By Stephanie Strom
(The New York Times Online Edition) – Few nonprofits groups have dared embark on a capital campaign since the financial crisis started.
But the Center for Jewish History, which serves as the umbrella for the largest collection of documents, photographs, books and other materials related to the Jewish experience, had little choice.
A letter of credit that backed some $30 million in tax-exempt bonds it had floated in 2001 to buy and renovate its home on West 16th Street in Manhattan was expiring, and the terms to renew it were onerous. “We couldn’t afford it,” said William A. Ackman, the peppery hedge fund manager and one of the center’s board members.
The debt had long been a headache for the center. Though it had no trouble raising the $5.5 million it needs for its operations, it had to dip into its endowment each year to make its $1.5 million in required principal and interest payments.
“Raising money for debt service is not part of our mission and that made it a harder sell when we were fund-raising,” said Michael S. Glickman, the center’s chief operating officer. “That in turn made it much more difficult to hit the target for our operating budget each year, particularly as the credit market was freezing up.”
What’s more, the center was missing out on investment opportunities because it had to keep its endowment in Treasury securities.
The center was not alone. Many nonprofits that had floated tax-exempt bonds during the heyday were grappling with rising interest rates, swap contracts suddenly gone sour and other financial challenges related to their debt.
After the letter of credit expired at the end of 2009, the bank that issued it gave the center a yearlong extension. (Mr. Ackman declined to name the bank.)
Bruce Slovin, an investor who founded the center and serves as its chairman, decided the only solution was a capital campaign and asked Mr. Ackman and another board member, Joseph S. Steinberg of Leucadia National, to take the reins.
They quickly agreed to kick in $5 million apiece. Other board members also contributed to the campaign “and then Joe and I went around taking people to lunch,” Mr. Ackman said.
At first, he said, fund-raising went along smoothly. Bruce Berkowitz, the investor behind the Fairholme Fund, which had invested in General Growth Properties along with Mr. Ackman’s Pershing Square Capital Management, was one of the first external donors to contribute. His Fairholme Foundation gave $5 million — “making the decision in about 15 minutes,” Mr. Ackman said — bringing the center halfway to its goal.
Over the year, eight more donors kicked in amounts ranging from $100,000 to $2 million, but raising the full amount was slow going, Mr. Ackman said.
“It was getting close to the end of the year, and the bank wasn’t happy,” he said.
He offered to increase the amount he was donating by 20 percent on the condition that other donors do the same. Mr. Berkowitz agreed to do so, as did one other donor, but the center was still short of its goal.
To sweeten their pitch, Mr. Ackman and Mr. Steinberg had promised donors that they did not have to cut their checks until the total amount required to retire the debt had been pledged. With the time quickly running out for the donations to qualify for tax deductions for 2010, Mr. Ackman grew concerned.
“I honestly was worried that some donors might just take their money elsewhere,” he said. “The thought of that catalyzed the board, and so we all chipped in a little more.”
In the end, a total of 22 people contributed to the campaign, with the smallest gift being $50,000.
Now the center is debt-free. “Our $10 million endowment is being invested, and we are doing some absolutely fabulous programs, working on digitizing the collections and launching some new initiatives to make them more accessible,” Mr. Glickman said. “The center is in a better position than ever before.”
As for Mr. Ackman, he’s out fund-raising again, this time through tickets for the Harbor Investment Conference on Feb. 3. The proceeds from that conference will go to Boys and Girls Harbor Inc., which operates a charter school and after-school programs in New York City.
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