After evaluating five Program-Related Investment (PRI) opportunities for the past three years, we are excited to announce the first official PRI for The Gambrell Foundation effective August 2020! Previously, the Foundation passed on PRI opportunities for various reasons, including excessive fees, concerns regarding repayment, and a lack of follow-through from the PRI applicant. We define a PRI as a recyclable, interest-bearing grant. Separating the Foundation’s recyclable PRI pipeline from grants ensures the PRI program is self-sustaining. Also, we believe that PRI due diligence requires three sets of skills: programmatic, financial, and legal. Now that I’ve set the stage, I’d like to elaborate on the PRI we just executed. In May 2019, the Charlotte Center for Legal Advocacy (“Charlotte Legal”), a local non-profit, reached out to The Gambrell Foundation. Our Executive Director met with Charlotte Legal’s leader, who was soliciting grants to fund the renovation of a new office building. At this initial meeting, Charlotte Legal was looking for a new space, but it took them longer than expected to find a facility that fit their needs. They had found a new location, but then the Covid-19 pandemic hit. Consequently, this project was paused for several months. In early 2021, Charlotte Legal reached out with updates on their progress. Our Executive Director proposed that the Foundation make a PRI instead of a grant during these renewed conversations. Charlotte Legal was receptive to that concept, but they acknowledged that this would be their first experience with PRIs. We reassured them that we would learn this process together. On May 12, the Foundation provided its PRI application link to Charlotte Legal. Charlotte Legal submitted their thoroughly completed PRI application back to the Foundation by May 24. After an initial review, our financial team had a handful of follow-up questions, which Charlotte Legal quickly and sufficiently answered. Through the PRI application and subsequent conversations, the Foundation agreed on an unsecured loan to Charlotte Legal for the principal amount of $500,000 at half the market rate, or 2%, with a 5.5-year term. Both parties agreed on quarterly interest payments with a principal balloon repayment upon maturity on January 31, 2027.* Charlotte Legal will use the Foundation’s below-market-rate loan in combination with a commercial loan from Towne Bank for $3 million at 4% to renovate its new office building. By late June, the Foundation formally completed due diligence, and outside legal counsel drafted documents by July 8. Both parties executed the loan agreement and promissory note by August 3. The Gambrell Foundation cut a check to Charlotte Legal for the loan amount deposited on August 19. This marked the official execution date of our first PRI. Like other investments, the Foundation will monitor its PRI with Charlotte Legal on an ongoing basis until maturity. *Note: One of the essential lessons from this experience was that PRI principal repayments must go out again in the same calendar year they are received through either new PRIs or grants. We were mindful in coordinating a loan maturity date in January as opposed to December. For example, if this loan matured on December 20, 2027, we would only have 11 days to get $500,000 back out via another PRI or grant.
