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.