First Kroc Center Set To Open

June 1, 2008       Mark Hrywna      

The first Ray and Joan Kroc Corps Community Center constructed with funding from Joan Kroc’s $1.7-billion bequest will be dedicated June 27 in San Francisco. The opening will mark the first of 30 scheduled to open during the next five years by The Salvation Army. The next one to be dedicated is slated to be Sept. 14 in Atlanta.

The widow of McDonald’s founder Ray Kroc, Joan Kroc left the bulk of her estate to The Salvation Army after she died in October 2003. The $1.5-billion bequest, which turned out to be more like $1.7 billion after the estate was settled, was not to go for current programming. Instead, the gift was earmarked to build Ray and Joan Kroc Corps Community Centers, like the one opened in San Diego in 2002, and to provide endowments to operate the facilities equal to construction funding.

That stipulation was enough to have some question whether such a “mega-gift” could — or should — even be accepted. Some Army chapters have had to overcome donor perception that the organization doesn’t need their contributions given that they received a huge bequest, potentially jeopardizing existing programming. The first Kroc Center, built in San Diego with the help of a donation from Joan Kroc in 1997, made clear the importance of an endowment match. Kroc added $5 million after her original $87-million donation proved insufficient to complete the project — but the endowment was never added to — and the center opened to problems in 2002.

The Atlanta and San Francisco centers are further ahead of others because they had already started campaigns when Kroc’s gift, the largest single gift to any one charity, was announced in 2004. Other centers are in various stages of planning and construction with nine more expected to open next year, another 12 in 2010 and four in 2011. Five centers are still undetermined, although one of those hopes to break ground this year.  The cost of centers ranges from $16 million to $160 million, the most expensive campaign being in Chicago.

The Kroc Center in San Francisco sits on a half-acre of land and is about 75,000 square feet, with an additional 60,000 square feet of transitional housing connected. Construction totaled about $56 million, with $30 million for the Kroc Center, and another $32 million for the center’s endowment. The largest center, in Chicago, will be about 200,000 square feet on 33 acres and among the most expensive, at $72 million for construction costs and another $88 million for the endowment, with $50 million raised locally.

A billion into millions more The Salvation Army’s four territories (Eastern, Central, Southern and Western) equally shared the $1.7 billion, but determined the endowment funds would not be enough so they established a process by which chapters could apply for funding. Communities would have to submit detailed business plans and grant proposals detailing the uniqueness of the center, how it would meet Kroc’s wish, and perhaps most importantly, address the sustainability issues of running the center, said Maj. George Hood, national commander of the Salvation Army.

The process netted 99 applications within the Army’s four territories, and 30 were selected. With each territory receiving a quarter of the $1.7 billion (more than $400 million), they are responsible for raising more than $200 million.

Of the five undetermined centers, Hood said it’s always a possibility that they might not raise enough money for the endowment, “but no one’s pushing the panic button right now.” There still is time to raise the appropriate funds, he said, which is why there’s no deadline. The best-case scenario for the centers might be five years, he added, but they could stretch to seven or eight years. And, the current turbulent economy might slow progress on some of the projects.

“No one expected economic conditions that people are facing now,” Hood said. “We don’t know what’s going to happen to the economy, investments, people’s disposal income.” While some chapters got early enough starts and have been successful, he said others are still raising those funds before they can start any construction. Some have started the process and realized that they just couldn’t come up with the funds for a matching endowment.

The endowment aspect of the gift has been a very difficult challenge, Hood said, which is why the business plans had to be well prepared and developed.

“We’re making sure we’re not just raising money, but the outcome and sustainability of those centers; that’s so critical.”

Three chapters (Aurora, Ill., Duluth, Minn. and St. Paul, Minn.) started the process but eventually came to the understanding that they just couldn’t raise the necessary funds, among other factors.

When fundraising begins in a small or mid-sized community for $25 million to $30 million, there comes a stage when one can answer the question of whether it’s achievable or not.  “If you can’t get that lead gift, and get an indication that it’s not doable, you need to stop,” Hood said, adding that it usually occurs in those smaller markets.

‘A fundraiser’s dream’ A strong sustainability plan is critical for the centers, particularly in Philadelphia, said Chaz Watson, divisional director of development for the Eastern Pennsylvania and Delaware Division. Other high-profile civic projects have struggled to achieve major fundraising goals, he said, only to have difficulty in operating because there weren’t enough endowment dollars in place. “People don’t want to see that again in Philadelphia,” he said. “We don’t want to build something and not be able to sustain it. It’s all about access, quality service and delivery, that’s not compromised by skeletal staffing and underinvestment.”

The challenge and opportunity Joan Kroc put to The Salvation Army through these centers and the “way she structured the gift has been very healthy” for the organization, Watson said. The campaigns are “teaching us to be even more rigorous in how we plan, not just for capital, but long-term sustainability in what we do.”

These are definitely unprecedented times for The Salvation Army, said Watson, which is typically engaged in half-million to $3-million campaigns. These campaigns are $20 million, $30 million or more.

“From a fundraising standpoint, a lead gift of $72 million toward an overall $118 million, including capital and endowment, is pretty incredible,” Watson said. “The Kroc gift has given us 65 cents of every dollar we need to accomplish that goal. That’s a fundraiser’s dream.”

The Philadelphia center has raised more than $15 million and hopes to get to $20 million by the end of June and reach its goal of $36 million by year’s end. Of the $36 million goal, $20 million is for the endowment and $16 million for capital. “It’s a very aggressive schedule,” Watson said, and “if we stay on a fast-track, we’re hoping to pour the foundation by the end of October,” complete construction by 2009 and open in early 2010. Philly is on a faster track than normal, with a typical campaign taking more like two years versus three, Watson said.

Million-dollar breakfast Denny’s is known for its $2.99 Grand Slam Breakfast but the Grand Rapids, Salvation Army has its “million-dollar breakfast.”

Joy Ross, the wife of Maj. Roger Ross of the Grand Rapids Kroc Center, cooked breakfast for three potential donors, making a presentation in a relaxed atmosphere and answering questions.

Roger Ross was confident after the meeting that they could get a significant contribution, thought to be in the $20,000 to $30,000 range. Before the end of the day, Ross got a call from his major gifts chairman informing him that one of the couples had pledged $1 million. “They were not even on our radar for a major, substantial gift,” Ross said. His wife is now getting invitations to cook breakfast for other groups.

With $15 million for construction from the Kroc gift, Grand Rapids had to raise at least $7.5 million for its share of the matching endowment, and with acquisition and site improvement costs, the total campaign was set for $10 million, said Ross.

Originally, there was a concern whether the local Salvation Army could handle a $7.5-million campaign and compete among other ongoing campaigns. “We’ve not done a major campaign like this in 30 years, certainly nothing to the magnitude of this size,” Ross said, adding that other campaigns in the area ranged from $20 million to $30 million.

But within eight months of starting the campaign last spring, Ross said the $10-million goal had been reached — thanks to fewer than 100 donors — so the Army decided to go for $2.5 million more. They’re now at $10.8 million with another $2 to $3 million in outstanding asks, Ross said, and that’s only from the major gifts division. The community division will launch its share of the campaign when groundbreaking occurs in late September or early October.

The Southwest Atlanta Ray and Joan Kroc Corps Community Center got a helping hand for its endowment as well as a head start. A training and seminary school located, adjacent to the planned facility, helped in the fundraising, as did the Southern Territory headquarters and state offices all located near Atlanta.

Like San Francisco, Atlanta already had started on a campaign when the bequest was announced and was about 20 percent along the way. But the planned facility was to be much smaller, on the scale of $5 million as opposed to the $21-million Kroc Center. The Kroc funds enabled the Army to redesign the structure and address more needs in the neighborhood, Maj. Bert Tanner said, adding more literacy and job training programs as well as a performing arts component. The Kroc gift was the “catalyst to put together an increased statement to community,” he said.

San Francisco changed direction when the Kroc gift was announced, having already launched a campaign, Maj. Joseph Posillico said. The Army had to convince donors of the need to raise an endowment despite a bequest of millions of dollars. With the capital side of the endowment all but wrapped up, he said the organization plans an ongoing campaign to secure the remaining $6 million for the operating endowment.

“It’ll be one of the areas where we work with planned giving, major gifts, to continue to focus on this though not as big of a public push as we have last couple years,” he said.

Land costs, challenges Building in Chicago or San Francisco is going to be more expensive than in Dayton, Ohio, or Massena, N.Y., Hood said, so territories had to manage assets to the point that they determined within their territory, based on how much money they had to put into it.

In San Francisco, the Army was able to use an existing building, Hood said, which is why it’s so far ahead of other centers. Boston has been very difficult in terms of land acquisition, he said, cobbling together 40 different parcels into one site. “When you get into Chicago and other major markets, land acquisition becomes very difficult,” said Hood.

In Dayton, Ohio, a piece of land was wrapped around an old historic residential site and the Army was able acquire the entire piece. The historical building will be completely preserved and used as office space. “It was a very easy acquisition and there’s also added value to the community because of the historical preservation,” Hood said.

“When you talk about major markets, like Philadelphia, Boston, Chicago or Atlanta, land acquisition gets to be a little more difficult,” Hood said. In smaller markets like Ashland, Ohio, or Grand Rapids, Mich., “these places have been far more manageable in terms of putting the pieces together.”

“Obviously, one of the big challenges when one starts looking for 10 to 20 acres of land, the word gets out that it’s the Kroc money and people want to escalate the price to take advantage of the opportunity,” Hood said, adding that most of those land searches were going on two years ago.

Still in the design and development phase, the Grand Rapids Kroc Center is slated to be 82,000 square feet on nearly 20 acres acquired near a creek in the heart of the city. But, that wasn’t the original location.

Originally the plan was to build on four acres within Garfield Park but the Army backed off after objections from local residents. The media attention over the concerns, however, heightened public awareness about the project and its potential, he added. “To bring $30 million into our community, it created a great deal of interest and support.”

The new location, only about a mile away from the original and near the Gerald Ford Nature Preserve, actually turned out to be a better fit, Ross said, because it’s in a little more needy area and allows for more space.  NPT