September 05, 2019

FAQs About Upcoming Changes at IHP

Since IHP’s announcement this spring of the decision to sell 3701 Chestnut and take a new path to further its mission, members of the IHP community have expressed sadness about the end of an era, curiosity about what’s next for the organization, and questions about how IHP leadership came to its decision. We have prepared the following FAQ with answers to some of the most common questions that we’ve received.

 

What kind of effort did IHP make and due diligence did it conduct before making the decision to pursue a sale of 3701 Chestnut?

 

IHP has wrestled for many years with declining finances and the organization’s role in a changing Philadelphia. IHP leadership made the decision to sell 3701 Chestnut following extensive efforts to maintain operations in the building, due diligence in examining available options, and a keen focus on the best way to accomplish its mission moving forward.

 

IHP has been on shaky financial ground for well over a decade as operational deficits, deferred maintenance at 3701, and servicing a construction loan have forced us to tap into the organization’s reserve fund at an unsustainable rate. The increasingly dire economic situation has been fueled by declining occupancy, substantial liabilities associated with the building’s condition, and lack of an endowment to cover ongoing maintenance.

 

IHP engaged in a broad variety of efforts over the years to try to reverse declining occupancy and raise the resources necessary to maintain a housing program at 3701. Efforts to strengthen marketing and lower our rents met with little success in an increasingly competitive housing market with many high-amenity, modern housing options and universities offering stronger supports for international students.

 

We aggressively tried to fundraise for years to support IHP’s legacy programs and reinvestment in the building, but encountered stiff headwinds in a shrinking donor base and declining philanthropic interest in devoting resources to a mission being served in many ways outside the walls of IHP. The amounts that we were able to fundraise paled in comparison to the amounts needed to address urgent building needs and maintain operations at 3701.

 

IHP secured a construction loan in 2016 for elevator, sprinkler, and boiler replacement projects to allow the building to stay in operation (see below). A detailed property needs assessment conducted as part of this work, however, revealed that an additional $15-$20 million was required for critical investments to remain in operation in the coming years, and at least another $10-$15 million on top of that to bring it up to modern-day standards.

 

Given the size of this economic need and the stark economics facing the organization, the board of trustees determined that the only path forward for IHP to continue to pursue its charitable mission and eliminate significant current and looming future liabilities was to engage in a real estate transaction. We secured a real estate expert to help assess our options and saw that a partial sale of the property was not viable given the need for building-wide system replacements and the scale of investment required.

 

Following extensive deliberation, it was determined that the best path to build on IHP’s legacy and drive meaningful impact in the future would be to divest itself of the building – and to do so with a sense of urgency given the organization’s dwindling reserve and the prospect of the end of the current economic cycle looming. It was a very difficult decision to make, but financial realities demanded action and IHP’s board of trustees did not make it lightly. The trustees believe that the building sale is the best and most responsible way to advance a reimagined mission for IHP in a changing world.

 

 

Did IHP contact other international houses for ideas?

 

Yes – we have been in close contact with other members of International Houses Worldwide to share ideas and learn from their experiences. Many have been facing similar struggles to IHP related to aging buildings, increased competition for student housing, and changes in higher education. A common characteristic among the i-houses that have remained in stable financial health has been the existence of either a substantial endowment or their affiliation with a major university. Over the years, several previous IHWW members have either closed international houses or refocused their efforts in areas outside of student housing.

 

 

What happened to the loan that IHP secured a few years back for building improvements?

 

A construction loan taken out two-and-a-half years ago allowed IHP to stay operational. We were approved for a $10 million loan and borrowed $7.7 million, using $3.7 million to consolidate and pay off existing mortgages and $4 million for critical building investments. With these investments, we were able to replace our elevators and key electrical and boiler components, and install sprinklers throughout the building.

 

While these investments allowed us to maintain operations at 3701 for now, our work on these projects revealed that at least four times this amount was needed to keep the building in operation over the next few years to cover expensive and much-needed pipe, HVAC, window, and façade replacements, among other items.

 

 

Is there any potential for a fundraising push to renovate the building?

 

The scale of investment required for us to maintain operations at 3701 is well beyond what we could expect to fundraise based on years of experience trying to aggressively raise funds. Our community - while deeply committed to the values of IHP - is not positioned to successfully execute a $30 million+ capital campaign on short order. And after years of pushing off harsh financial realities in the interest of maintaining operations, we no longer have the luxury of time to make one more push as our reserve approaches zero with operating deficits and liabilities posing an existential threat to the organization if we do not act now.

 

 

What is IHP doing to support residents and staff leading up to the building sale?  

 

IHP is taking all measures to enable the smoothest possible transition for residents and staff as we reposition the organization. We are committed to maintaining IHP's housing and cultural programs, including Lightbox Film Center, through the end of 2019, and we announced our plans to pursue a building sale eight months before our target closing date to provide staff and residents with ample time to find new housing and job opportunities.

 

The IHP board and leadership team is committed to being as transparent as possible throughout the building sale and transition process and to provide staff and residents the best possible supports as we move out of 3701. This includes regular communications and meetings to provide updates, answer questions and address concerns. IHP will also provide one-to-one counseling and assistance to facilitate housing and job transitions for after the building sale.

 

 

What will happen to Lightbox Film Center?

 

We are in active conversations with arts organizations to provide a new home for IHP's Lightbox Film Center program and will have more to share about its future in the coming months. We are deeply proud of IHP’s 40-year history of serving as the premier showcase for moving image art in Philadelphia and are working hard to ensure that the unique Lightbox mission and audience continue to be served moving forward.  

 

 

What's next for IHP?

 

IHP believes it is time to move on from our legacy student housing focus and go in a new direction that better meets the evolving needs of international students and other immigrant communities in Philadelphia. 

This will result in a different model and set of programs for IHP, but one that builds on our core values of promoting internationalism, mutual understanding, and fostering a diverse global community in and via shared space and enables us to carry on our proud legacy to best serve today’s Philadelphia. While much is still be determined for this next phase, it will focus on IHP providing shared space, shared services, and other supports for organizations working to promote immigrant integration, global connections, and international education in Philadelphia.

 

 

Can I visit 3701 Chestnut before IHP sells the building?

 

Yes – we encourage alumni and friends to come visit , and IHP is also planning a celebration for November 2, 2019 to celebrate IHP’s many accomplishments and to give a proper farewell to 3701. Please contact Clara Fomich at claraf@ihphilly.org if you would like to coordinate a visit – though drop-in are always welcome! – or to be included on invitations to upcoming celebration events.

 

 

We deeply appreciate the IHP community’s engagement and understanding through this transition for the organization. Please do not hesitate to contact IHP President & CEO Josh Sevin at josh@ihphilly.org or 215-895-6527 with any questions or concerns.