1 July 21, 2015 YWCA USA Financial Leadership & Management Program Facilities and Finances: Risks and Opportunities for every woman 1 Join us on

2 WELCOME

3 Financial Leadership Model

4 Nonprofit Program Expenses Specific Program Costs Shared Costs Admin Costs

5 Why cover facilities in Financial Leadership? Typically largest asset Requires significant “non-adjustable” cash Can magnify or dampen IMPACT

6

7

8 Today’s Conversation Understanding facility options with Pros and Cons Avoiding pitfalls of facilities New trends and best practices

9 Before You Decide...

10 What’s Driving Facilities Planning? Program needs Administrative space requirements Community convening spaces

11 What’s Driving Facilities Planning?

12 Facility Needs HighMediumLow Housing programs Health care Child care Health & Fitness Schools Youth development Skills trainings / workforce development Working wardrobe Counseling Advocacy Administration Fundraising Depends in part on program type and need for presence.

13 Understanding Options

14 What’s Included: Space –Build out? –Shared space? Utilities –Technology? Maintenance Tech Terms Single or Multi-year Rent stability and increases spelled out Options to renew Security deposit Leasing

15 Leasing Advantages: Flexibility –Scale of programs –Make-up of programs –Location of constituents Repair and maintenance typically not your responsibility Perceived less risk Challenges Less stability –Subject to local economy and rent increases –Lack of control over terms Lower visibility Build out can be expensive Competition for finite financial resources

16 Owning / Buying What’s Included: Single or multi-tenant facility Bricks and mortar What it Entails: Financing: –Reserves –Capital campaign –Loans (construction and other) Construction –New or renovation –Build out –Design

17 Advantages: Stability –Multi-year mortgage payment –Asset with capital appreciation potential Control of Space –Visibility, image –“Community Institution” Possible lower costs –Property taxes / Depreciation Challenges: Lack of flexibility –Community need or demographics may change Long-term Maintenance Skills required –Facility management Market fluctuation –Rentals and value Owning / Buying

18 Decisions, Decisions Own “old” FacilityOwn “new” FacilityLease +Community institution -Does it serve your programs today? -Deferred maintenance +New, attractive facility +Designed specifically for your Association +Opportunity to engage / attract constituents -Competition for operating funding -Stability of programming -Cost over-runs +Flexibility -Hard to finance build out -Image

19 What To Do About Our Current Facility? 1.Can our facility support our mission, needs? Does it accommodate programs; is it sited for accessibility? What capital, operating costs required in next 3-5 years? Do we have capacity to secure those funds? 2.Would a Sale Benefit Us Financially— Meet our space needs and Preserve Asset Value? Net Proceeds = Sale price minus:  Broker fees, taxes, other sales costs  Pay-off of mortgage  Repayment of government loans/grants for capital  Relocation expenses Net Annual Operating cost: our facility vs. rent elsewhere? Annual distribution for operations (e.g. 4% of last 12 quarters)

20 Decision Making Considerations Can the organization project operating revenue of a surplus (1 to 2%) over the next five years? Has the organization experienced rapid growth or does it expect to in the next five years? –Can it predict that growth? What percentage of the organization’s revenue comes from government contracts? –These doesn’t usually keep up with inflation.

21 Decision Making Considerations Does the organization only serve one community? Does the organization understand the migration of its constituents and their needs?

22 Can the Facility Support Mission/Needs? Would a Sale Benefit Us Financially? Action Plan YesNo Develop capital plan Take steps to raise funds (e.g capital campaign, rentals, financing) Make facility improvements NoYes Take steps to sell the facility Secure alternative space Invest net proceeds; set annual distribution rate to maintain “corpus” Decision Making Approach

23 FACILITY PITFALLS Financial Leadership

24 Pitfalls: Ownership of Long-Held Historic Buildings Deep emotional connection Don’t understand community Lack of skills to maintain the building Deferred- maintenance

25 Time Out: Depreciation What is it? –“ A reduction in the value of an asset with the passage of time, due in particular to wear and tear.” Is it cash? Do we have to have it? Do we have to fund it?

26 Pitfalls When Selling YWCA-Owned Buildings Overlook significant governmental obligations if used to purchase building or provide upgrades Use of assets to fund structural deficit

27 Time Out: Using Reserves What are reserves again? –Liquid reserve: Unrestricted cash + investments Why are we using reserves? –Timing? –Structural? –Investment?

28 Pitfalls When Buying (or building) Buildings Poor projections –Programs –Construction costs –Moving –Staff time Lack of contingency

29 MITIGATING PITFALLS Financial Leadership

30 Realistic Projections Understand organizational facility costs: –Maintenance (annual and ongoing) Include: –Staff time –Moving expenses –Adequate contingency –Program related costs –Revenue adjustments for moving –Capital campaign / development expenses

31 Realistic Projections Utilize comparable organization costs Fund depreciation Compare projections to alternatives

32 Human Capital Board knowledge and expertise Adequate facility management staff –Especially important if considering rentals Consultants –IFF, Other CDFI Loan Funds

33 Community Understanding Needs of constituents Demographics and changing location or preferences of constituents Real estate values and changes Marketplace for rentals

34 OTHER FACILITY IDEAS Financial Leadership

35 Free or Discounted Space Advantages Collaboration Low rent and opportunity to share costs Flexibility Access to clients Challenges Less control Inadequate space? Need to cover costs

36 Shared Space Advantages Synergy between organizations One-stop shop for clients Greater impact Halo effect from being with another great organization Challenges Time consuming to arrange details Need to have shared values up front Donor perceptions Risk from being tied to other organizations

37 Shared Space: Questions to Ask Do we share the same values? Do our programs work well together in: –Constituents served –Outcomes –Service approach

38 Shared Space: Example Sojourner Family Peace Center

39 Your Questions

40 Recap Facility MISSION IMPACT

41 Recap Use realistic projections Know your options! (e.g. shared, in-kind) Take advantage of resources (e.g. human capital, YWCA intranet) Understand your specific facilities needs

42 YWCA Facility Resources The following resources are available on the YWCA USA Intranet Resource Library: 1.Click on “Operations and Policies” then “Buildings and Grounds” –YWCA Facilities Management Guide –Facilities Checklist and Budget Planning Worksheets 2.Click on “Property Management and Risk Management” –Risk Management Self Inspection Checklist –Risk Management Planning Guide (all risk categories)

43 YWCA FLM: Discussion Site

44 Next Webinar: August 25th The Art and Science of Budgeting and Dashboard Driving Telling your organization’s financial story Stages of budgeting including roles and timelines Cut through the clutter with a visual dashboard for engaging stakeholders

45 Steve Zimmerman Spectrum Nonprofit Services