Professional and lay leaders of nonprofit organizations face many challenges, such as limited operating income, dilapidated or underutilized facilities, scarce endowments for future operations, and the need to relocate facilities. In today’s hottest of hot real estate market, though, many of these nonprofits are able to meet their challenges by evaluating real estate holdings and taking bold steps for efficiency and improved operations.

“In times when residential demand is significantly exceeding supply and the city allows in some cases bonuses to build community facility spaces, nonprofits find that their real estate might be worth a lot more to someone else than to themselves,” a partner at Massey Knakal Realty Services, Shimon Shkury, said. “There are a few options: sell and move somewhere else, do a joint venture with a developer who will share the profits and build an alternative facility on the same site, or do a joint venture with a developer who will build and share profits and move to a new site location utilizing a community facility allowance.”

Last month, the Real Estate Board of New York announced the winner of the Rebny’s Henry Hart Rice Award for the Most Ingenious Deal of the Year, a deal that demonstrates the value of the current market for many of the city’s nonprofits. The winners were Howard Nottingham and Woody Heller of Studley for their work on the expansion of the New York Law School, a nonprofit organization in Lower Manhattan. The transaction will transform the school’s TriBeCa campus, strengthen its financial profile, help move its endowment ranking to 10th from 55th among American law schools, and create a state-of-the-art facility next to its original home.

The law school acquired a residential building at 54 Leonard St. and subsequently moved to clear the site and transfer the air rights to another parcel, at 240 Church St. It will now build a new school on the existing parking lot and redevelop three buildings. Studley then arranged for equity partners Dune Capital and partner developer Alexico Group to purchase 240 Church St., which will be converted to residential condominiums for $136 million. The proceeds from the sale of the development site at 240 Church St. provided the law school with a significant endowment and funds to construct a 200,000-square-foot facility for its library, classrooms, and student spaces on an adjacent parking lot. A second phase will connect existing school buildings with the new structure.

The sale proceeds were placed in an endowment, while construction financing for the new building was provided through tax-exempt bonds. The investment returns on the endowment are expected to cover the debt service, leaving the school with the 10th largest endowment among American law schools.

A number of other local nonprofits will be increasing their endowments as well as upgrading their physical facilities by selling real estate holdings.

The Salvation Army is the second-largest Christian nonprofit in America and the owner of prime residential sites throughout the city. The nonprofit is expected to fetch in excess of $100 million for the Parkside Evangeline residence in Gramercy Park. According to real estate sources, another residential property, the Ten Eyck-Troughton Residence on East 39th Street between Third and Lexington avenues, is in contract to sell for more than 150% of its recently appraised value.

The Salvation Army has more than 80 locations throughout the five boroughs, including prime locations in Manhattan at 225 Bowery, 175 E. 125th St., 132 W. 14th St., 720 West End Ave., 315 W. 47th St., and its New York regional headquarters at 120 W. 14th St. According to real estate sources, the nonprofit has retained an investment broker to evaluate the potential sale of many of these sites.

Due to a combination of factors, including the Berger Commission report on health care, evaluation of space requirements, and financial need, health care institutions are seeking to sell real estate. Last week, an investment broker was appointed exclusive agent for Long Island College Hospital to sell a site at 340 Court St. in the Carroll Gardens section of Brooklyn. The zoning for the site allows a purchaser to develop a residential development of 114,000 square feet and a community facility development of 218,000 square feet.

The Long Island College Hospital is a member of the Continuum Health Partners, a nonprofit hospital system comprising Beth Israel Medical Center, Roosevelt Hospital, St. Luke’s Hospital, and the New York Eye and Ear Infirmary. Since 2004, hospitals in the entity have sold development sites and residential apartments buildings at 170 East End Ave. and in Gramercy Park on Third Avenue between 22nd and 23rd streets.

As a result of the Berger Commission findings, St. Vincent’s Midtown Hospital, located on 51st and 52nd streets between Ninth and Tenth avenues, is to close its doors in 2008. This month, the hospital retained an investment banker to sell the campus, which is used as a hospital and administrative offices. Industry leaders expect a developer to demolish the property and build residential buildings in the up and coming Clinton neighborhood.

Later this month, the New York College of Podiatric Medicine will be closing on the sale of its parking lot at 1800 Park Ave., at 125th Street in East Harlem. The school will be receiving more than $40 million to be utilized to increase its operating income and aid in the creation of an endowment. On the site, the purchaser — a joint venture of Vornado Realty Trust, MacFarlane Partners, and Integrated Holdings — is planning to construct a mixed-use, 21-story, 640,000-square-foot retail and office tower intended to attract financial service companies.

The Mount Sinai Medical Hospital and Medical Center plans to build the Mount Sinai Center for Science and Medicine on its campus on Fifth Avenue. The hospital has retained Newmark Knight Frank to sell the apartment building at 1212 Fifth Ave. and an adjacent parcel that can be developed with a transfer of 315,000 square feet of development rights to create a 32-story residential tower. The new residential building with an entrance on East 102nd Street will also house mechanical facilities for Mount Sinai. The adjacent site is the location of the planned new center for science and medicine.

Cooper Union has seized the opportunity to capture value in its excellent site and location. In 1966, the college purchased a parking lot site at 445 Lafayette St. on Astor Place, where Lafayette Street meets Fourth Avenue, for $677,000. In 2002, Cooper Union signed a 99-year lease agreement with the Related Cos. On the site, Related built a 21-story residential condominium, the condos known as the “Sculpture for Living” at Astor Place.

Later this month, Cooper Union is expected to name the developer that will provide the college with funds for its endowment as well as a possible educational space. According to real estate sources, Cooper Union might be able to fetch more than $100 million for an upfront payment for the 99-year land lease at 51 Cooper Square, where a large office development could be built to replace the existing building. The new 270,000-square-foot office building would include 40,000 square feet of educational community space. The site is bounded by Third and Fourth avenues, 8th and 9th streets, and Wanamaker Place.

Numerous churches and synagogues in the city have entered into joint ventures and have sold land to developers. In many instances, developers will construct a new house of worship on the site or pay for relocation. A number of these sites have been in Harlem, where the church and the developer have built residential condominiums.

Construction is under way by a joint venture of Phoenix Realty Group, Uptown Partners LLC, and Artimus Construction for the development “Fifth on the Park,” a new building that would occupy the entire block front on Fifth Avenue between 119th and 120th streets. The first floors of the building would house a 38,000-square-foot church for the Bethel Gospel Assembly, the site’s previous owners. The top 26 floors would have a total of 247,000 square feet of market rate condominiums and 50,670 square feet of affordable rental apartments. The building would also have a 117-space underground parking garage.

A managing partner at Massey Knakal Realty Services, Tim King, said his firm recently “helped the Jewish War Veterans sell their building at 2216 Avenue X in Brooklyn. Declining membership made the decision easy and appropriate one for them. This year we helped a church who owned over an acre of land on a site in Bay Ridge on Fourth and Ovington Avenue in Brooklyn which had a school building and church on the grounds. The Pastor was adamant that maintaining a decaying obsolete building was not consistent with their mission, and subsequently the property was sold to a developer who built a new but much smaller space at the site of the Church.”

I must concur with Mr. King when he says: “The strategy of selling the equivalent of the family jewels to pay the rent is a shortterm solution to a long-term problem that will probably lead to future negative consequences.” Nevertheless, the role of the nonprofit is to provide community service, as opposed to operating a real estate business, and the leadership and the board must work hand in hand to evaluate the financial requirements as well as the mission of the organization.

Mr. Stoler a contributing editor to The New York Sun, is a television broadcaster and senior principal at a real estate investment fund. He can be reached at mstoler@apollorealestate.com.