[jyl]

For RE and other braintrust consideration.

I’m on my neighborhood association (NA) board. We are a 501c3. A non profit in the neighborhood owns a property (land + building) that is used as a rental venue - weddings, parties, meetings, classes, dances - as well as for their own events. They are in financial straits and have floated the idea of donating the property to our NA. For reasons related to how they received the property, they cannot sell it, they can only dispose of it by gifting to another non profit. Their organization and our NA have worked together over the decades. Our NA is fairly familiar with the building, as we’ve held our board meetings there for many years as well as some large neighborhood fundraisers and other events. I know their board president and helped publicize their activities and tried to help them get more members, via our neighborhood newsletter. So we’re friendly organizations with personal and historical ties.

It may be an opportunity for our NA to acquire an income stream that we can use for community needs. The building is historically significant to our neighborhood and we’d like to make sure it is preserved. Naturally, we’re interested.

I’ve come up with these issues to study in our due diligence. Can you think of others?

1. Revenue, operating expenses, capital needs. We’d review their accounts related to the property to see how economically viable its been for them, as a rental venue.

2. Property condition. We know some things about the property and needed work. We can get it inspected (we have architects and contractors who volunteer with our NA, one is on our board), and review city records for any violations/pending issues.

3. Management. It isn’t clear that our NA board can, should, or wants to handle the operation of a rental venue. I may propose contracting with a manager, ideally but not necessarily someone from the neighborhood, to operate the property. There are a number of potential persons I know here - think successful people who did similar businesses then took a hiatus to have kids and are now looking to re-enter the work-outside-the-home world, but don’t need to make big bucks because the family income is already more than sufficient, that kind of thing. I am thinking a profit share arrangement might create suitable entrepreneurial incentives. We would need to think through employment issues.

4. Legal structure. Our NA is a non profit, and if we have too much unrelated business income then it complicates our tax filings and could jeopardize our non profit status. We probably need to remain a non profit, for various reasons. I’m talking to a non profit consultant (conveniently, also on our board) and will consult a CPA and non profit attorney about structures that would minimize our unrelated business income or its effect on our status.

5. Legal title and liens. We’d do a title search and have a real estate lawyer review it.

What am I missing? Anyone have experience in this stuff?