The American Red Cross of Greater Los Angeles, struggling financially despite an outpouring of donations targeted for tsunami relief, is planning to sell its Wilshire Boulevard headquarters.
Red Cross officials maintain that the move the second major asset sale in a year is being driven by a desire to operate more effectively and efficiently. But they acknowledge that the sale will help shore up the chapter's finances.
"We know it will reduce our expenses somewhat. We can free up dollars that are not in overhead," said chapter Chief Executive Roger Dickson, who said some of the money will go to bolster its reserves.
The building's employees would be sent to other offices. Just over a year ago, the chapter eliminated 29 positions to cut costs.
The Greater Los Angeles chapter is by far the largest Red Cross chapter in Los Angeles County, serving 6 million people in 36 cities through its headquarters and seven regional district offices.
Last week, the chapter reported an increase in revenue, to $19.3 million for the year ended June 30, 2004, from $14.6 million in the previous year.
But the revenues include $7 million in proceeds from the sale of a building on South Vermont Avenue that the chapter was leasing out. Without those proceeds, its revenue would have dropped 13 percent, to $12.3 million. At the same time, expenses rose 10 percent, to $19.7 million.
Non-profits across the country have struggled over the past several years as the economy slowly recovered from a recession and donations tailed off. At the same time, there is concern in the non-profit community about plans by the Bush Administration to cut social programs a big source of non-profit funding.
The situation has not been helped by a series of huge disasters, from 9/11 to the recent tsunami, which prompted a massive outpouring of financial support from Americans but which also has squeezed non-profits' budgets. The targeted dollars go to specific causes, making it harder for non-profits to raise funds for other operations.
Dickson said the tsunami was a "mixed blessing" but maintained that fundraising at the Red Cross chapter is on track this year. But he acknowledged the chapter finances were a factor in the elimination of 29 full-time equivalent positions in November 2003.
"We needed to bring expenses in line with revenues," he said. "We underwent a significant reorganization."
Dickson said the decision to sell the chapter's 48,000-square-foot Wilshire Boulevard building was the result of a six-month planning process in which the administration and board decided the chapter could operate better without its headquarters, home to 90 employees.
The chapter's seven regional offices, located from West Los Angeles to Torrance to Santa Clarita, each house a handful of employees, though they could handle more.
"The closer we are to the people that need our service the better," he said, adding that new information technology makes it unnecessary to have such a large centralized staff. "You really have instant access to everybody."
Chapter officials also were concerned that in the event of a major earthquake, the centralization of its employees could prevent the district offices from providing services if roads became bottlenecked.
As part of the plan, Red Cross officials intend to open a Wilshire Boulevard district service center at a second building it owns near the current headquarters, where it has its emergency operations center. That is where Dickson expects to be based.
The chapter primarily provides two types of services: relief to victims of earthquakes, residential fires and other small and large-scale disasters; and training to individuals and companies in health and safety topics. Blood services are provided by a Red Cross unit not affiliated with the chapter.
Peter Manzo, executive director of the Center for Nonprofit Management, a Los Angeles consulting firm, said the decision to eliminate a headquarters operation struck him as an "interesting strategy" that was "not obvious."
"I have more questions than comments on that," Manzo said. "It makes sense for every non-profit to lower their overhead, (but) you would hope something like this is driven more by strategy than cash flow."
Jonathan Larsen, a commercial insurance broker with Trammell Crow Co. said the Rampart-area building could sell for about $80 to $120 a square foot, noting that sale prices in the area have been rising. That would total about $5 million. The chapter has occupied the building for 25 years.
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