As his office developments thrived in the 1990s, Jay Shidler began making donations to his alma mater, the University of Hawaii. From 1994 to 1997, the gifts totaled $175,000. Then Shidler decided to contribute more.
In 2006, the real estate veteran took a big step, donating $25 million to his alma mater's business school, which was renamed the Shidler College of Business. “My wife and I turned 60, and we decided to give away most of our estate,” says Shidler, who has founded two public real estate investment trusts: Corporate Office Properties Trust and First Industrial Realty Trust.
The Hawaiian entrepreneur is not alone in his generosity. After years of strong commercial property markets, many entrepreneurs are turning attention to giving away their fortunes. Companies that once made ad hoc donations have developed foundations and systematic giving programs.
The strong property markets have helped to fuel a rash of big gifts to business schools. Stephen M. Ross, CEO of New York-based developer The Related Cos., gave $100 million to the University of Michigan business school, which renamed itself the Stephen M. Ross School of Business.
Robert H. Smith, CEO of apartment developer Charles E. Smith Residential based in Englewood, Colo., a unit of Archstone-Smith, a REIT, gave $30 million to the University of Maryland, which named its business school after Smith.
Investment banker William Polk Carey donated $100 million to Arizona State University and John Hopkins University. Both institutions named their business schools in his honor: W.P. Carey School of Business and the Carey Business School, respectively. Carey is chairman of W.P. Carey, a New York firm that acquires commercial and industrial properties and leases them back to corperate tenants on a triple-net basis.
While many notable contributions have gone to business schools, real estate givers have also made donations aimed at alleviating poverty in inner cities and developing nations, such as Africa. Along with top executives, employees from the lower ranks have joined in supporting causes such as the United Way. Many companies are encouraging employees to give money and time to groups such as Habitat for Humanity, the home builder.
Community participation
One of the most effective ways real estate companies can provide assistance is to volunteer their expertise, says Mark Burkhart, president of Colliers Turley Martin Tucker, a St. Louis-based brokerage firm that manages 140 million sq. ft. of office and industrial properties. Many executives serve on the real estate committees of nonprofit organizations, says Burkhart.
By helping charities acquire and maintain buildings, the real estate experts enable nonprofits to spread their dollars further. Some 15 executives with Colliers Turley Martin Tucker serve on local YMCA boards. “Nonprofit boards are always looking for someone with knowledge of real estate or accounting,” says Burkhart.
When Shidler made his donation to the University of Hawaii, he also volunteered his labor. Part of his big gift was for renovations of the business school. The institution asked Shidler to oversee the improvements. Built in 1971, the business school had not been painted in decades, and landscaping hadn't been improved in years.
Hiring top subcontractors, the veteran real estate executive planted lush Hawaiian trees and painted the building inside and out. He replaced 30-year old auditoriums with stadium seating that included electrical outlets for each student's laptop. The whole renovation project cost Shidler $2 million. “School officials realized that if they did the work themselves, it might cost twice as much,” says Shidler.
Profiting from charity
Some companies encourage board service and other volunteer efforts by giving employees paid time off. Along with supporting worthy causes, employees' service to their communities can benefit businesses. Employees serving on boards learn new skills and make connections that can help to generate business leads.
Just as important, charitable work can improve morale. When employees believe that their company is a solid corporate citizen, they exhibit pride in their business and are less likely to quit, says Craig Hall, author of “The Responsible Entrepreneur: How to make money and make a difference,” and chairman of Hall Financial Group in Dallas.
“We have a huge number of people who have been at our company for 25 or 30 years,” says Hall. “Part of the reason for the loyalty is that people feel the company shares their values.”
Hall encourages his employees to take 40 hours of paid time off each year to volunteer in the non-profit of their choosing. Hall himself is also committed to making donations and doing volunteer work. He funded and helps run the North Texas chapter of the National Foundation for Teaching Entrepreneurship. The non-profit organization instructs low-income young people how to become economically productive members of society by improving their academic, business, and technological skills.
Charitable hotels
Many franchised hotel chains make special efforts to build employee loyalty. Hotel companies can be plagued by high turnover of cleaning and food staff. In addition, franchisees are often at odds with the franchisors.
During his tenure as CEO of Ramada, Steven Belmonte introduced a charitable program that helped to unite employees of the hotel chain. Belmonte started on a small scale in 1991, giving $21 a month to Plan USA, which supports impoverished children in the Third World.
In return for his donation, Plan sent Belmonte a picture of the child he was supporting. Pleased with the program, Belmonte supported several other children. Then he began making more donations to Plan USA, supporting programs that showed poor people how to build wells and housing.
After several years, Belmonte introduced the charity at the chain's annual convention, which brings together hundreds of corporate staff and franchisees. Hotel executives from around the country proved eager to support the cause. Individual hotels began announcing programs, in some cases posting notices in lobbies so that guests could contribute. “We started raising millions of dollars,” says Belmonte. “In some hotels, everybody in the housekeeping department would pitch in to adopt a child.”
Belmonte left Ramada in 2002, and now serves as CEO of the Lexington Collection, a group of a dozen hotels. He remains committed to the charity. “The cause became part of the culture of Ramada,” he says. “It brought franchisees and the franchisor closer together.”
Power of the press
Charitable projects can generate a positive image for a real estate company in communities. Local newspapers cover charitable deeds, especially when they involve public events, such as walks to raise money for the American Heart Association or other causes. A positive public image may help a company recruit employees and win favorable rulings from zoning boards.
While a stellar reputation is valuable for any property, good publicity can be particularly important for a hotel. “In a second-tier market, a hotel may be one of the most visible businesses,” says Joe McInerney, president of the American Hotel & Lodging Association, a trade group in Washington, D.C. “If a hotel is not involved in the community, then the community will not support it.”
The hotel association encourages donations to business schools and other institutions that may produce future employees. The association doles out $1 million a year for college scholarships and training programs. One program prepares military spouses to work in the lodging business. “We want to encourage people to work in our industry,” says McInerney.
Many hotel chains coordinate substantial charity efforts, including Starwood, Marriott, and Hilton, says McInerney. According to a study financed by the association, the hotel industry gave $815 million in 2005.
To spread the word of their good deeds, some real estate companies run newspaper advertisements. For the last several years, Colliers Turley Martin Tucker has been running ads in local newspapers and business journals that feature pictures of employees involved in community projects.
A recent ad in the St. Louis Business Journal showed a Colliers staff member teaching school children in a Junior Achievement class, which is designed to acquaint youngsters with business. “Rather than bragging about our real estate expertise, the ads focus on how our people are giving back to the community,” says Burkhart, president of Colliers.
Tax advantages
Instead of donating cash or labor, some executives prefer giving raw land. Often such land gifts can come with substantial tax benefits. After developing a 100-acre industrial park in Lenexa, Kan. last year, real estate executive Ross Stiner realized that he still had 11.5 acres of unused land.
Stiner, chairman of Fishman & Co. in Olathe, Kan., could have sold the land and donated the cash. But because the parcel had appreciated in value since Stiner bought it several years earlier, he would have faced capital gains taxes.
After taxes, the size of his donation would have been smaller. Instead, Stiner gave much of the land to Servant Christian Community Foundation. Now that the foundation owns the land, Stiner will help the charity sell the property.
Both the charity and the donor will enjoy advantages from the transaction. “Because the foundation does not pay taxes, it can keep the entire proceeds from the land sale,” says Stiner. “The donor can deduct the full value of the property as soon as the land is given to the foundation.”
Because of tax advantages, some real estate companies are establishing their own foundations. Donations to a foundation can be deducted immediately. But once the endowment is established, at least 5% of assets must be given away annually to avoid running afoul of tax rules.
Another approach is to set up an operating foundation, which raises money and gives it away the same year. That is the method used by Majestic Realty, a Los Angeles-based firm, which set up an operating foundation in 2002. Each year Majestic Realty Foundation raises and gives away about $2 million.
“Our company has a 60-year history of giving,” says Fran Inman, president of the Majestic Realty Foundation. “By setting up the foundation, we formalized the process and began focusing on giving in a disciplined way.”
Watershed decision
In the past, Majestic had been a passive donor, responding to appeals that came through the transom. But with the establishment of the foundation, Majestic decided that the charity should be an aggressive partner with nonprofits, reflecting the company's business approach. In its business, the real estate company has long done its homework, only entering a community when the potential investment showed promise.
Once it has acquired a portfolio in a community, Majestic has typically stayed put for years. In the same fashion, the Majestic Foundation now does careful research on a nonprofit before making a contribution. And once it decides to back a cause, the company jumps in, working with the nonprofit to maximize the impact of donations. Employees are encouraged to volunteer. More than 200 employees serve on 40 nonprofit boards.
Many of Majestic's real estate holdings are industrial properties, and the company encourages tenants to participate in charities. At a recent luncheon in Crossroads Business Park, a property in City of Industry, Calif., tenants raised $100,000 by participating in an auction and making donations.
The foundation also taps its bankers and other business associates. Whenever the developer starts a new project, it asks partners in the property to make a contribution, which is matched by Majestic.
The foundation's support goes to a variety of causes, including Por Los Ninos, which assists poor children, and Coro Foundation, an association that prepares young people to take leadership positions in their communities. Majestic also coordinates campaigns for the American Heart Association. For every employee that wears red on certain days, the foundation donates $25 to the cause.
Majestic spreads out its charitable work, making donations in Atlanta, Denver, Los Angeles, and other communities where the company has holdings. “We are long-term stakeholders in those communities,” says Fran Inman, president of the Majestic Foundation. “The stronger the communities are, the stronger our business will be.”
Stan Luxenberg is a New York-based writer.