Have you ever wished that property abutting one of your current locations would come on the market? What if a for-profit service provider in your community wanted or needed to exit a facility that was perfect for a service expansion? What if the undeveloped parcel that fits your long-term strategic plan suddenly became available after years of cultivating the owners?
Would you be in a position to close? The timing doesn’t always line up, and it’s possible that you wouldn’t be. But instead of walking away, consider the often-overlooked source of bridge funding: the friendly buyer. The friendly buyer purchases and holds the real estate with the intention that at some future date, your organization can and will purchase from them.
Here are three scenarios that we’ve seen play out in real life.
- You may not have the funds available at the time the real estate becomes available. Despite your best efforts, you just might not have the financial resources to close on the perfect piece of property when it’s for sale or need time to get financing together. Rather than see it go to someone else, your buyer steps in. This can be an individual of means, or a group of people who come together to form an LLC or partnership to own the property. They may hold it at arm’s length or may lease it to you to begin utilizing in your program delivery. This can be a function of the buyer’s financial situation, and whether they’ve paid cash or financed the property and how long you might need to put your plan in place.
- When real estate markets are hot, you may not have time to line up all the committee and board approvals you need to make an acquisition. As staff of non-profit organizations, we rarely have the authority to purchase significant assets absent board approval. If your friendly buyer steps in, you have the time you need for due diligence and approval. If you don’t get approval for some reason, the buyer can always flip the property to some other purchaser. The risk for the buyer is mitigated by that very same hot market.
- You might not be ready for the larger community to know what your expansion plans are. Perhaps there are some legal or political hoops you still need to jump through. Or you may be at a critical juncture in a different capital campaign and don’t want to create a distraction. Whatever the reason, a friendly third party can keep a property available to you while you wait for the right moment.
Asking an individual or group to step into the role can be a great way to leverage affluence and influence in a new and interesting way. Some people will love being asked, some will love the relative complexity, and some may even find a tax benefit for themselves. In one recent deal we saw the buyer donate back a significant portion of the ultimate purchase price to the organization. The non-profit got the land they needed and ultimately at a bargain price!
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