WE Charity says it will liquidate some assets. What about all that real estate not owned by WE?

When WE Charity abruptly announced Wednesday that it would shut down in Canada and sell its assets, it did not say what would happen to the millions of dollars worth of real estate held by affiliated companies.

WE Charity has paid $26.1 million for Toronto real estate, according to Ontario land registry documents. The six properties, storefronts clustered around the charity’s headquarters at Queen St. E and Parliament St, were bought between 2015 and 2018 and intended to one day become a “campus for good.”

Immediately adjacent to the WE properties is an additional $13.1 million in property owned by Me to We Asset Holdings, Me to We Foundation and a numbered company registered to a staff member of WE Charity.

In response to questions earlier this year, WE told the Star that in some cases it was required to register its properties under separate business and charitable entities to comply with co-ownership rules and provincial development regulations.

Four additional properties owned by Fred and Theresa Kielburger were made available for nearly a decade to WE and ME to WE, which paid mortgage interest, taxes and utilities but no rent, the charity said. WE says these properties should not be considered WE-related or WE-affiliated. They were not included in the Star’s tallies.

Outside Toronto, the Kielburger family and the charity’s for-profit arm, ME to WE, own property in Kenya, bought for a total of $1.25 million (U.S.).

In full-page ads taken out in the Star and the Globe and Mail (and posted to the charity’s website) Thursday, the Kielburger brothers said the COVID-19 pandemic “disrupted every aspect of our work.” WE Charity laid-off hundreds of employees in the spring and the chair of its board of governors resigned, followed by the departure of most of the other board members.

Shortly after WE was awarded a $544 million government contract to run a student volunteering program in June, it emerged that the charity had in the past paid Prime Minister Justin Trudeau’s brother and mother to speak and covered part of an overseas trip for the family of former Finance Minister Bill Morneau. WE pulled out of the government contract, but suffered from the conflict-of-interest controversy that followed.

WE lost several big corporate sponsors and a number of school boards announced they would no longer work with the charity.

“WE Charity will sell its Global Learning Centre headquarters and other assets to fund a new endowment that will be managed by an independent board with a mandate to sustain our humanitarian and education programs for the long-term,” Wednesday’s statement said.

According to WE’s 2019 audited financial statements, WE currently values its property at almost $40 million.

In response to questions, WE told the Star it will sell assets owned by ME to WE Foundation and put the revenues into the same endowment as those from the sale of WE Charity’s assets.

“All lead donors to purchase the real estate have been informed about the sale and planned endowment, and they have given their permission for the redeployment of resources to the endowment fund. No real estate was purchased with donations from children or international program funds,” the charity said.

WE said that it had not yet decided what to do with the three storefronts on Queen St. E owned by Me to We Asset Holdings.

“All energies and decisions have been focused on WE Charity at this stage. ME to WE Social Enterprises is in the process of pausing all its operations for the foreseeable future and potential indefinitely. All decisions regarding ME to WE Social Enterprises will be determined as part of the reorganization process,” WE charity said.

Kate Bahen, Managing Director of Charity Intelligence Canada, said the complex ownership of WE’s property in Toronto is reflective of WE’s sprawling network of businesses and charitable entities around the world.

“They were very clear that only the Canadian charity is shutting down at this time,” Bahen said, adding that ME to WE, should its operations continue, is a private company that doesn’t have to report its finances publicly like a charity.

Bahen pointed out that WE’s activities in the United States were big business, contributing $20.9 million to WE Charity in Canada last year.

The Kielburgers said WE’s overseas projects would continue, funded by an endowment created from the revenues of liquidating WE Charity’s assets in Canada. The new endowment’s fund will support WE’s projects in Kenya, Ecuador and China. These are also key destinations for ME to WE’s travel trips, said Bahen.

“Craig and Marc Kielburger have made the drastic decision to shut down WE Charity Canada, the mothership of its global activities,” said Bahen. “What will happen to the rest of it, they haven’t said yet.”

The property used by WE in Kenya includes accommodation for foreign staff and that is owned by the Kielburger family and provided to WE Charity rent free, the charity’s Kenya country director, Robin Wiszowati, said in a statement. A company called ME to WE Trips also owns a luxurious beach house called Toriana purchased for $850,000 (U.S.) where guests on ME to WE trips would stay for three days as part of their volunteering trip to Kenya, Wiszowati said.

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In late 2019, WE added a page to its website detailing the organization’s “philosophy on real estate.”

“Since its earliest days, the WE organization has operated based on the philosophy that it can ensure fiscal stability, maximize its program delivery, and ensure its long-term impact by owning property as a form of endowment,” the page states.

In response to questions asked earlier this year, WE Charity said the real estate holdings “provide approximately 8-9 months of financial security.”

In a series of transactions between 2011 and 2019, WE Charity (then known as Free the Children), and ME to WE Asset Holdings sold 12 properties in Cabbagetown for $19.5 million. Between 2015 and 2019, the same entities, along with ME to WE Foundation and a numbered company, purchased 14 properties in the Queen St. E and Parliament St. area for a total of $39.9 million.

WE previously told the Star that it received $25.5 million in targeted donations to purchase the properties at Queen and Parliament. Donors included Hartley Richardson, David Aisenstat, The Richardson Family Foundation, The Gilgan Family Foundation, Castlepoint Investments, Craig Burkinshaw and the Losani family.

The numbered company, 2569144 Ontario Inc, is owned by ME to WE, the Charity said, and its CFO, Victor Li, signed documents on the company’s behalf. The company was required because the property it owns is part of a co-operative that does not allow more than one unit to be owned by the same owner.

Charity lawyer Mark Blumberg said it was unlikely that WE Charity could be immediately shuttered, considering it could take months or years to sell so much property.

“They’ve only said they’re shutting down ‘operations,’” Blumberg said.

What’s sure is that the proceeds from the sale of any charity-owned real estate must be used for charitable purposes, Blumberg said.

“Since they’re unlikely to do much fundraising and will have minimal administration costs, everything else should go to their charitable mission. This could mean hiring other WE charities in Kenya or Ecuador to run the programs there. Or it could take the form of a grant to another Canadian charity to undertake work outside Canada.”

Either way, the public won’t know how the proceeds are spent until WE files its annual statement with the Canada Revenue Agency every February.

“It could be a whole year before we find out how that money is being spent,” he said.

Despite their pledge to turn the future endowment over to an independent board, Blumberg questioned whether the Kielburgers would relinquish all control.

If the endowment is registered as “perpetual,” only the interest generated by the principal —typically two to three per cent — could be spent each year, leaving tens of millions of dollars sitting in the bank instead of being spent on charitable activities.

“If WE Charity holds the endowment then the real control is with the founding members, even if they do not sit on the board of directors, as they can replace the directors at any point. Therefore, the power of the founding members may continue for many years or even decades.”

Marco Chown Oved