Sarasota YMCA dabbles in deals

Flipping a property brings a profit but also raises questions.

By MELANIE AVE, Times Staff Writer
Published July 30, 2007

SARASOTA - When you think of real estate investing, chances are the local YMCA doesn't come to mind.

But in 2005, the Sarasota Family YMCA rode Florida's real estate boom and made a $475,000 profit in a single day.

The agency, in charge of foster children in five counties, including Pinellas and Pasco, took advantage of a process known as property flipping. Buy low, sell high.

While more common in the world of business and finance, critics say such a deal is unconventional, if not questionable, for a nonprofit whose stated mission is to "build strong kids, strong families, strong communities."

The transaction on Sept. 12, 2005, involved a 22,000-square-foot run-down office complex the agency was partially leasing for foster records storage.

The Sarasota YMCA bought the building at 2198 Princeton St. for $830,000 and sold it the same day for $1.3-million.

YMCA chief executive Carl Weinrich said the deal was a quick way to raise money for the agency's health and social service causes.

"We had a good lawyer. We bought it and sold it in 30 seconds," Weinrich said. "It was just a business transaction. There was nothing wacky about it."

All three parties involved made out nicely.

The seller, a company run in part by a Sarasota YMCA foundation board member, donated half the property, receiving a healthy tax writeoff, and sold the other half to the YMCA.

The YMCA sold the entire property for $475,000 more than it paid. And the final buyers, who also think they got a good deal, now hope to sell it for a $700,000 profit or more.

Tax writeoff for donor

Here's how the deal unfolded:

Attorney and developer David S. Band, a YMCA major donor and YMCA foundation board member, handled much of the deal. He is a partner in the Sarasota law firm, Abel Band.

One of his companies, Princeton Associates, was the property's original owner. The company donated half the property to the Sarasota YMCA and sold the remaining half to the agency a month later for $830,000, loaning it $690,000 to complete the deal.

Princeton Associates then took a tax writeoff for the donation, though Band declined to reveal the amount.

Weinrich said he did not know the amount.

"That wouldn't be our business," Weinrich said. "When somebody donates something, they have to get their own appraisals. That's between their accountants and the IRS."

He said he didn't know if it was half of $1.6-million, which is the property's estimated value when it was donated, or half of the $1.3-million final sales price.

The Sarasota YMCA did not seek its own appraisal.

'Was market value'

At the same closing, the YMCA sold the property to appraiser Robert J. Fletcher and architect Todd M. Sweet, partners in Princeton Street.

They have no problem with the YMCA's steep profit.

"Our purchase was market value," said Fletcher, who works for Bass and Associates, a commercial real estate appraisal, consulting and planning firm. "I'm not certain what happened on their side of the ledger.

"It was complicated, and I didn't fully understand it."

Fletcher said he had an interest in the property, which he had appraised before, and approached Band about it.

He and his partner want to renovate the building for office condominiums. They have it listed for sale for $2-million, though the county property appraiser places its value at $1.2-million.

Band, one of the original sellers, said his group sought an "independent appraisal," later adding that it could have been the one completed by the buyers.

While records show the Sarasota YMCA made a profit of $475,000, Weinrich said that after closing costs and commissions, the YMCA will clear only $250,000.

Still, he said, a nice sum.

YMCA makes loan

This month, the Sarasota YMCA stopped leasing storage space in the building, part of which was reimbursed with government funds. It had been paying $75,000 a year, Fletcher said.

But the agency's involvement with the property is far from over.

The Sarasota YMCA loaned Fletcher's company $1-million of the $1.3-million sales price.

Payments are due to Band's company, Princeton Associates. The balance will be due in full on Sept. 12, 2008, according to YMCA financial audits.

Weinrich said the YMCA's only risk on the deal is if the new owners default on the loan. "My God, that's minimal risk in terms of reward," he said.

If they do default, the YMCA would sell the property to pay off the loan.

Band said he and his partners in Princeton Associates, as the note holder, would "try and make sure the Y is covered," if the new buyers default. "I can't say we would for sure. I haven't talked to the others."

Bennett Weiner, chief operation officer of the Better Business Bureau Wise Giving Alliance in Arlington, Va., said the YMCA should have sought outside appraisals to make sure it was getting a fair deal and made a special effort to create an arm's length transaction since a foundation board member was involved.

"There's a lot of questions here," Weiner said. "Charities are principally there to seek out and carry out a stated mission and to carry out programs to accomplish that mission.

"They are not created to exist as banks for interested parties."

Daniel Borochoff, president of a Chicago charity watchdog group, the American Institute of Philanthropy, praised the YMCA's creativity in making money for the charity.

But he also worried about whether it's putting itself at risk.

The main question, he said, is whether Princeton Associates received an inflated tax benefit on the property, and if so, whether Sarasota YMCA officials knew about it.

Band said the tax benefit was proper.

And, he said, in the long run Princeton Associates may have lost money on the property while trying to help the YMCA.

"They're one the most reputable charities in town," Band said. "They've expanded and done extremely well for the community. The fact is, we were trying to help them."

Times staff writer Jeff Testerman and researcher Angie Drobnic Holan contributed to this report. Melanie Ave can be reached at 727 893-8813 or mave@sptimes.com.

Fast Facts:

A philanthropic property flip

Aug. 5, 2005: Princeton Associates LLP deeds 50 percent of an office complex at 2198 Princeton St. to the Sarasota Family YMCA. Princeton's general partner is David S. Band, a major YMCA donor and a YMCA foundation board member, attorney and developer. Other partners are Robert P. Rosin, retired attorney Harvey J. Abel, Daryl J. Brown, attorney Jeffrey S. Russell and Jacqueline D. Russell.

Sept. 2, 2005: Princeton Street LLC forms and includes Robert J. Fletcher, an appraiser, and Todd M. Sweet, an architect.

Sept. 12, 2005: Princeton Associates sells half of the remaining property to the YMCA for $830,000 and loans it $690,000 of the cost.

Sept. 12, 2005: YMCA sells the property to Princeton Street for $1.3-million and loans it $1-million, with payments to be made to original seller, Princeton Associates. Balance is due Sept. 12, 2008.

Sept. 12, 2005: The YMCA makes a $475,000 profit after selling the $1.3-million property for which it paid $830,000. Princeton Associates receives an undisclosed tax writeoff. The YMCA CEO says the agency's net profit will be about $250,000.

[Last modified July 29, 2007, 22:53:07]