Expanding a Mission Over Time
Many nonprofits take advantage of the lower interest rates that come with tax-exempt bonds. When improvements must be made in stages, occasionally over multiple years, an already complex review process is further complicated with considerations about how assets should be used during the term of the bonds. This was the case with the Lower East Side Tenement Museum in Manhattan.
Museum Project Overview
The Tenement Museum purchased and renovated a multi-story historic building (c. 1888) on Orchard Street in Manhattan. Our client sought to expand but over several years, which led to the necessity for more flexible, holistic solutions that could meet both short and long-term goals for the organization.
Financing for All Project Phases
Some of the more complicated financing involved the mixed-use component of the property involving residential, commercial, and retail usage. The newest additions build on the programming of previous conversion and renovation efforts, including the expansion of programming devoted to visitor services, retail, and education. Funding strategies encompassed all phases of the museum’s expansion leveraging tax-exempt bonds placed directly with large commercial banks and capital grants from the city.
Managing Debt Load
The Tenement Museum originally approached ThinkForward about its latest expansion plans, requesting assistance with refinancing debt on the existing building. We procured that savings through reduced interest rates and a more economical structuring that helped finance part of the new exhibit space. We introduced several more competitive investor options, including the alternative to maintain less in cash reserves, while also securing grant assistance from the NYC Economic Development Corporation.
The result of this improved restructuring is a less burdensome debt load to manage, while also enabling the organization to continue to grow and thrive.
Funding Compliance Strategies
As with all conduit tax-exempt financing through state and local governmental units, our work with the Tenement Museum involved an extensive review process. We guided our client through each step towards eligibility. This often entailed simultaneously addressing the requirements of multiple agencies.
For such a complicated compliance process, it helped that ThinkForward knew the people sitting across the table—knew what constituted a hot button issue and how to secure answers to critical questions.
How Property Use May Impact Financing Eligibility
Although low-cost tax-exempt bonds were a desirable option from the start, the mixed-use nature of the museum’s property had the potential to be problematic. Residential and commercial office uses were being converted as current tenants left. It is possible to lose exempt status subsequent to the issuance of bonds due to a change in the use of a bond-financed facility.
Working with Government Agencies
Furthermore, the restrictive nature of agency requirements can sometimes make this type of financing financially unattractive. In the museum’s case, tax compliance issues represented an additional hurdle to be resolved. ThinkForward tapped into an extensive network of consultants, including real estate tax and law experts, to address this issue and many more.
By managing the process from “soup to nuts” we succeeded in securing for the Tenement Museum the right space under the right conditions.
More About Our Client
For more than a century, a Lower East Side tenement apartment complex housed 10,000+ people, including working class immigrants working toward better futures for themselves and for generations of Americans to come. 103 Orchard Street presents an ordinary building but one that “re-imagines the role that museums can play in our lives,” to quote our client. Visiting the places where our ancestors once lived can result in a profound connection with the past.