The NonProfit Times - November 1, 2008 - (Page 25)

IS PURCHASING AN OFFICE CONDO THE RIGHT MOVE FOR YOUR NOT-FOR-PROFIT? INDUSTRY EXPERTS SAY YES. summer, Time Equities, Inc. hosted a symposium in New York City to discuss the beneﬁts of ofﬁce ownership for not-for-proﬁt organizations. Speakers from various facets of the not-for-proﬁt and ﬁnance industries addressed questions and key concerns regarding the procurement of and transition into an ofﬁce condominium. Edward G. Lloyd, SVP of Operations and CFO of the U.S. Fund for UNICEF, described what prompted his organization to purchase 75,000 square feet of ofﬁce space at 125 Maiden Lane. “Our lease was about to end. We had outgrown our space, and the space itself just wasn’t attractive,” said Lloyd. “We asked ourselves, ‘What’s our other alternative?’” After running analysis on a multitude of scenarios, the company concluded that over 30 years, it would save $25 million if it chose to buy. “It was a no-brainer,” Lloyd said. Lloyd went on to address the ease with which his company was able to transition from rental space to ofﬁce condo. His most informative tip: “Put together a great team. You need a good legal team, a good ﬁnance guy, a good architect… We had a really great team.” From demolition to move-in, the U.S. Fund’s entire ofﬁce condo took only 14 weeks to assemble. As for expenses, Lloyd admitted that the initial cost of purchasing an ofﬁce condo was more than if his organization had chosen to continue renting, but in the long term the not-for-proﬁt will save money with the purchase. Over the last three years alone, the property value has increased at twice the annual rate the U.S. Fund anticipated. According to David Lebenstein, Senior Managing Director of Colliers ABR’s Not-For-Proﬁt Division, the fact that 501(c)(3) not-for-proﬁt groups are exempt from paying real estate taxes is a huge advantage. “That could be worth anywhere from $5 to $10 to $12 a square foot, which is a very signiﬁcant beneﬁt when you compare it to leasing,” he said. “For strong, stable not-for-proﬁts that can predict their growth and future, owning is the way to go,” said Lebenstein. As proof, he cited the case of 666 Broadway, which sold for $850,000 a ﬂoor in 1985. In 2007, one ﬂoor sold for $5.7 million. “We’re seeing buildings trading at $600 to $800 a foot today that were trading for $300 as recently as 2005. There’s no question that these spaces will be worth more in 2012 or 2020 than they are today.” Paul T. Lamas, SVP of the broker-dealer Roosevelt & Cross, elaborated on the initial costs of buying an ofﬁce condo. When procuring a bond, the closing costs are actually higher than typical ﬁnancing, explained Lamas. “There are fees for the New York City Industrial Development Agency (IDA), which issues the bond. There are fees for lawyers. Closing costs tends to range between 3 and 5% of the total bond amount.” But when the IDA issues a bond, the organization waives the New York State and City mortgage recording tax, which is equal to 3.8% of the mortgage amount. “So that really brings it back in line with traditional ﬁnancing,” said Lamas. “There are a wide range of opportunities for ﬁnancing,” said Lamas. “If you obtain a letter of credit from a commercial bank, you can get a Last low ﬂoating rate, and you have to add on to that the annual cost of the letter, which is usually around 1%.” Additional options include variable rate ﬁnancing – which Lamas admitted can be “challenging for not-for proﬁts to consider,” but he assured that it’s a reliable method – and private placement-type ﬁnancing. According to Lamas, the economic downturn in the United States has created a high demand for tax-exempt bonds, due to their reputation as safe and secure investments. “If you’re a not-for-proﬁt that has been leasing ofﬁce space and is looking to secure a tax-exempt bond to acquire a condo in Manhattan, it’s really viewed as a straightforward transaction by the banks,” Lamas said. “Through the employment of these bonds, we have been able to secure ﬁnancing anywhere from 75 percent up to 100 percent of the project’s cost.” He explained that when the U.S. Fund for UNICEF purchased its space, Roosevelt & Cross secured a bond worth more than $43 million, while the U.S. Fund spent only $500,000 in out-of-pocket expenses. Conversely, another client, the Guttmacher Institute, chose to put more equity into its purchase, covering $1 million of a $12-million-dollar project. “Manhattan ofﬁce rents have reached historic highs,” concluded Michael Rudder, Director of Ofﬁce Sales for Time Equities. “It has become nearly impossible for not-for-proﬁts to survive in Manhattan, despite their vitality to the city’s success.” With the option of ofﬁce condo ownership, Time Equities is giving these organizations the opportunity to own their future by taking advantage of a unique host of beneﬁts that were never before available to them. FOR MORE INFORMATION CONTACT Michael Rudder at 212.206.6072 mrudder@timeequities.com www.teofficecondos http://www.teofficecondos.com http://www.teofficecondos.com

Table of Contents Feed for the Digital Edition of The NonProfit Times - November 1, 2008

The NonProfit Times - November 1, 2008 Reach Out Community Investment Loans Agencies Aim For Back Office Savings Contents Page 4 Special Report: An In-Depth Study of America's Largest Profits Charity Accounts Foretold Ecomonic Meltdown Liquid Assets Groups Shaving Expenses With An Eye Toward ROI Green Is Good Governance Becoming Institutionalized National September 11 Memorial & Museum Finds Its Footing NPT 100 Groups Turning Real Estate Into Cash NPT 100 Investments Beat Broader Market The NPT Power & Influence Top 50 Gala Calendar NPT Jobs Resource Directory

The NonProfit Times - November 1, 2008

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