It is essential to have clarity of vision. Without first discerning an organization’s vision and clarifying said vision with the board and staff, it is easy for organizations to become fixated on operational concerns. The organization should also know the type of space they need. Are there are any special requirements to the space? Is it important for it to be location bound?
“A great example is the story of SKETCH, which as of this spring has acquired their space supported by community bonds, a mortgage and some fund raising” explains Collins-Swartz, “For them, the risk of being priced out of their current location outweighed any of the financial risk. So we worked with them to assess the financial plan for how they were going to afford the $4 million dollar purchase.”
2. Management team stability
Having management stability is also crucial – the organization must have strong leadership, staff, and advisors. “You need a champion, someone that believes in owning the space and who will see it through” Hancock explains, “Because there will be ups and downs, changes, setbacks and you really need to be able to hang on to that vision, believe in yourself as a leader and know that you will make your way through this.”
3. A clear financial future
It is also important for the organization to have a clear financial future, recognizing that the time frames involved with building ownership can be lengthy; “It takes a long time for these things to come to fruition, whether you’re building something new or whether you are buying and renovating, it’s likely going to take years. For Family Services Toronto, it took 10 years from the initial discussions, planning, city, developers, to completing construction on the property. During that time some of your vision will change and you need to have confidence when adapting” explains Hancock.
4. Strong partnerships
Finally, strong partnerships are key. Organizations should partner with individuals that can bring expertise into the conversation, from developers and consultants to financial partners and legal experts. When not-for-profits are looking to invest in their future through building ownership, a broad sounding board is critical. Often, partners can unlock opportunities that may not have existed without their help. A good example of this is when the Community Action Planning Group (CAPG) was able to set aside a facility in the Jane and Finch area to be turned into a community hub and arts center; “We partnered with people that could bring expertise into the conversation.” Said Francis, “If it wasn’t for the Toronto Community Benefits Network we would have never been able to present our case to Metrolinx.”
Watch the event and the full discussion here.
If you’d like to learn more about building ownership for non-profits, read our article: To buy or to rent: Evaluating the right path for your non-profit.
Are you considering owning social purpose real estate? If so, pleaseand we’d be happy to discuss the different financing options available.