The man who turned commercial real estate into a tool for philanthropy has another surprise in store for Santa Barbara. Tom Parker, president of the Hutton Parker Foundation, wants to bring together the city’s colonial past with its charitable future.
The foundation has bought the Hill-Carrillo Adobe at 15 E. Carrillo St. in the heart of downtown Santa Barbara. Built in 1825, the state historic landmark was once home to the Santa Barbara Foundation.
Union Bank currently holds the lease, but when that ends, Hutton Parker will create a “foundation center” – allowing four or five private charitable foundations to pool resources and reap networking benefits like start-ups in a tech incubator.
“We will share receptionists,” Parker said. “We will share an accountant. We will share software. We will share things together, be able to be more efficient and save money so we can grant out more. And have it all under one roof … It’ll be an opportunity to see if we can work together. And I know we can.”
Parker likens the concept to the Arts and Culture Center at 1330 State Street — a former Washington Mutual branch that the Hutton Parker Foundation bought in 2008. It now houses eight arts-related nonprofit organizations, including Opera Santa Barbara, Santa Barbara Center for Performing Arts (The Granada Theatre) and the Santa Barbara Symphony.
He says having all these nonprofits share the same space works collaborative magic.
“The arts groups have worked together in ways I had no idea (they would),” he said. “They even share development together, they share ticketing, they talk to one another constantly.
“It’s been great … Foundations can do that same thing. So we need to walk the walk I’ve asked nonprofits to do.”
This is real estate philanthropy, Tom Parker style. He uses foundation money to buy buildings at a discount (paying cash) and then rents them at a discount to local nonprofits. The idea of a philanthropic landlord – Hutton Parker even helps nonprofits with moving expenses – is a mind-bending oxymoron. But the foundation, under Parker’s leadership, has been doing it since 1997. That’s when it loaned money to the Santa Barbara Rescue Mission to help build its East Yananoli Street complex.
The foundation now owns and operates 16 nonprofit office buildings (15 in Santa Barbara County) — with nearly 100 nonprofit tenants. The rents are below-market, but the cash flow brings liquidity to the foundation, helping to fund a total of more than $50 million in grants. Unlike many foundations, Hutton Parker makes most of these grants for operating expenses — not new programs.
“Tom understands that physical environment is often a powerful, yet largely overlooked facilitator of collaboration among nonprofits,” said Ron Gallo, president and CEO of the Santa Barbara Foundation.
“His real estate-based philanthropy has not only made possible a stable and affordable home for dozens of nonprofits, it has given them the physical and psychological space to think big, think together, and reach for greater impact.”
Ask anyone involved with Santa Barbara County’s nonprofit sector and they will tell you that the Hutton Parker Foundation is one of the most innovative funders in town. Creative is the word they use to describe Tom Parker.
Parker rejects the praise. He says it’s just in his nature to “find a better mousetrap.” (See below.) *
For him, philanthropy boils down to a philosophy of life.
“It’s not about the money,” he said. “It’s about the money growing, using it in such a way that everyone can win … I always understood from the macro sense that things need to be in balance. If money is in too few hands, it doesn’t work — capitalism doesn’t work. It implodes. I understood all that. So … OK, recirculate wealth.”
Parker’s philosophy fits with what he calls his “process” — a never-ending quest to use his natural business talent to produce a more elegant solution for his community. In this the Hutton Parker Foundation rides a growing tide of impact investing — a hybrid form of philanthropy that seeks social impact and a financial return.
In fact, Parker cares so much about this relatively new kind of philanthropy that he’s helping the Santa Barbara Foundation add this strategy to its investment portfolio. A long-time member of its Investment Committee, he will be advising the Santa Barbara Foundation’s new Mission-Related Investment Task Force, which is charged with figuring out how the foundation can best invest a portion of its endowment here in Santa Barbara County.
Parker doesn’t normally sit on boards other than Hutton Parker’s. But the chance to help Gallo lead the largest grantmaker in the county (with assets of $330 million) into impact investing was too tempting.
“We are grateful to have Tom on our team,” Gallo said. “One would have to look far and wide to find someone who better understands impact investing.”
Parker’s office sits atop the foundation’s West Anapamu Street building, which also houses two Santa Barbara nonprofit stalwarts, The Fund for Santa Barbara and the Community Environmental Council. He’s been telling me about his love of playing the guitar and singing the blues. Then he stops and smiles.
“See this, he said, holding up a sheet full of numbers describing one the foundation’s investments. “This is my music, too. This takes my brain into a place that takes all this stuff and gives me a simple conclusion … It’s fun for me.
“So my thing on philanthropy is so much different than someone who feels like there’s this homeless shelter and they are focused on helping the homeless because they feel it in their heart. I feel this,” he holds up the sheet of numbers again, “in my heart.”
“It’s just how I’ve grown up probably,” he said. “It’s how I get fed.”
The son of a butcher, Parker was born in Santa Barbara and grew up here, attending local schools, starting with Franklin Elementary on the Lower Eastside. A bachelor’s degree and an MBA from Cal Lutheran University followed before he became successful developing commercial real estate.
That for-profit experience planted the seeds of his nonprofit success.
As president of the Hutton Companies in the 1990s, Parker faced a challenge. A Hutton-owned high-rise in Riverside was only 20 percent occupied and seemed destined to stay that way. Then he had an epiphany. He sought out the biggest law firm in town and offered the firm 30 percent equity in the building in exchange for signing a 15-year lease. The firm would fill about 60 percent of the building. The firm would also pay rent increases of 5 percent a year, but it would pay absolutely nothing for its part-ownership of the building. So why give up equity?
“The building has no value,” said Parker, explaining his strategy. “It’s only the tenants that bring value to anything. Only that cash flow. Why not share the upside of that cash flow if the tenants are eliminating your risk?”
The Riverside deal proved successful. And he repeated similar deals with other vacant buildings — except this time with a 51 percent to 49 percent equity split. Everybody won. And Parker built wealth by sharing wealth.
Parker altered this formula when the foundation opened its doors in 1996, after the death of Betty Hutton. Ever since then, he’s been sharing the foundation’s wealth to build community (and the foundation’s endowment). But always as an astute businessman.
“Once you do it, people say well that’s really creative,” Parker said. “No it’s not. If you could take money in a foundation and instead of giving it to Wall Street, go buy a building, get a hell of a deal, all cash. Almost double your money the day you buy it. Turn around, lease it to nonprofits at 5 percent, which is better than a bond is going to get. Which still makes the foundation money. Plus the asset appreciates.
“I mean, how fundamentally simple is this … I won’t take risks. It’s not a part of me. I don’t need to take risks … It’s like one block on another.”
He tells a tale of three foundations to illustrate efficacy of his approach. Hutton Parker and two other private foundations each had around $60 million in their endowments in the year 2000. By 2015, Hutton Parker’s assets exceeded $100 million while the two other foundations — which both invested traditionally in the stock market and bonds — dropped to $42 and $32 million, respectively. What’s more, Parker points out, their foundations gave $10 million less in grants than Hutton Parker over those 15 years.
Parker feels so passionately about this approach he wrote a book about it. Co-authored by Michael Bowker, it’s called The $100 Million Secret (2014, Kele Publishing). He also travels the country giving speeches to other foundation leaders. The basic message: investing in community works — whether you are looking at your mission statement or your financial statement.
But Parker hasn’t stopped looking for better mousetraps. One of his latest challenges is taking him overseas for the first time as a philanthropist. In Tanzania, he’s found a nonprofit that helps low-income families make the transition to solar lighting from unhealthy kerosene lamps.
In characteristic fashion, however, Parker wasn’t satisfied with just giving a grant. Instead, he suggested the nonprofit change its model. Now, rather than simply give the solar panels to needy people, the nonprofit will build a business. The panels will be distributed — financed by low-rate loans — to the small-scale sellers of kerosene. And people will lease the solar-powered lamps at only 40 percent of the cost of the kerosene.
It’s not only healthier, Parker says, it lets everybody win — even the kerosene sellers.
At the end of my interview, I asked Parker to offer some advice to people engaged in philanthropy and those simply interested in giving back in some way. This is what he said:
“There are so many nonprofits. Find one whose need matches your skill set … If you are an artist, there are so many nonprofits you can help. If you are a musician. Fiscal things. Medical things. Construction. Whatever it may be. Nonprofits need those skills.”
Parker does not hold with the give-till-it-hurts philosophy of philanthropy. Making a difference “feels good,” he says.
And what makes Parker feel good is using his business mind to get philanthropic results.
“I love the nonprofit sector,” he said. “I love the recirculating of wealth through choice and through engagement …
“ This process — to feel like I’m producing, I’m moving forward —– is what gives me nourishment.”
Tom Parker’s ‘Better Mousetraps’
» When Antioch University Santa Barbara needed new premises for its expanding program in Santa Barbara in 2011, Hutton Parker stepped into to buy its new home on the corner of Cota and Anacapa streets. Antioch has a 10-year lease and pays near market-rate rent, but the 30,000-square-foot campus with 18 classrooms enabled it to grow and stay in town.
» In 2009, following the financial crisis, Hutton Parker joined with the Orfalea Family Foundation and Bernie and Tim Marquez of Venoco Inc. to buy The Bank of Santa Barbara from East Coast owners. Parker says small banks often support local nonprofit organizations with loans, and he felt philanthropic ownership could help more capital get to nonprofits to serve the community.
» The Main Family Resource Center opened in 2009 after the Hutton Parker Foundation struck a deal with the Carpinteria Unified School District to turn a disused school site into the home of Community Action Commission’s Head Start kindergarten-readiness preschool program. With support from the J.S. Bower Foundation and the Orfalea Foundation, the center also provides office space to other nonprofits that provide additional services to these children and their families. Tenants pay only the cost of their own utilities.
— Author and writer Steven Crandell helps integrate story and strategy for organizations, with nonprofit foundations a particular focus. “Thinking Philanthropy” aims to provide practical, thought-provoking ideas about giving. This article was cross-posted on Tumblr. Steven can be contacted at email@example.com, or follow him on Twitter: @stevencrandell. Click here for previous columns. The opinions expressed are his own.