Nonprofit build assets to help fund programs
April 5, 2004
Unless nonprofits start acting a lot more like for-profits, Cloyd Phillips says, they’re going to be out of business.
“Nonprofits have to learn how to develop assets,” he says.
“You can’t help poor people if you’re broke.”
Community Services Agency and Development Corp., the Reno nonprofit that Phillips oversees, is busily developing assets.
The agency commonly known as CSADC is becoming a good-sized property developer and using the profits to support programs ranging from Head Start to the weatherization of the homes of low-income people.
It holds equity stakes in apartment complexes totaling 1,424 units in Reno and elsewhere in the state.
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Among its holdings is a piece of the 142-unit Terracina Apartments at 2175 Sierra Highlands Drive, a property it developed with USA Properties.
Another example of its work is the 48- unit Dakota Crest Apartment Homes near Washoe Medical Center.
That project was developed by CSADC in a venture with Rural Properties Inc., a private company led by Robert Nielsen of Reno.
More partnerships are on the way.
At the corner of Pyramid and Prater Way in Sparks, work is beginning on a 78- unit senior housing complex developed by CSADC and a private development group on property leased from the city government.
Another 55 units of senior housing is nearing completion at Oddie and Rock boulevards.
This project is created by a limited-liability corporation held in equal parts by CSADC and the Grace Tabernacle Church of God in Christ, which owned the land next to its church.
And CSADC is doing little projects, too.
Driving around Sparks, Phillips points out single-family homes the agency has purchased, rehabilitated and sold for a profit.
The common element in all the projects? Their tenants are low-income or working poor.
Phillips says the agency generates “pretty good dollars” from its development ventures, although he doesn’t provide specifics.
A portion of the profits is set aside to provide seed capital for future projects.
Bank of America through its community development bank played a key role in getting CSADC started in the development business.
In testimony to the Federal Reserve Board, an executive of the agency said Bank of America provided $26.8 million in construction financing for nine of the agency’s first 11 projects.
Those profits haven’t come without some risk.
CSADC’s mixed-use project at Fourth Street and Wells Avenue, the Plaza at Fourth Street, struggled to fill its retail space even while tenants snapped up the residential units.
Late last month, the retail space was 57 percent filled.
Even so, CSADC doesn’t rule out further retail development in future projects.
The agency seeks to control its risks through a cautious approach.
In its first deal with USA Properties, construction of the Terracina Apartments, CSADC took only a 15 percent stake.
“I sat there at the corporate table and learned,” Phillips says.
One of the lessons he learned is to take great care in selecting partners for projects, and the number of developers pitching deals to CSADC grows each year.
Often, Phillips says, the agency is visited by what he called “folks who came in on a Southwest flight that morning.” CSADC has too much riding on its community development activities, however, to take on a high-flying project.
Along with its own financial stake in funding programs to help the poor, CSADC’s leaders hope the agency provides a financial model for other nonprofits.
He dreams, in fact, of the day that nonprofit agencies band together to provide entrepreneurial training to their leaders.
“If you live by grants, you die by grants,” says Phillips, who notes that more than a third of the nation’s nonprofits spent more than they took during 2000.
“We no longer can think like nonprofits.
We’re in business.”