Open Forum

I will try to be concise in describing the background for my question.

There is a property in my area that would make a wonderful museum and gardens to become a major draw for tourists and a fantastic learning opportunity for area residents, primarily youth.  Here's the situation.

This property is owned by a holding company with a number of shareholders.  The property is for sale. The lead investors may have an interest in leaving a lasting legacy.  This is unknown at this time. The interest of all the shareholders is, probably, a return on their investment.  The asking price of the property is around $2M.  How would one structure a deal that would allow the potential 501c3 to acquire the property and have the shareholders realize a return on their investment?

By being concise I have probably left out information.  There is also plenty I don't know yet.  This is just an initial thought about something that can benefit the area.  Please ask questions and if I do not know the answers I will certainly try to find them out.

Thank you all in advance.

Before any involvement with a potential purchase of the property I would examine the zoning regulations re:museums. Municipalities require acre size, traffic, FAR,etc. If you plan to get involved with grants and fed regulations one requirement is that the building you are using as a museum cannot be used as your residence. I would also look at costs to set up the property such as clearing, roads, benches, flowers, sculpture purchase,etc.

Return on investment is a challenging concept when it comes to museums. The "return" most nonprofits are looking for is related to their mission. That could be broadly defined as: What kind of impact does the museum have in changing how people see the world?

Any excess earned income (profit) is reinvested in supporting that mission either by building an endowment or increasing programming.

It is a challenging task to serve a nonprofit mission and generate enough revenue to satisfy investors. It is equally challenging to find the money to pay the mortgage if you can manage to borrow the money to buy the property. 

If I understand the situation correctly, the most successful strategy for this kind of opportunity is to raise the money to buy an option to purchase the property. The option should tie up the sale of the property for long enough for you to raise the money to buy it outright and begin development as a museum--perhaps as much as one or two years.

If the idea is compelling, you should be able to make a case to potential funders in that time and then be able to start up debt and obligation free so you can focus any revenue on fulfilling your mission.

This all depends on many variables. We help people with this kind of project frequently. I'd be happy to talk about it on the phone if you think it would be helpful.

Guy

Good morning, Kevin. Our firm has been involved in several cultural "start ups". Buckle your seatbelt -- it will take longer than you think, with many ups and downs.

Is there an existing 501(c)3 that is a logical partner for this project, at least in the beginning? Perhaps a civic association (Rotary, Kiwanis) or a local community foundation? 

It sounds as if some of the property owners will want to realize a financial gain from the sale of the property. As suggested earlier, you may be able to raise a small percentage of the purchase price to place an option on the property. Then you can approach the various owners to determine if some might reduce/eliminate their portion of the sale price, resulting in a "bargain sale". This is a complex transaction that will require legal assistance. As an alternative, you might approach the owners about a ground lease -- whereby the building becomes the property of the museum while the property stays with the original owners who receive annual lease payments. It will need to be a very long term lease -- say 40 years + two 10-year options -- for donors to have confidence in funding the creation of exhibits, etc. Finally, your municipality or county may have an interest in participating in some way -- have you talked with them?

Best of luck, and please don't hesitate to ask if we can offer some resources for your journey.