Final Evaluation: The Rockefeller Foundation's Program-Related Investments Portfolio
PROGRAM-RELATED INVESTMENTS (PRIs)
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John D. and Catherine T. MacArthur Foundation May 2010 PROGRAM-RELATED INVESTMENTS (PRIs) AT A GLANCE • Like grants, program-related investments are used to support organizations, projects, or commercial ventures that fulfill recognized charitable purposes, such as child-care centers serving low-income families, affordable housing, and arts organizations. However, unlike grants, PRIs are designed to be repaid with a modest amount of interest or other financial return. • From 1986 through 2009, MacArthur awarded PRIs totaling $377 million to 214 recipients in the U.S. and abroad. Since the program began, the Foundation has received more than $140 million in interest payments and repaid principal. • Most of MacArthur’s program-related investments go to mission-driven loan funds and nonprofit housing organizations committed to increasing economic opportunity and strengthening low-income communities across the U.S. PRIs also have been used in other areas of the Foundation’s grantmaking, including women’s health, environmental conservation, and independent media. To expand the reach of its grantmaking, the MacArthur Foundation makes low-cost loans and equity investments, known as program-related investments, to support charitable organizations and activities. PRIs are a powerful tool for private foundations to strengthen social enterprises and support projects that are too risky, complex, or small for conventional investors. Photo courtesy of Hispanic Housing Development Corp.
Transcript of PROGRAM-RELATED INVESTMENTS (PRIs)
John D. and Catherine T. MacArthur Foundation May 2010
PROGRAM-RELATED INVESTMENTS (PRIs)
AT A GLANCE
• Likegrants,program-relatedinvestmentsareusedtosupportorganizations,projects,orcommercialventuresthatfulfillrecognizedcharitablepurposes,suchaschild-carecentersservinglow-incomefamilies,affordablehousing,andartsorganizations.However,unlikegrants,PRIsaredesignedtoberepaidwithamodestamountofinterestorotherfinancialreturn.
• From1986through2009,MacArthurawardedPRIstotaling$377millionto214recipientsintheU.S.andabroad.Sincetheprogrambegan,theFoundationhasreceivedmorethan$140millionininterestpaymentsandrepaidprincipal.
• MostofMacArthur’sprogram-relatedinvestmentsgotomission-drivenloanfundsandnonprofithousingorganizationscommittedtoincreasingeconomicopportunityandstrengtheninglow-incomecommunitiesacrosstheU.S.PRIsalsohavebeenusedinotherareasoftheFoundation’sgrantmaking,includingwomen’shealth,environmentalconservation,andindependentmedia.
To expand the reach of its grantmaking, the MacArthur Foundation makes low-cost loans and equity investments, known as program-related investments, to support charitable organizations and activities. PRIs are a powerful tool for private foundations to strengthen social enterprises and support projects that are too risky, complex, or small for conventional investors.
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John D. and Catherine T. MacArthur Foundation page 2
BACKGROUND
Since1986,theMacArthurFoundationhasusedprogram-relatedinvestmentstoexpandthereachofitsgrantmaking,providingapproximately$377milliontoover214recipientsintheU.S.andaroundtheworld.FoundationPRIshavesupportednonprofits,for-profitbusinessesandspecial-purposefundsinarangeoffields,includinghealth,conservation,education,independentmedia,affordablehousinganddevelopmentfinance.Thevastmajorityhavebeendirectedtowardincreasingeconomicopportunityamonglow-incomepeopleandfosteringvibrant,stablecommunitiesintheU.S.
PRIscanbemadeintheformofloans,equityinvestments,bankdepositsandguarantees.Liketraditionalgrants,theinvestmentsareusedtosupportcharitableorganizations,projectsorcommercialventuresthatfulfillanIRS-recognizedcharitablepurpose.Unlikegrants,PRIsaredesignedtoberepaidtothedonor,usuallyalongwithamodestamountofinterestorothertypeoffinancialreturn.Recipientsmustbeabletogeneraterevenuethroughfees,earnedincome,orpublicsubsidiestorepayPRIs.Forexample,ownersofaffordablerentalhousingcanrepaytheinvestmentswithincomefrommonthlyrentalpayments.
Establishedasaresultofchangesinthefederaltaxcodein1969,program-relatedinvestmentshavebecomeincreasinglypopularwithfoundationsaspartofalargersocialinvestingstrategyorsimplyasawaytoexpandthereachoftraditionalgrantmakingprograms.
BENEfITS Of PRIs
PRIshaveseveralbenefitsforfoundationsandrecipientsthatgrantsdonotprovide:
• FoundationscanredistributethefundsorreplenishtheirendowmentsoncePRIloansandinvestmentsarerepaid;
• Therepaymentrequirementsofprogram-relatedinvestmentsallowrecipientstoestablishtheircreditworthinesstoother,moretraditionalinvestors;therequire-mentsalsoheightenfinancialdiscipline
andaccountability,whichhelpsstrengthenbusinesspracticesofbothfor-profitandnonprofitrecipients;and
• RecipientscanleveragecapitalfrompublicandprivateinvestorsbyusingPRIstoabsorbrealorperceivedrisk.
WhAT MACARThUR fUNDS
TheFoundation’sPRIscurrentlysupportthreegrantmakinggoalsintheU.S.:
• Preserve affordable rental housing.AspartofMacArthur’s$150-millionWindowofOpportunityinitiativetopreserveaffordablerentalhousingacrossthecountry,PRIssupporttheworkof21largenonprofithousingdevelopersand18specializedfinancialintermediaries.Theseinvestmentsaimtofinancethepreservationandimprovementof300,000unitsofaffordablerentalhousingover10years.Inadditiontosupportingthislarge-scaledemonstration,theFoundationhasmadegrantstosupportpolicygroups,public-privatepartnershipsandresearch,allwiththegoaloffosteringpoliciesthatfacilitateandsustaintimely,cost-effectivepreservationofaffordablerentalhousing.
Formoreinformation,includingalistofWindowofOpportunityrecipients,visitmacfound.org/window/brochure.
• Revitalize and strengthen Chicago communities.Since2005,theFoundationhascommittedPRIstotaling$65milliontostimulatepublicandprivatesectorinvestmentinChicagoneighborhoodsandtherebyadvancetheworkoftheMacArthur-supportedNewCommunitiesProgram.Thesecommitmentsincludesupportforsevenleadingcommunitydevelop-mentfinancialinstitutions,$10milliontohelpfinancethetransformationofChicago’stroubledpublichousingintonew,mixed-incomecommunities,and$42millionforaspecialForeclosurePreventionandMitigationProject.
Formoreinformationvisitmacfound.org/foreclosureandmacfound.org/chicago/pdf.
• Increase the scale and impact of the nation’s leading community development financial institutions.MacArthurhasbeenaleadingsupporterofcommunitydevelopmentfinancialinstitutions(CDFIs),providingapproxi-mately$250millioningrantandPRIsupportsincethemid-1980s.Communitydevelopmentfinancialinstitutionshelpexpandeconomicopportunityamonglow-incomepeopleandcommunitiesbyprovidingappropriateandaffordablefinancialproductsandservices.IntheU.S.today,thereare1,200CDFIs,
Program-RelatedInvestments(PRIs)
A SNAPShOT Of CDfIs
Communitydevelopmentfinancialinstitutions(CDFIs)helpcreatestable,vibrantcommunities.TheaccomplishmentsofCDFIsintheU.S.during2007aloneincluded:
• $25 billion:Assetsundermanagement
• $5.3 billion:Dollarvalueoffinancingandfinancialservicesprovided
• 9,000:Businessesassisted
• 34,000:Jobscreatedormaintained
• 57,000:Affordablehousingunitsbuiltorpreserved
• 687:Childcare,school,andotherfacilitiesbuiltorrenovated
• 30,000:Mortgagesandaffordablealternativestopaydayloansprovided
• 7,800:First-timebankaccountsforlow-incomecustomers
Source: 2007 CDFI Data Project / Opportunity Finance Network
whichincluderevolvingloanfunds,venturefunds,banksandcreditunions.Together,thesefinancialinstitutionsdeliveranestimated$5billionannuallyinloans,investments,andfinancialservicestourban,rural,andNativeCommunities.TheFoundationawardeditslargestprogram-relatedinvestmentever—$25million—tocreatetheNEXTAwardsforOpportunityFinancein2007.ApartnershipwithWellsFargoWachoviaFoundationandtheOpportunityFinanceNetwork,thisfive-yearprogrammakeslarge,one-timeannualawardstooutstandingCDFIstohelpthemgrowandincreasetheirimpact.
Formoreinformation,visitwww.nextawards.org
REPRESENTATIVE PRIs
BRIDGEHOUSINGCORPORATIONSan Francisco, CA$3,000,000program-relatedinvestmenttoacquireandpreserveaffordablerentalhousing,aspartoftheWindowofOpportunity:PreservingAffordableRentalHousinginitiative
COMMUNITYINVESTMENTCORPORATIONChicago, IL $1,000,000program-relatedinvestmentinsupportofanew“energysavers”loanfundforthePreservationCompactofCookCounty
GREATERMINNESOTAHOUSINGFUNDSt. Paul, MN$600,000program-relatedinvestmentforarevolvingloanfundtofinanceaffordablehousingpreservationinMinnesotaoutsidetheTwinCities
GULFCOASTHOUSINGPARTNERSHIPNew Orleans, LA $1,500,000program-relatedinvestmenttosupporttheproductionandpreservationof10,000affordablehomesintheGulfCoastregion
IOWAFINANCEAUTHORITYDes Moines, IA $2,000,000program-relatedinvestmentforpredevelopmentandenergy-efficiencyimprovementloanstopreserveaffordablerentalhousinginIowa
MARYLANDDEPARTMENTOFHOUSINGANDCOMMUNITYDEVELOPMENTCrownsville, MD$4,000,000program-relatedinvestmentforshort-termpredevelopmentandacquisitionfinancingtopreserveaffordablerentalhousingnearmilitarybasesineightcounties
MERCYHOUSINGLAKEFRONTChicago, IL$1,750,000program-relatedinvestmenttosupportthepreservationofaffordablerentalhousingintheChicagoareaaspartoftheWindowofOpportunity:PreservingAffordableRentalHousinginitiative
NATIONALCHURCHRESIDENCESColumbus, OH$3,000,000program-relatedinvestmenttosupportpreservationofaffordablerentalhousingacrosstheUnitedStatesaspartoftheWindowofOpportunity:PreservingAffordableRentalHousinginitiative
NATIONALCOMMUNITYSTABILIZATIONTRUSTWashington, D.C.$3,000,000program-relatedinvestmenttolaunchtheNationalCommunityStabilizationTrustaspartoftheForeclosurePreventionandMitigationProject
NEIGHBORHOODHOUSINGSERVICESOFCHICAGOChicago, IL$9,000,000program-relatedinvestmentguarantyandloaninsupportoftheHomeownershipRetentionandNeighborhoodPreservationLoanProgram,a$110millionfinancingpoolforhomemortgagesinlowandmoderateincomecommunities
NETWORKFOROREGONAFFORDABLEHOUSINGPortland, OR$4,000,000program-relatedinvestmentforshort-termacquisitionfinancingtopreserveaffordablerentalhousinginOregon
NEWYORKCITYACQUISITIONFUNDNew York, NY$5,000,000insupportofaguarantypoolbacking$150millioninnewprivatesectorfinancingforhousingdevelopersseekingtobuildandpreserveaffordablehousingthroughoutNewYorkCity
OPPORTUNITYFINANCENETWORKPhiladelphia, PA$25,000,000program-relatedinvestmentinsupportofmajorfundingfortenpremiercommunitydevelopmentfinancialinstitutionsthatwillbeselectedthroughtheNEXTAwardsforOpportunityFinance,whichisjointlyfundedbytheWachoviaWellsFargoFoundation
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JeffBrown,PresidentofBrown’sSuperStores,withcommunityresidentMaggiePowellattheShopRiteofIslandAvenueinPhiladelphia,whichwasfinancedbyaMacArthur-backedCDFI.
John D. and Catherine T. MacArthur Foundation May 2010
Program-RelatedInvestments(PRIs)
About the MacArthur foundationTheJohnD.andCatherineT.MacArthurFoundationsupportscreativepeopleandeffectiveinstitutionscommittedtobuildingamorejust,verdant,andpeacefulworld.InadditiontoselectingtheMacArthurFellows,theFoundationworkstodefendhumanrights,advanceglobalconservationandsecurity,makecitiesbetterplaces,andunderstandhowtechnologyisaffectingchildrenandsociety.
for more information, or to sign-up for our free electronic newsletter, please visit www.macfound.org.
JohnD.andCatherineT.MacArthurFoundation140SouthDearbornSt.,Suite1200,Chicago,Illinois60603-5285Telephone:(312)726-8000www.macfound.orgTDD:(312)920-6285
for More Information
Julia StaschVicePresidentProgramonHumanandCommunityDevelopmentjstasch@macfound.org
Debra [email protected]
Allison [email protected]
Marion [email protected]
ADDITIONAL RESOURCES
PRI Makers Network:www.primakers.net
“Program-Related Investing: Skills and Strategies for New PRI funders,” a Grantcraft publication:www.grantcraft.org/index.cfm?
The More for Mission Campaign, hauser Center for Nonprofit Organizations, harvard University:www.moreformission.org
Opportunity finance Network:www.opportunityfinance.net
Center for housing Policy:www.housingpolicy.org
New Communities Program:www.newcommunities.org
Cook County Preservation Compact:http://chicago.uli.org
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StudentsatMasteryCharterSchoolinPhiladelphia,whichwasfinancedbyaMacArthur-backedCDFI.
