Friends Center Buys House From Boss’s Company

BY THOMAS BREEN The New Haven independent

The Friends Center for Children paid $383,000 to a company co-owned by the nonprofit’s director, Allyx Schiavone, to purchase a Quinnipiac Avenue house where early childhood educators can live rent-free.

Schiavone said she recused herself from the deal, which the Friends Center’s board approved. The sales price was $70,000 below the property’s independently determined fair market value, according to the buyer and sellers. It was also $60,000 above the property’s city tax appraisal.

That real estate transaction and related documents were recorded on the city’s land records database on Nov. 3.

The property sale marks the latest expansion by the Fair Haven Heights-based childcare nonprofit, which already provides free housing for ten teachers across 12 different residential units located in several different Fair Haven Heights-proximate properties owned by the Friends Center. The childcare nonprofit has provided rent-free housing for some of its staff as part of a years-long effort to better compensate people, and in particular women, who work in an industry beset by low wages.

There are three documents in total that were filed to the city’s land records database on Nov. 3 that shed light on this transaction.

One shows that Schiavone — who is the executive director of the Friends Center nonprofit— quit-claimed ownership of the house at 646 Quinnipiac Ave. for $1 to a company called The Missy, LLC. State business records show that Schiavone is the manager/member of that LLC. Schiavone and her sister Josie, a luxury travel agent who lives in Maryland, told the Independent that they co-own the LLC, on a 50-50 split.

A second land-records filing from Nov. 3 shows that The Missy, LLC sold 646 Quinnipiac to Friends Center Teacher Housing LLC, which is controlled by the Friends Center nonprofit, for $383,000.

A third document shows that The Missy, LLC issued a ten-year, $125,000 seller’s mortgage at a fixed 5 percent interest rate to Friends Center Teacher Housing LLC for 646 Quinnipiac.

While it’s not illegal for a nonprofit to buy property from its director or another board member, both parties have to go to lengths to show that the transaction is in the best interest of the organization and not the director. According to the Internal Revenue Service (IRS), “There is no prohibition against an exempt charity dealing with its founders, members, or officers in seeing to the conduct of its economic affairs. However, any transaction between an organization and a private individual in which the individual appears to receive a disproportionate share of the benefits of the exchange relative to the charity served presents an inurement issue,” which can cause a nonprofit to lose its tax exempt status.

The burden of proof is on the nonprofit to demonstrate that the transaction was in its own best interest and not its director’s. Evidence can include proof that the nonprofit couldn’t have found a better agreement with reasonable effort under the circumstances, and its director recusing themself from voting when they have a financial interest, which is expected. 

In separate interviews this week, Allyx Schiavone, her sister Josie Schiavone, and Friends Center Program Director Miriam Sutton all said that Allyx recused herself from the real estate transaction in order to maintain a necessary level of distance from a property deal involving the nonprofit she runs and a private LLC she co-owns with her sister.

They also all said that the Friends Center did its own due diligence in getting an independent appraisal when coming to a mutually agreed upon sales price with Josie Schiavone, as the representative for the seller. The Friends Center board vetted and approved this deal.

Asked if she profited from the transaction, Allyx replied, “we could have made more money” selling this property on the open market. “We decided to sell below market and not have a broker involved and to offer a seller’s mortgage to the Friends Center. The goal was, we obviously wanted to sell the property, and wanted to find the best use that aligns with our values.”

Josie Schiavone and Miriam Sutton said that the $383,000 property transaction took place at a sale price $70,000 less than the fair market appraisal of 646 Quinnipiac Ave., though it did take place at $60,000 above the property’s $321,400 city tax appraisal. Josie Schiavone and Sutton framed that $70,000 markdown from the fair market value as an “in-kind donation” by the seller to the Friends Center as part of this deal.

Allyx Schiavone also noted that 646 Quinnipiac is a legal two-family residence, even though the city assessor’s database currently incorrectly identifies it as a single-family home. She said that the Friends Center plans to seek the necessary relief from the Board of Zoning Appeals (BZA) as soon as possible to try to convert this property into a legal three-family, in order to maximize the number of teachers and their families who can live here rent-free.

Sutton described 646 Quinnipiac Ave. as a “perfect fit” for the Friends Center to buy and incorporate into its teacher housing program, given its “size, yard, and location” within walking distance to the Friends Center’s East Grand Avenue headquarters and childcare center. 

Correction: An initial version of this article incorrectly stated that Josie Schiavone lives in Washington, D.C. She lives in Maryland. The article also incorrectly identified Miriam Sutton as the program manager at the Friends Center. She is the program director.