The Special Appeal of Commercial Condos

Fulfilling your organization’s mission while simultaneously dealing with New York City’s real estate market is a tall order. Is it any wonder that many nonprofit organizations see an office condominium purchase as an appealing option?

Own Property—with Class A Building Amenities

Nonprofits, just like any business, can cash in on a strong sales market. You can sell and consolidate real estate holdings and effectively cast off the responsibilities (and liabilities) of a building owner. Buying space within a commercial office building delivers the advantages of ownership without compromising on amenities and location. No small motivator for residents of Manhattan.

Differences between Nonprofit and For-Profit Property Acquisitions

Whether scaling back, consolidating, or relocating assets, or some mixture of all these factors, nonprofits face challenges and opportunities unique to their sub-sector.

From potential site analysis to financing options for capital improvement projects, it’s a different ball game for nonprofit organizations. Condo ownership can be appealing in ways that go far beyond the “cash out” that comes with selling valuable real estate. A fiscally responsible strategy may involve having liquid assets that can then be reinvested into endowments and into expanding programs. But, there’s also the argument for maintaining some of the benefits of property ownership. This is especially true when faced with potentially losing real estate tax breaks by leasing. 501(c)(3) status makes an organization exempt from paying real estate taxes.

Enlist Expert Real Estate and Financial Help

Nonprofits face additional challenges specific to their status when financing property acquisitions and capital improvements. You may not have the internal resources (or mindset) to anticipate and navigate processes best tackled with a team of legal, accounting, real estate, and financial experts at one’s side. Tax-exempt financing entails various approval processes and requirements by the lender and bond issuer, which is why it makes sense to tap into a network of professionals.

You’ll have an advantage if your partners in the financing process know the people sitting across the table—know what constitutes a hot button issue for the lender and how to secure answers to critical questions.

Understanding Where Your Commercial Broker is Coming From

In New York City, brokers often work within a landscape of coveted neighborhoods and constrained supply. Office condo buildings are at a premium in Manhattan. You will more often than not be competing against for-profit businesses. Companies with high infrastructure costs (doctors, dentists, skilled trades) also find office condos an appealing option. Compounding this highly competitive market are foreigners buying commercial properties as investments.

Navigating the Real Estate Market

Nonprofits should consider differences in business and sales cycles and be prepared at each twist and turn to provide appropriate information, analysis, and forethought. When you adhere to a predictable calendar of fundraisers, capital campaigns, and endowments, the fast pace and unpredictability of the real estate market can be jarring, to say the least.

Financial Planning and Real Estate

Planning for significant structural, operational, and programming changes exists for many nonprofits within a 5, 10, 20-year context. Conversely, the speculative nature of funding philanthropic initiatives often leads to particularly complex financial transactions. Consolidation and expansion plans will bring unexpected challenges, including refinancing debt and the need for economical structuring.

Process Worth Your Investment

All of these factors can translate into a lengthy, complicated process. However, with the right people to help you, the commercial condo market can ultimately be very rewarding. Ownership—especially without having to be a landlord—provides a level of independence not present when leasing a facility.