Childhaven Featured in Puget Sound Business Journal
Behind the Deal: How Childhaven and Cascade Public Media found new homes
By Judy Temes – Contributing writer
Sep 17, 2022
ANTHONY BOLANTE | PSBJ
Rob Dunlop took a step onto the second-story patio of 316 Broadway Ave., a children’s slide set and water fountains made for 3-year-olds in front of him, and stunning views of Mount Rainier behind.
“We can shoot amazing footage from here,” he said. “And just think about bringing people up here for community events!”
The building — owned and built for Childhaven, the nonprofit that has been helping Seattle area families and children who experience trauma and abuse for more than 100 years, changed hands this summer, selling for $23 million to Cascade Public Media on June 30. For both of these longtime Seattle institutions – CPM and Childhaven – the sale was much more than a real estate transaction. As nonprofits, each with its own changing mission, it was a rare opportunity to go where their constituents are, and serve them better.
“We see the building as bringing the community together around journalism, around civic issues important to Seattle,” said Dunlop, president and CEO of CPM, which owns and operates KCTS 9, Seattle’s only locally owned television station, and the news site Crosscut. In what are now classrooms, CPM will have updated production centers to film, broadcast and stream content.
As for Childhaven, many of whose constituents have been forced out of central Seattle due to rising prices, the building is a huge financial asset, the sale of which is expected to help fund upwards of $60 million in strategic initiatives and new programming to help families where they are now.
Big building, fewer clients
Erected in 2004 with donations from Seattle companies, foundations and individuals, the 77,412-square-foot building on First Hill served more than 150 children a day at its height, many of them picked up by vans from their homes. Those numbers declined as the Broadway location became increasingly less convenient and accessible to families.
“The demographics of this neighborhood have changed significantly,” said Jon Gould, chief community impact and government relations officer for Childhaven. “Many low income families have moved away to South King County or Federal Way. That started a whole discussion about how we can best serve our families. Part of that strategic plan was to sell the building.”
By the time the pandemic hit, much of Childhaven’s work had shifted to places outside the building, into homes, community centers and co-locations inside hospitals such as Harborview Medical Center and the Odessa Brown Children’s Clinic of Seattle Children’s Hospital.
“Instead of transporting kids to the mothership, this allows us to bring Childhaven to the kids,” said Mark Fadool, consultant and former chief program officer at Childhaven.
The $22 million proceeds from the sale will help Childhaven reach not just 300, but eventually as many as 3,000 children and families in the greater Seattle area, said Gould.
CPM, whose 40-year lease at Seattle Center was due to expire in 2024, plans to spend an additional $12.5 million to renovate the building and create modernized production facilities for its community programming. The amount is part of a $40 million capital campaign to pay for both the purchase and remodel.
Covid curve ball
While the deal is a win-win for both parties, it was by no means an easy one to pull off smack in the middle of the pandemic. CPM had been shopping for space since 2014 and has seen upwards of 40 properties, exploring joint ventures, ground-up development, and dozens of pre-existing purchase options. It was either the wrong deal or too high a price, and overall, a “roller-coaster ride,” said Dunlop.
The parties found each other in 2019, with Childhaven trying to lease the building at first, in keeping with its strategic plan. Eventually, they came together and signed a purchase and sales agreement in March of 2020 for $25 million, which is exactly when everything shut down, recalled Dunlop.
“There was a great deal of uncertainty around everything. We didn’t know what would happen to philanthropic giving and whether our sources of revenue would change. We had a window to exit the deal and we did.”
Due diligence also revealed some problems with the building’s exterior, the cost of which would have pushed CPM over its budget, added Michael Finch, principal with CenturyPacific LLP, which represented CPM in the deal. Childhaven agreed to a fix, but the pandemic still held uncertainties.
“We went our separate ways but parted amicably,” said Finch. That was around June of 2020.
Finch, however, kept his eyes on the property. Meanwhile, the pandemic had its own impact on values, and with few buyers vying for office space, Childhaven eventually agreed to take $2 million less, Finch said.
Asset becomes endowment
The deal still made sense for Childhaven. The organization experienced operating losses prior to the pandemic with costs exceeding revenues in 2017, ‘18 and ‘19, according to the organization’s 990 tax filings. This was in part due to one government contract with Washington’s Department of Children,Youth and Families, whose terms led to higher than expected operating costs, said Knox Duncan, chief marketing and communications director of Childhaven.
But the organization’s board also wanted to make sure that money from the sale did not get sucked into old deficits, Duncan explained.
“A condition of our Board of Directors agreeing to sell the building was that the proceeds would go to future services/initiatives and not to subsidize historical shortfalls.”
To that end, Childhaven spent the last two years restructuring its contract with DCYF and merging with two other nonprofits to create efficiencies and additional sources of revenue. Its merger with Renton Area Youth Services and Art with Heart added five new program areas, and 13 new service lines. The changes helped Childhaven report positive operating revenues for 2020 and 2021, Duncan said.
The $22 million in net proceeds will cover retirement obligations, but the vast majority will be dedicated to future programs and community investment.
Asked if it was bittersweet to leave a home that got its start on Broadway as a nursery school serving single parents more than 100 years ago, Gould was quick to say “No ... it was clear we needed to change our service mode. ... This allows us to do what we do, just better.
