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Real Estate Gifting Realized: Business Opportunities for Real Estate Professionals

CCIM Feature
Real Estate Gifting Realized: Business Opportunities for Real Estate Professionals
by Mary Stark Hood, J.D. CFP

This seventh article in the series on real estate gifting issues discusses the opportunities available to real estate professionals when working with donors or charitable organizations on real estate donations. A real estate professional’s involvement may occur at various stages in the gifting process and may be on behalf of the donor of the property or the charitable organization receiving the property.

Commercial real estate professionals and their clients should consider all options when discussing the charitable donation of real property. Real Estate Gifting Realized, a new program through the CCIM Foundation, facilitates the donation of real estate to charitable organizations. A donation may be made directly to the CCIM Foundation or the Foundation can assist with the donation to a chosen charity.

The Donor

The donor, whether an individual or corporation, may have a relationship with a real estate professional and turn to that person for assistance in evaluating the pros or cons of donating real property to a charitable organization. Another source of business may be referrals from the real estate professionals’ network of attorneys, financial advisers, or CPAs who are working with either corporation on gifting issues or individuals involved in estate planning. In either instance, the real estate professional will probably be asked multiple questions about the options for real estate donations. There’s often an education process involved on the donor’s side so that the donor and his other advisers understand all of the issues involved in donating real property. If a donor has already decided to donate to a charitable organization, the donor must obtain an appraisal from an appraiser with expertise on the type of property being donated in accordance with Internal Revenue Service guidelines.  

B. K. Allen, CCIM, managing partner of BA Realty Advisors for Charity and past president of the CCIM Institute, recently worked with a corporation that expressed interest in donating property to a charitable organization. Allen acknowledged that it was an education process through several layers of management. Although corporations appreciate the positive publicity that results from philanthropic activities, they are always concerned about write-offs, balance sheets, and shareholder profits and value. Thus, outside accounting firms are typically involved along with the chief financial officer, and final approvals must come from the highest levels within the organization and the board of directors. This can be a lengthy process especially in publicly traded companies, so patience and tenacity are required of any real estate professional working in this market niche.

Allen also stressed that it’s important to find an individual within the company to champion the gift. Often it’s a division head that quickly grasps the financial benefits and the philanthropic advantages, and understands the layers of management necessary for approval of the real estate donation.

The Charitable Organization

In some instances, a charitable organization may seek out a real estate professional once it has received notice of a real property donation from a donor. In other instances, networking with philanthropic organizations and their members in the local community may result in referrals.

John Culbertson, CCIM, SIOR, CRE, of Cardinal Real Estate Partners, was recommended by individuals he knew at a foundation looking for assistance in handling a potential donation of a warehouse in a rural part of the state. If willing to accept the warehouse, the foundation recognized the need for a strategy for management and disposition of the property. The first step was due diligence on the property, which Culbertson was asked to undertake. With due diligence completed, the decision to accept or reject the donation rests with the foundation. Should it accept the donation, Culbertson’s role may then evolve. If the foundation decides to retain the property, it may need a property manager. If it decides to dispose of the property, it will need sales/brokerage assistance.  In either instance, it’s a business opportunity for Culbertson should he desire to get involved and work for the foundation.

It is evident that business opportunities exist for real estate professionals at various stages in the real estate gifting process. Compensation may come in various ways such as consulting fees, property management fees or commissions, depending on the objectives of the foundation in keeping or disposing of a property. This may be a market niche that you or your firm has an interest in exploring and developing by working with donors or other professionals in your network. As well, you may be approached by charitable organizations seeking your assistance. If so, refresh your knowledge of the real estate gifting options available by referring back to the first six articles in this series and by visiting Real Estate Gifting Realized, for more information.

Also, seek the assistance of other CCIMs with expertise in this area if you don’t have the expertise yourself, as it is a complicated area. The rules on charitable deductions to qualified charities are very detailed and require review at the time a charitable donation is contemplated as the rules may change or be impacted by current tax court decisions and case law.

 

Mary Stark Hood, JD, CFP, is president of the Hood Group, which provides consulting services to business organizations and foundations. She currently serves as a consultant to the CCIM Foundation’s Real Estate Gifting Realized Program. Contact her at maryshood@comcast.net. Learn more about the Foundation’s gifting program at Real Estate Gifting Realized.

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