Nonprofits Are Floating In A Sea Of Uncertainty. Cushman & Wakefield Is Building A Life Raft

From federal budget cuts and shrinking donor bases to a national layoff crisis, it’s possible that it has never been a more difficult time to operate a nonprofit in the U.S. 

These organizations have always faced challenges, but with the nonprofit sector losing at least 22,757 full-time jobs between Jan. 20 and June 30 of this year, many are struggling to provide core services. In response, some organizations are looking at their offices, whether they own or lease them, to see if they can find creative ways to get the funds they need.

“Nonprofits are looking for ways to get equity out of their properties,” said David Lebenstein, executive managing director and co-chair of the not-for-profit advisory group for Cushman & Wakefield. “We've handled half a dozen sales in the last year from multiple nonprofits in boroughs across New York, trying to help them get some much-needed cash.” 

Lebenstein and his team at Cushman & Wakefield have been working with nonprofits to extract value from their real estate to help them continue to serve their communities. He is working with a handful of nonprofits to sell their headquarters or other major pieces of property to combat significant budget cuts. 

“They don't really want to sell, but they have this asset, it's a lot of equity, and they're making the decision to downsize for the good of their organization,” he said. 

Along with selling their properties, Lebenstein’s team has been helping nonprofits employ new workplace strategies to downsize smartly. These include reassessing how many desks an organization actually needs and whether they can be shared, determining when people are coming into the office versus working from home, and more. As a result of these conversations, he said, some nonprofits that are leasing 30K SF discover that they could operate comfortably in a space half that size. 

Lebenstein has also been helping nonprofits loosen their tight margins through creative financing strategies. He explained that in New York City, organizations that sign a lease for 30 years or longer can work with the property owner to create what’s known as a leasehold condominium. 

Through this model, the organization would be treated as the owner of the space it occupies for tax purposes, even though it is technically only a tenant. As a nonprofit organization, gaining this status means it will no longer have to pay real estate taxes, or any other taxes, on the property. 

The Cushman & Wakefield team worked on this type of transaction for two NYC nonprofits — the Community Preservation Corporation and the Bowery Residents Committee. This deal was particularly important for BRC, Lebenstein said, an organization that works with people who are experiencing homelessness, because it was looking to move its executive offices into a space where it could also accommodate a 300-bed shelter and a day treatment counseling program. Through the leasehold condominium agreement Lebenstein and his team put into place, the organization was able to move into a 100K SF property and stay off the tax roll. 

Another financial tool nonprofits should consider is tax-exempt bond financing, Lebenstein said. Through programs like Build NYC, nonprofits can receive tax-exempt bond financing for real estate projects, debt refinancing and other capital needs.

“With this type of financing, the mortgage rate is typically lower than the bank rate and you can lock it in for 30 years, which is why we recommend it to some of our clients,” added Elizabeth Holmes, a senior associate also on Cushman & Wakefield’s not-for-profit advisory group. 

Lebenstein doesn’t see the challenging environment nonprofits find themselves in shifting anytime soon, and they will likely have to continue to make difficult decisions about personnel, the programs they offer and their real estate. Through it all, however, Cushman & Wakefield plans to be there to guide them through it, he said. 

“It's going to be a difficult time for nonprofits for a while, but we’re here to help them work through it, as challenging as it is,” he said. “Our goal is to come up with creative solutions to get them the funding they need to continue their work.” 

​This article was produced in collaboration between Cushman & Wakefield and Studio B. Bisnow news staff was not involved in the production of this content.

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