When Jerome E. Hyman wanted to make a donation to Harvard Law School, where he received his law degree nearly 70 years ago, he went about it in a less than obvious way. Rather than cutting another check or pledging his investment funds, Hyman made a more tangible promise: Harvard could have his house.
Hyman owns a vacation home in Westhampton Beach, New York, a popular waterfront beach destination. Or, at least, he used to.
“The deed, the technical records, would show that it is owned by the President and Fellows of Harvard College,” Hyman said—though that doesn’t stop him from visiting for the occasional weekend getaway or mid-summer vacation. Harvard may own the property, but it will only sell it and reinvest the money when Hyman dies, per the agreement he and the University reached.
Hyman’s home is just one of many unconventional gifts Harvard receives from alumni and donors. In the past, the University has welcomed as donations stamp collections, Italian villas, geological minerals, and fine pieces of art. Except in cases when the University may want the object for itself, Harvard usually sells and re-invests the money from these donations into its $37.6 billion endowment.
Amidst Harvard’s record-setting $6.5 billion capital campaign, the University tries to raise hundreds of millions of dollars every year. Sometimes, though, raising money means making a sale.
“They give it a value, and then they generally sell it. It can be homes, it can be land, it can be apartments,” Peter L. Malkin ’55, a prominent donor and real estate mogul, said about Harvard fundraising. “It can be anything.”
Benefactors have donated non-monetary gifts since the beginning of Harvard’s history. John Harvard, one of the University’s first major donors, gave to Harvard half of his estate and his entire library. In 1982, a stamp collector donated his whole collection to the University.
Today, donating such gifts to the University begins, as most donations do, with a conversation. Harvard fundraising officials regularly meet with alumni to discuss donating to Harvard, beginning a series of negotiations between the donor’s interests and the University’s needs.
That back and forth becomes all the more complicated when donors want to give their home or piece of real estate. The Harvard Management Company, which oversees Harvard’s endowment, then helps evaluate and sell the property. The complicated nature of the process can help explain why Harvard does not actually receive the money from some gifts to Harvard’s capital campaign until long after the fundraising drive is over, according to Tamara E. Rogers ’74, the vice president of alumni affairs and development.
But Harvard may not want to accept every piece of real estate a donor offers, said Gary Snerson, who was the vice president of estates and special gifts at HMC until 2011 and now works at Planned Giving Innovations, LLC. Sometimes the pieces of property may be too indebted, so purchasing it may not be the wisest investment.
“A lot of times you reject a particular piece of real estate because the amount of time and effort you have to spend to do the due diligence and liquidate it is just not worthwhile in terms of the amount of funds derived from the sale,” Snerson said. “However, it was my policy to try and take the assets offered if I thought they could yield Harvard a net gain.”
“The rejections were much fewer than the acceptances,” he added.
After Harvard decides to accept real estate, it usually sells it. When a donor’s estate has not already sold the property, Harvard often turns to real estate brokers to do the job for it. Harvard tries to liquidate real estate donations as quickly as it can—the return on investment is much higher on the endowment, Snerson said.
But when Harvard and a donor sees value in a particular property beyond its price tag, it may end up keeping it for research or other Universities activities. The Villa I Tatti, a 66-acre villa in Florence, now serves as the Center for Italian Renaissance Studies; Bernard Berenson, class of 1887, left his Italian estate to Harvard in the 1950s.
Harvard will also keep more humble pieces of property if they are located nearby, Snerson said. Alan M. Garber ’76, the University Provost, lives in a donated home on Hawthorn Street in Cambridge. Garber is the first provost to live in the unassuming olive brown home, located less than a mile from his office in Massachusetts Hall.
“If someone died and left Harvard a house that was close to Cambridge, the first thing I would do is call Harvard Real Estate and ask if they were interested in retaining the house for visiting professor housing,” Snerson said.
Non-monetary gifts to colleges and universities are somewhat commonplace. Just last year, Stanford grabbed headlines when it received a donated art collection valued at $622 million.
While Harvard certainly profits from the gifted real estate, donors also reap benefits beyond the usual satisfaction that comes from giving to the University.
Donating his house to Harvard, Hyman said, seemed like “the logical thing to do.” Not only did it allow him to pledge a larger amount of amount of money to support the University, but now he does not have to pay as many taxes on his vacation property as he would otherwise. As a tax-exempt educational institution, Harvard doesn’t have to pay real estate taxes. And Hyman doesn’t have to worry about selling his home.
“In effect, you get the tax advantage, and the University gets it eventually,” Hyman said. “It also saves the trouble of selling it, it shifts that burden to Harvard.”
Donating real estate also allows philanthropists to avoid a capital gains tax on the added value of the property.
“If you have a property that you bought for $100,000 and it’s now worth a $1 million and you decide to donate it to Harvard or some other charity, you avoid capital gains taxes on $900,00 and get a charitable income tax deduction for $1 million,” Snerson said.
And having the Harvard Corporation as your landlord isn’t so bad, Hyman said. While the University owns his home, Hyman said he’s largely free to do with it what he wants—he can repaint or redecorate as he sees fits.
“You can do anything I suppose. If you set fire to it they might be a little unhappy,” Hyman said with a laugh.
—Staff writer Andrew M. Duehren can be reached at email@example.com. Follow him on Twitter @aduehren.