As those who work in the industry know, collaboration is a key ingredient in successful commercial real estate transactions. It’s best when both sides can walk away feeling good about the deal. That was the result after the recent sale of an office building in North Oak Cliff.
The deal involved two nonprofits, Youth 180 and AIDS Services of Dallas. Youth 180, the seller, provides counseling services to youth and their families for the prevention and treatment of substance abuse. Its led by Keri M. Stitt, president and CEO of Youth 180.
ASD, the buyer, provides housing and support services such as food, transportation, and employment services, for low-income individuals and families living with, impacted by, or at risk for HIV/AIDS.
My company, Solender/Hall, was involved as the real estate broker. Here is how it transpired:
Youth 180 received an unsolicited offer to purchase a 10,000-square-foot building on Tyler Street. The
board decided it was willing to sell the property and lease back some of the space. The organization
determined it only needed about 5,000 square feet.
When the potential buyer’s proposed leaseback terms for the entire building substantially increased Youth 180’s budgeted occupancy costs, a sublease tenant to share the costs became a necessity if the transaction was to be viable. Finding a compatible sublease tenant was imperative. ASD came to
mind as a possibility.
Led by CEO Traswell C. Livingston III, ASD developed and owns five multifamily properties in Oak Cliff. The nonprofit has a strong desire to remain in the North Oak Cliff area where it has operated for more than 37 years. It was a challenge, though, as North Oak Cliff has few small office
buildings for sale or lease, and parking is almost always a challenge.
After touring the building, Livingston recognized it was a unique opportunity for ASD to buy a property in North Oak Cliff and have another nonprofit help carry the occupancy costs. The other potential buyer graciously stepped away, thus allowing the two nonprofits to begin the negotiation process.
I have learned from past transactions between nonprofits that they are not easy to accomplish and require close communication between the CEOs of the organizations, both of whom must be able to work through the inevitable bumps that occur. This is highly unusual because in most real estate transactions, the principals rarely have direct interaction. Communication is typically through the brokers and the attorneys.
In this case, the two CEOs knew each other from community work, and they had the wherewithal to know that working together could lead to a greater good for both organizations. They established trust and open communication as a priority.
Collaboration also required the confidence of both boards in the transaction, ensuring they did not burden the CEOs with unreasonable requests. The boards needed to trust their leaders and to deal with some of the ambiguities in working out the details of the complex sale/purchase/leaseback transaction. Attorneys involved also effectively represented their clients while keeping the transaction moving forward.
The result? The collaboration and transaction worked. ASD purchased the building from Youth 180, and Youth 180 is leasing back approximately half of the space. There will be some shared spaces, and the two organizations have already collaborated on joint grant efforts to enhance services in the community.
Youth 180 will continue having its administrative offices in the building. ASD will move from its current leased office in Oak Cliff Tower on Zang Boulevard at the expiration of its lease. It will use its new space primarily for administration, but it will also expand to include outreach services. Both organizations will be able to achieve their goal of remaining in North Oak Cliff.
Through creativity, hard work, communication, and commitment, the two nonprofits both walked away a winner—as did the entire community.
This article was originally posted in DMagazine Commercial Real Estate – Nonprofits | CRE Opinion