The Ordean Foundation has sold its building at 424 W. Superior St. to Titanium Partners LLC for $1.2 million.
Despite the sale, the foundation will continue to occupy offices on the fifth floor of the seven-story building. Don Ness, Ordean’s executive director, said the time was right to hand over ownership, explaining that managing a commercial office building was “not our core competency.”
“We have three people on our staff, and we were continually faced with building management decisions and functions and responsibilities. It was distracting our attention from our primary focus, which is our charitable giving and working with area nonprofits,” he said.
In negotiating a sale of the building with Brian and Monique Forcier of Titanium Partners, the firm agreed to limit any increase in rent to 2% during its first year of ownership and no more than 3% annually for the next 15 years.
The sale came as no surprise to Matt Hunter, president of the Head of the Lakes United Way, who said: “Ordean has a social mission, and being the manager of a building is not part of that mission. It takes a lot of time and resources, so I understood completely why they were looking to sell.”
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The United Way has been a tenant of the Ordean Building since it opened in 1974, and Hunter said he remained confident the Ordean Foundation would watch out for the interests of other nonprofits as it explored a sale of the property.
Nevertheless, he said: “It feels good that they found a good buyer and that they’ve agreed to keep any rent increases to a minimum.”
Ness credited Titanium for its commitment to continue serving the building’s nonprofit tenants, and said the firm also will bring valuable experience and resources to bear on the property.
“I think we’re really fortunate to find a buyer who first and foremost is interested in serving these nonprofit clients and seeing this property as different from their other holdings,” Ness said.
“Healthy downtowns need owners who are committed to the community and who are looking to make long-term commitments, and that’s what we found in Brian. This is not a quick-turnaround, make-a-quick-buck sort of transaction. He and Monique are committed to owning this building, managing it well, serving our nonprofit tenants and making this a long-term holding,” he said.
Brian Forcier did not return a call from the News Tribune Thursday afternoon.
Ness said Ordean’s covenants required it to not operate the building at a profit, instead accepting annual operating losses that continued to eat into the organization’s endowment. When capital expenses arose, the foundation took an even bigger hit. For instance, several years ago, Ordean had to absorb the $500,000 cost of repairing the building’s elevator system.
As the building ages, Ness said he expects to see mounting needs for capital improvements and predicted the foundation was bound to struggle with those expenses.
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Ness described what he called a sort of Catch-22 situation, explaining: “At the end of the day, there was a direct disincentive to make capital investments in the building, because every dollar that we put into the building was a dollar that was taken away from our charitable mission,."
Meanwhile, the foundation’s endowment has shrunk significantly.
“Twenty years ago, the Ordean Foundation was the largest foundation in Duluth,” Ness said. “In the late ‘90s, we had $50 million in assets and today we have $35 million in assets, even after a 10-year bull run in the markets. So, we kind of had to come to terms that if we are going to fulfill our obligation to our nonprofit partners through our charitable giving, we have to prioritize that piece of our mission, and managing and owning a building was actually counter to that charitable mission.”
The Ordean Foundation occupies less than 5% of the 30,000-square-foot building, just 1,300 square feet, to be exact.
In essence, Ness said Ordean found itself managing a commercial office building for others — something no other foundation in the state does, and for good reason.
Albert Ordean — a prominent Duluth banker also active in the wholesale grocery business — and his wife, Louise, created a foundation in their name by bequeathing their fortune in 1933. The Ordeans were childless, and the foundation's mission is to address issues of poverty.
“Albert Ordean expected that his gift to this community would exist in perpetuity. That’s our charge as an organization,” Ness said.
“We had been on an unsustainable path that would have put our commitment to Mr. Ordean at risk. Selling the building is a critical step in ensuring that Ordean will be able to support local nonprofits for years to come,” he said.
