Tools & Resources

Chino Cienega Foundation Makes PRI to Conserve Land

This case example appeared originally in Essentials of Impact Investing: A Guide for Small-Staffed Foundations
Investor: Chino Cienega Foundation
Investee: Friends of Palm Springs Mountains
Asset Class: Private Debt
Investment Amount: $350,000
Impact Sector(s): Environmental Conservation & Preservation
Date of Investment: 2014
Projected Exit: 2015
Financial Return Goal: Below Market Rate
 
The Chino Cienega Foundation, based in Palm Springs, California, focuses on international grant making. However, its name derives from a deep appreciation of the local geography in the area where the founding family settled almost four generations ago. In 2014, the Friends of Palm Springs Mountains (FPSM) approached Stephen C. Nichols, the foundation’s president and founder, to provide funds for its efforts to conserve undeveloped land in the Chino Canyon area of Palm Springs. The organization wanted to purchase the land from a developer who was willing to sell rather than pursue development plans that had languished during the recent recession. After purchase, the land would be preserved in perpetuity and managed both to protect natural wildlife habitat and to provide public access through an interpretive trail system with informative signs and designated viewing areas. There was considerable urgency in FPSM’s quest for funding: it had negotiated patiently and at length with conservation agencies to raise most of the purchase funds, but its community fund-raising efforts were still about $350,000 short of the amount needed to close the transaction by the seller’s deadline.
 
Initially, the foundation felt that its grant-making program had no room for the level of support the FPSM was seeking. First, the amount required was far beyond the scope of grants the foundation customarily made. Second, such a grant would depart from the foundation’s emphasis on international programs. Finally, the foundation had already committed its grant making into the following year and there was nothing left in the budget to enable a grant on such short notice.
 
But reflecting on the FPSM’s request, Nichols began to see the possibilities. He thought of his family’s longstanding ties to the region, and also of the peace such a purchase could bring to the community, which years earlier had been embroiled in divisive politics over land use proposals. He wondered if a PRIloan would work, and following unanimous board approval, offered the organization a bridge loan to give it time to complete its fund-raising plan. Time was short, and the foundation had no paperwork templates for this type of loan. Nichols remembered meeting Peter Berliner, who at the time was managing director of Mission Investors Exchange, at one of its conferences, and Nichols called him to discuss the PRIopportunity. Berliner, in turn, put him in contact with the Gaylord and Dorothy Donnelley Foundation of Illinois, which had extensive experience in land conservation transactions. Within days, templates for loanagreements and related documents were on their way to Palm Springs.
 
Chino Cienega Foundation provided a low-interest (2.5 percent) bridge loan of $350,000 to FPSM with the term of approximately one year. The agreement was that this money (along with other funds the group raised) would go toward the purchase of the land. FPSM then had the following year to raise funds and repay its debt to the foundation.
 
Process
As the president of a small foundation with no staff, Nichols relied on assistance from Mission Investors Exchange’s network to draft documents in a timely manner. The generosity of the Gaylord and Dorothy Donnelley Foundation proved to be crucial to the foundation’s ability to act quickly and, hence, to the transaction’s success.
 
Partners Involved in Investment
None
 
Projected Impact
Although the foundation was already fully subscribed as far as grants for the coming year, and ultimately went over the 5 percent distribution requirement, this first-time PRI will recirculate funds back to the foundation that will become available for future grant (or PRI) cycles. Accountants for the foundation had to be educated on the treatment of PRIs, but they do not anticipate any financial shortcomings.
 
Without this loan, this transaction to conserve the land would not have been possible. The Chino Cienega Foundation was able to participate in the perpetual preservation of land that meant so much to its founding family. The community of Palm Springs benefits immeasurably from the preserving this land for public enjoyment. Finally, the preserved land provides wildlife with a stable habitat in which to thrive unaffected by further development.
 
On-the-Ground Insights
Don’t be afraid to try something new. Chino Cienega Foundation has prided itself on finding ways to turn a “no” into a “yes.” This may be its best example yet, stemming from a willingness to try a new funding mechanism despite considerable temporal and financial challenges.
 
Reach out to your community for help. The foundation could not have so confidently pursued this PRIloan without the valuable advice of Peter Berliner and others at Mission Investors Exchange. And without Mission Investors Exchange, contact with the Gaylord and Dorothy Donnelley Foundation, and the resources it provided, would have been highly unlikely.
 
Being small has its advantages. A small foundation can act quickly, call a meeting when needed, hash out the issue, and approve it as may be appropriate.

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