Collaboration is essential to success
Several critical players work closely together on the cultural organization’s path to facility ownership. These typically include a foundation, a Community Development Financial Institution, the local government, a real estate holding company.
Arts and Cultural Organization
Facing displacement and lacking key capital, assets, and real estate expertise.
May provide the capital (in the form of a grant or program related investment) for the pool of funds to address the issue of facilities.
Using the equity provided by the foundation, a bank offers a line of credit to make more liquid capital available on a timely basis, which is required for the purchase of real estate.
Community Development Financial Institution
The Community Development Financial Institution (CDFI) uses the bank capital to establish an initial pool of funds for the property purchase and increases it through aggregating other funding streams. The CDFI also structures both the sources and uses of funds, including the foundation grant dollars, additional funds borrowed from the bank, and equity loaned through the Federal New Market Tax Credits Program, or other sources. The CDFI may work jointly with the real estate holding company or another entity to provide real estate expertise to identify appropriate properties.
Real Estate Holding Company
The Real State Holding Company is a stand-alone entity that works with the participants to ensure that the focus remains on a shared vision and goals. In partnership with the local CDFI, a holding company, such as the Community Arts Stabilization Trust, purchases real estate on behalf of several organizations. They also help organizations with decisions to purchase facilities, assist with financial planning, and conduct organizational due diligence. In many cases, they maintain the pipeline of nonprofits that need help with facilities (this work is shared with the CDFI).
Plays various possible roles, including providing zoning designation, intervening in public policy to encourage access, or identifying certain properties or neighborhoods. The city can bolster the case for mitigating displacement, provide seed funding for nonprofits to remain in communities, and contribute to the conversation on maintaining diverse neighborhoods, among many other roles.
As the need arises for an expanded pool of capital, other foundations, corporate, or government funders can contribute. They can also bolster the process through supporting an individual organization’s capital campaign or operating costs. As the capital pool is developed, various financial instruments are employed including foundation program related investments funds.