Nonprofits Learn to Profit by Sharing Space, Services

When former photographer and schoolteacher Anthony Handy started a literacy program for inner-city youngsters, he figured that renting office space would eat up $2,600 of his $25,000 first-year budget.

But, “we spent just $600 on rent in 1982,” said Handy, director of The Educational Alliance and Channel for Help (TEACH). The $2,000 savings equaled the cost of giving eight youngsters six months of remedial tutoring in reading, writing and arithmetic, he said.

Instead of renting an entire office, TEACH stretched its budget by renting part-time use of a desk at A Central Place, one of the first in a growing number of shared office space arrangements around the nation for small nonprofit organizations.

Sharing space is a growing trend among public-benefit organizations trying to stretch their budgets and illustrates the expanding efforts to develop a nonprofit infrastructure that can strengthen and support private voluntary efforts.

Proponents say that cooperative space arrangements can foster synergy while serving a variety of purposes, including holding down costs, building networks among nonprofits and helping tiny charities grow.

In Four Cities Now

These arrangements exist in Los Angeles, San Francisco, Stockton and Oklahoma City, and others are being planned in cities across the country. In New York City, the first of what may be several office condominium projects for nonprofits is expected to begin soon, allowing participating agencies to beat skyrocketing rents, avoid property taxes and build up equity, which during lean times can be borrowed against to maintain operations.

In Los Angeles, the Southern California Center for Nonprofit Management shares space with four other nonprofits and two profit-making organizations in the 1052 Building on West Sixth Street. On the sixth floor of the Eastern-Columbia Building downtown, 28 arts organizations rent space at about 50% of commercial rates from a supportive landlord. United Way in Los Angeles also rents space, at full cost, to some nonprofit agencies, such as the Volunteer Center of Los Angeles, a United Way spokesman said.

Take Over a Firehouse

Next fall, the Los Angeles Theatre Alliance plans to provide space for three other arts organizations when it takes over an old firehouse on Figueroa Street downtown, Executive Director Michele Garza said. Several other nonprofit organizations in Los Angeles say they are studying the feasibility of such cooperative ventures.

“The important thing about this is sharing by people in organizations that have similar goals, similar problems,” said Alan Sieroty, the former state senator who is vice president of Eastern-Columbia Inc. “To some extent they share mailing lists, information, know-how, can give each other encouragement and can even schedule performances with each other.”

“We all have shared visions and can provide collaborative support,” Patty Oertel, associate director of the Center for Nonprofit Management, said of the five nonprofits and two businesses that share 2,500 feet of space in the 1052 Building on 6th Street just west of downtown. “Its nice to have other knowledgeable people to bounce ideas off of, as well as to provide emotional support when things get tough.”

Oertel said the organizations she works with share telephone-answering, a conference room and some secretarial services and all pay full costs. However, Oertel said the joint arrangement made it possible to rent a larger space, thus reducing per-square-foot costs for all seven organizations.

Shared Rental Space

A Central Place in Oakland, and a similar facility run by the Washington Council of Agencies in the District of Columbia, go beyond simple cooperation among charities in renting space jointly. A Central Place is a nonprofit agency whose purpose is providing and managing office space for smaller charities; the Washington Council of Agencies includes this purpose among its many functions.

The 300-member Washington Council of Agencies subleases downtown office space to 12 member agencies, which share a conference room, a large photocopier and reception, telephone answering and secretarial services.

Jim Kalish, the Washington council’s executive director, said the participating charities also save money by hiring two nonprofit sheltered workshops--which provide employment for the emotionally troubled--to do mass mailings and to clean the building.

A Central Place rents 5,000 square feet in an old commercial building across from Oakland City Hall at less than actual costs, with corporate, foundation and government funding making up the difference. The airy and brightly lighted floor has high ceilings, with some walls painted bright blues and browns and others covered by bulletin boards alive with the posters and flyers of the causes that sublease space.

The 45 charities currently participating share a central receptionist and telephone-answering, a conference room, photocopying and graphics equipment, electric typewriters, a small computer and other office tools that, individually, they could not afford. Since its founding in 1977 more than 100 charities have taken part, some of them moving on, others dying and some, including a local ombudsman program for nursing-home patients, growing large enough to strike out on their own.

“What we do is allow small nonprofits to rent a space which is commensurate with their needs and their budgets,” said Jose Arce, A Central Place’s board president. “A lot of these organizations would be operating out of people’s garages or post office boxes. In fact, a lot of them were. But with the sharing here we have a collective use of resources and energy and an incredible exchange of information that benefits everyone.”

Currently 26 nonprofit organizations share a desk, rent a cubicle or have a private office at A Central Place. These organizations range from the local League of Women Voters to the Epilepsy League of Alameda-Contra Costa County to the Black Filmmakers Hall of Fame.

Jane Hotz, the volunteer president of the national Cystinosis Foundation, tries to raise physicians’ awareness of a genetic disorder that causes about 100 American children, including one of her grandsons, to suffer kidney failure. Hotz’s organization rents a refurbished wooden desk, with an incoming-only telephone line, for 10 hours each week. Another 10 hours is taken by the Scott Joplin Music Academy, whose volunteers Hotz has never met.

Another 19 charities that lack a paid staff, depending entirely on volunteers, subscribe to a $25-per-month Lifeline service, which provides a mailing address, an answering service for 25 calls per month and use of A Central Place’s conference room once a month for as long as three hours.

These Lifeline clients represent a wide range of interests, including the Black Cowboys Assn., the Bay Area Black Journalists Assn. and a group of medieval music devotees known as the San Francisco Early Music Society.

A Central Place began after 15 women from a variety of East Bay service groups got to talking about the prohibitive costs of office space for small charities that depend entirely on volunteers or have only one or two employees, Executive Director Shirley Roberson, one of the founders, said.

“We wanted to encourage really diverse groups to work together, which reflects the diversity of Oakland’s population,” Roberson said.

A Central Place charges only partial costs. In 1978, its first full year of operation, rents and service charges covered only 10% of its budget. Roberson said that this earned income now accounts for 52% of the $130,000 budget and will rise to 60% for 1989 and beyond.

Grants from corporations and foundations and--beginning this year--from the City of Oakland make up the difference.

“Full cost recovery makes sense for mature nonprofits, especially those that earn a lot of revenue from fees,” said Arce, who is the chief fund-raiser for the Spanish Speaking Unity Council, a nonprofit community development corporation in East Oakland. “But there are a lot of smaller nonprofits that do valuable work, but just can’t afford an office,” Arce said.

“It’s really an investment, for those foundations and corporations that look to the future, in building a nonprofit infrastructure,” said Tricia Swift, who chairs A Central Place’s development committee and is a consultant to major corporations on developing women and minority employees.

Another approach is being tried in Manhattan, where several nonprofit organizations, hoping to beat skyrocketing rents, are planning to turn six floors of a 12-story Greenwich Village building into office condominiums.

David Lebenstein, a founder of Interface, a New York City nonprofit agency that analyzes that city’s $20-billion annual budget for other nonprofits, said the South Park Avenue offices it rented five years ago for $7 per square foot annually now go for three times that amount.

Rent Too High

“Nonprofits on a fairly fixed income cannot sustain a situation where 10% of their budget goes to rent; it should be 3% or 4% or 5%,” Lebenstein said.

The pioneering effort involves a real-estate developer who hopes to develop a niche in the marketplace by selling office condominiums to New York City nonprofit agencies, Lebenstein said.

The nonprofit office condominiums are expected to sell for about $115 per square foot. “That cost translates to only $13 to $14 per square foot annually, which looks like rent,” Lebenstein said. The building owner, Lebenstein said, agreed to take just 5% down and provide half of the financing at 11%, with the balance expected to be financed by the city and state governments at less than 10%.

Nonprofits that own their own building or a floor in a condominium building are exempt from real estate taxes in New York City. The exemption saves $2 to $3 per square foot annually, Lebenstein said.

He said the nonprofits planning to buy space are now studying what services they can share to cut costs, including joint purchasing of discount long-distance telephone services.