Doing good, doing well: profitable philanthropy; Abell Foundation part of trend that mingles charity with business

THE BALTIMORE SUN

For nearly a quarter-century, Mike Drocella has made a living amid the steamy furnaces at the Carr Lowrey Glass Co. on the banks of the Patapsco River, just like his father before him.

Enduring as it had been, Drocella's was a way of life under threat -- a threat that grew more ominous last year as the 110-year-old company, lagging behind its competition, struggled to find a buyer.

That is, until an unlikely investor entered the picture: Baltimore's Abell Foundation.

Recruiting partners to help manage the investment and the company, the nonprofit foundation put up $7 million to buy Carr Lowrey last year. It might sound like a risky move to the average investor, but to Abell's president, Robert C. Embry Jr., buying Carr Lowrey offered a rare chance to save 320 mostly blue-collar jobs and 198 pensions.

Abell's investment is part of a growing movement of entrepreneurial philanthropy -- a blend of charity and business aimed at swelling a foundation's coffers while addressing its pet issues.

The trend has taken various forms.

In Abell's case, a small portion of the foundation's $270 million in assets goes into for-profit businesses -- start-up or struggling-- as investments that are expected both to make a return and to further Abell's interest in Baltimore's economic development.

Those investments are separate from the foundation's grants to nonprofit organizations and from its more traditional investments in stocks and bonds.

Drocella, 42, doesn't care about the foundation's motives -- he's happy still to be working as the company's quality control manager.

"We were worried, in all honesty," he said. "Now we're doing better probably than any time since the 1980s."

Like venture capitalists

Other philanthropies have begun to act more like venture capitalists in their relationships with nonprofit organizations. They might sit on the boards of those programs, demand more quantifiable results and pledge money -- sometimes as loans instead of grants -- over a longer period.

In addition to its grants, the John D. and Catherine T. MacArthur Foundation in Chicago invests about $4 million of its $4 billion asset base annually in projects to further its philanthropic missions. One of its longest-running investments is in South Shore Bank, which was started 27 years ago to provide financial services in minority neighborhoods of Chicago.

"It's a small number of foundations that are very active in this area, but it's really an area of innovation," said Steven Lawrence, director of research for the Foundation Center in New York City, which monitors foundation trends.

From 1993 through 1995, 126 foundations spent $229.3 million on so-called "program-related" investments -- loans, loan guarantees or outright investments in activities to support their charitable missions -- according to the center's most recent research. Most foundations lent or invested amounts of less than $1 million.

"In essence this money is recycled. Those funds can then be used again, which is a very exciting prospect," Lawrence said. "The difficult part is there's a great deal more oversight involved."

$25 million invested

Abell has quietly invested about $25 million in local economic development over the past 10 years, mostly in emerging companies.

Some of the investments have worked out handsomely.

In 1995, Abell invested $2.5 million in a subsidiary of Guilford Pharmaceuticals formed to develop a drug to block the craving for cocaine, a project dovetailing with Abell's interest in fighting drug addiction. The stock was eventually exchanged for 750,000 shares in Guilford -- an investment that was worth $10.5 million as of yesterday.

In 1992 the foundation began investing in Artform Industries Inc., a Northwest Baltimore firm that employs 40 people who make plastic containers and trays.

Back then, the company sorely needed borrowing power, said owner Steven Wasserman, and banks weren't biting.

"It was kind of getting to the end of the rope," Wasserman said. "They seemed to be keenly interested in keeping the jobs in Baltimore City that were quickly vanishing."

Last year, the foundation created a $30 million "venture fund" to invest in private companies and hired a venture capitalist, Nora Zietz, to manage it. About $5 million of that fund has been invested so far.

But Carr Lowrey is Abell's largest single economic development investment to date, and there is more at stake. While the foundation owns a minority of the company's stock and fills only a quarter of its board seats -- with its partners holding the rest -- the $7 million put in is all Abell's.

"It's a lot of money, is the main issue," Embry said. "We're the only ones at risk."

Samuel J. Carr and William W. Lowrey started their company with one furnace, eight pots and high hopes in the Westport section of Baltimore in 1889. In 1927, it became the first glass company to automate certain parts of the process, such as a furnace that heats glass to thousands of degrees Fahrenheit, pours it into molds and sends it down an assembly line.

At one time, Carr Lowrey had more than 1,000 employees, making stylish, intricate perfume bottles for such customers as Avon.

Then the glass industry began to consolidate, as plastic and other materials emerged as increasingly worthy packaging competitors. Plants in New Jersey and Georgia responded by modernizing their equipment.

Meanwhile, Carr Lowrey's reputation for quality was deteriorating, said Francie Keenan, Abell's vice president for finance, who also sits on Carr Lowrey's board.

"Vendors were having concerns," said Phil Ross, an industry analyst with Glass Industry Consulting in Laguna Niguel, Calif. "They were just concerned about getting paid. Everyone knew that they were struggling."

But in the past nine months, the Abell Foundation and its partners have reconstituted the company's board, brought in a new plant manager and made other changes they say have improved the quality of the cosmetic bottles, candle holders and other glass products Carr Lowrey sends down its conveyor belts each day.

"There's been a dramatic turnaround in the quality of the product," Keenan said. "Sales are ahead of budget. The company is cash-positive for the first time in four or five years."

Jack Gettys, a national representative for the American Flint Glass Workers Union, which represents about 19 mold-makers at the plant, said the new ownership's approach has been encouraging.

"The glass industry is almost a dying art," Gettys said. "But they're taking it cautious, and they're taking it a step at a time like they should."

"I don't want to say they're over the hill yet," he said. "But the mold shop has been doing a lot of work on new samples and new jobs, and the work has picked up. People are starting to buy cars. They think it's going to go."

Embry and members of the foundation's board of trustees say they hope the company will eventually produce a good return for Abell.

"Sometimes it's going to work and sometimes it isn't going to work," said board member Walter Sondheim Jr. "But in general, I think, of the investments we've made of this type, the successes have far outweighed the failures."

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