Charity a real estate powerhouse

A house in Santa Monica, California, owned by the Salvation Army, which is providing it rent-free...
A house in Santa Monica, California, owned by the Salvation Army, which is providing it rent-free to officer Henry Graciani and his family. The house is valued at $US1.3 million. Photo by Los Angeles Times.
By day, Henry Graciani oversees a 54-bed treatment centre for alcoholics and drug addicts who come to him broke and hopeless. After work, he makes a quick drive to the $US1.3 million ($NZ1.8 million) Santa Monica, California, home he shares with his wife and three children.

Mr Graciani is not a highly paid executive returning to a beach retreat. He and his wife, Dina, are career Salvation Army officers who bring home $US25,000 a year, combined. They are among the charity's officers who are paid modest salaries but given rent-free housing, some in high-priced communities such as Southern California.

The Salvation Army is one of the largest charities in the United States. It serves more than 69 million meals a year to the needy, houses thousands of the nation's homeless and provides ready response to worldwide disasters, most recently in Haiti. It is also a real estate powerhouse.

In Los Angeles and Orange counties alone, the charity owns 87 homes and condominiums worth about $US52 million. Nationwide, it valued its real estate holdings, including commercial real estate, at about $4 billion in 2008 - one-third of its total assets.

For more than a century, the Salvation Army has provided a vast social-service safety net throughout the world, offering food for the homeless, shelter for the abused and relief for disaster victims. Founded in 1865 in London, the Salvation Army has an unusual, quasi-military structure and a highly religious mission.

It is led by officers who dress in uniform and carry ranks ranging from cadet - an officer in training - to a single general: Shaw Clifton, the group's London-based worldwide leader. Officers are allowed to marry, so long as their spouses agree to become officers as well. The Salvation Army has been boycotted by gay rights groups because it considers homosexuality to be immoral.

Aspiring officers are trained at four Salvation Army colleges in the United States, including one in Rancho Palos Verdes. Officers practise Christianity by running programmes to aid the needy. They are paid small salaries and provided houses that the Salvation Army owns across the country.

Salvation Army officials say the real estate programme makes sound business sense because it enables them to pay low salaries and transfer officers throughout the country without the burden and delay that typically accompany executive moves.

It's a policy similar to that of churches that provide housing to their ministers, said Victor A. Leslie, a lieutenant-colonel who oversees the Army's Southern California operations.

Mr Graciani's two-storey home is made of terracotta stucco and has a Spanish-tile roof and an enormous backyard with a trampoline for his children.

"The house is a nice benefit. It's not why I do what I do," Mr Graciani said during an interview in his home's second-floor master bedroom, a ceiling fan whirling overhead.

"I do what I do because of my commitment to God to serve people through the Salvation Army."

Some charity analysts said these homes conflict with the image of sacrifice and service that the Salvation Army markets to donors. The organisation reported receiving $US1.7 billion in support from the public in 2008.

"It creates an appearance issue, because John Public thinks, `I give the Salvation Army my hard-earned 50 bucks, and it's going to go to this fancy home I can't afford to live in,"' said Daniel Borochoff, president of the American Institute of Philanthropy.

The Salvation Army has long been one of the largest and most recognisable charities in the world. It spent more than $3 billion on services in the US in 2008, according to its annual report.

The charity has a reputation as a wise steward of its donors' money. It spends more than 80% of donor money directly on services, with the rest going on overheads, analysts said.

In 1997, the late management guru Peter Drucker told Forbes magazine that the Salvation Army was "by far the most effective organisation in the US. No-one even comes close to it in respect to clarity of mission, ability to innovate, measurable results, dedication and putting money to maximum use."

That reputation makes the charity's real estate holdings a surprise to some observers. In California, the group owns three Santa Monica houses worth $US1.1 million to $US1.6 million and eight properties in wealthy Rancho Palos Verdes, all used by officers.

The Salvation Army bought two of the Rancho Palos Verdes homes in 2007 for $US940,000 each. The two houses are within a few blocks of neighbouring San Pedro, where similar properties sell for considerably less.

When two of the Santa Monica homes became worn by age, the Salvation Army paid to bulldoze them and rebuild from scratch. One project on Pearl St cost more than $US500,000 to rebuild in 2004.

That decision made better business sense than selling and buying a different home, Lt-col Leslie said.

Gunilla Windon, a real estate agent on the Palos Verdes Peninsula, said she was surprised several years ago when she discovered that the Salvation Army was the owner of a property a client was buying. She later learned about the charity's vast holdings in Southern California.

"I just have a problem with them standing out there with their kettles at Christmas time, and people putting their hard-earned money in there when they own millions and millions and millions of dollars of real estate," said Ms Windon, who has not given to the charity since learning about its real estate holdings.

"It just doesn't look right. I don't like it."


• AT A GLANCE

Salvation Army officers are ordained Christian ministers who provide faith-based public service throughout the world. In the US, officers transfer about once every four years and with each new assignment comes a different furnished house. When they retire, officers are given one-time "housing allowances" to use as down payments on homes.

 

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