Hear from Shelley Trott, Director of Arts Strategy & Ventures at the Kenneth Rainin Foundation on the story of its big bet, the risks they took, and the payoff for Bay Area arts organizations.
Why did the Kenneth Rainin Foundation become interested in helping arts organizations with their real estate needs?
Six years ago, the soaring cost of real estate and rents created a perfect storm with an enormous influx of workers to fuel the Bay Area’s booming high-tech industry. The problem was particularly acute in San Francisco, and it was clear that a significant segment of the city’s cultural identity and economy was at risk of displacement.
Rent increases averaging 30% and higher were a major challenge for artists and arts organizations. The Kenneth Rainin Foundation realized that if we did not respond quickly, our grantees’ survival would be in question and our support through project and program grants would be futile.
Together with Joshua Simon of the East Bay Asian Local Development Corporation and Leiasa Beckham of Common Ground Urban Development (formerly with the Northern California Community Loan Fund) we created a collaborative model that connects resources in the community to the real estate needs of arts and cultural nonprofits. At the center of this model is a real estate holding and development company, like the Community Arts Stabilization Trust (CAST).
The Rainin Foundation’s board of directors approved a 5-year grant of $5 million to CAST to test the model in the Bay Area. It was a risk at the time, but the model proved successful in securing permanent, affordable spaces for two San Francisco arts organizations with deep roots—The Luggage Store Gallery and CounterPulse. CAST has exceeded our expectations and in November 2017 we awarded $3 million to help expand its work to Oakland.
What is CAST and how does this model promote strong, vibrant, diverse communities?
CAST is an intermediary who helps anchor vital community arts organizations through permanently affordable space. It uses a community development corporation business model adapted to serve arts nonprofits.
Investors receive tax deductions and the funds are used to purchase property, which CAST leases at below market rates to arts organizations on a “lease with an option to purchase” model. CAST also provides short- and medium-term solutions through grants and technical assistance.
As you do this work more and more, what have you learned about how to do it well, and how NOT to do it?
This work requires patience, significant capital, and a healthy tolerance for risk. The impact is not always immediately visible as real estate projects can take years to complete, but it is deep and structural. Important points to keep in mind:
- Diverse expertise, including real estate and development, nonprofit lending, nonprofit administration, public policy, is needed to guide this multi-layered work.
- The organizations must understand the vastly different timelines and operating procedures present in the real estate world, lending community, among architects and construction contractors, government agencies, and grantmakers.
If philanthropy could add one thing to what they’re currently doing to make a decisive difference in this area, what would it be and why?
Philanthropy has access to tools and resources that can significantly mitigate arts and nonprofit displacement. As powerful and privileged stakeholders, we can:
- Leverage our assets through program related investments in the form of loan guarantees.
- Use our considerable influence to aggregate funds and create a capital pool to acquire real estate and provide short-term support for organizations at risk.
- Support advocacy that results in policies that preserve arts and culture nonprofit spaces.
What does a slam dunk success look like in your book?
A slam dunk is when the Bay Area has enough permanently affordable square footage of real estate to sustain a diverse, robust and dynamic cultural ecosystem.
Success means artistic and cultural assets remain in their respective communities and continue to provide meaningful opportunities and experiences for generations.
The Rainin Foundation codified this Arts Real Estate Strategy to offer a blueprint to others grappling with similar affordability crises. We encourage people to visit the website to learn more about how it works and can be adapted to communities.