The First Ten Years at the Illinois Facilities Fund - IFF

ADifferentKind ofLenderThe First Ten Years at the1Illinois Facilities Fund

A Different Kind of LenderThe First Ten Years at the Illinois Facilities Fund1990–2000

There’ssomethingabouta building...Trinita LoguePresident, Illinois Facilities Fund

1It startedwithan idea. ..Cold winds blow into Chicago every winter,forcing even the hardiest residents to dig out warmclothing and fill gaps around windows. Those windsbrought another kind of trouble in the late 1970s. Theenergy crisis had driven heating costs up so fast thatmany nonprofit organizations were diverting thousandsof dollars from their programs to pay winter fuel bills.Even in warmer months, many human serviceagencies limped along with barely adequate facilities—payments couldn’t be used for capital improvements.This was just the kind of problem that sets the wheelsturning in Chicago’s philanthropic community.It was 1980 when six foundations pooled funds andmade their first energy-conservation loan, disbursing$4,200 at 3% interest to an arts and film organizationnamed Facets Multimedia. The money bought ceilinginsulation and a new thermostat control, with thepromise of $3,000 per year in energy savings. MoMingDance and Arts Center borrowed $2,197 to installinsulation and ceiling fans, figuring on getting half itsmoney back the first year. Twenty-five other organizationswon small grants for energy audits, and Lutheran Homeand Service for the Aged went for the first “big” loan,$60,000 over five years, to automate its heating system.As foundation initiatives go, the Joint FoundationEnergy Conservation Fund was a direct hit: a little money7

invested toward a big problem, with gratifying results. Butby opening a window onto the facility needs of nonprofits,it exposed a much bigger challenge. And it plantedthe seed for a new organization that would be a lender,consulting firm, construction manager and think tank,all rolled into one: the Illinois Facilities Fund.Raising the barTrinita Logue was assistant director of the ChicagoCommunity Trust when the Joint Foundation’s loanportfolio reached $750,000. A whirlwind of energy witha deft touch for the persuasive memo, Logue was askedby the Trust’s executive director, Bruce Newman, toexplore expansion of the loan program. He was thinkingbeyond energy conservation to gut rehabs, additionsand new construction.Newman had seen plenty of down-at-the-heelsnonprofit facilities where a visitor’s first impression isof worn-out linoleum, caked-on paint and makeshiftpartitions. Some agencies took a perverse pride in suchfacilities, figuring it proved their frugality and need,but to Newman and others in government and philanthropy,it seemed all wrong. Why should nonprofitsserving people have substandard buildings?The Trust and the Illinois Department of Childrenand Family Services had started a second facilities-loanprogram, channeling $1 million to agencies servingchildren, and it too was successful. Logue’s assignmentwas to find out how far the concept could be pushed.Did other agencies have similar needs? Could paybackmechanisms be created? With a thoroughness thatwould be a hallmark of the organization she would lead,Logue put together the argument.Focus groups, interviews and surveys revealed notonly an enormous need among nonprofits but a soundbasis for allocating government reimbursementstowards property improvements. After reading Logue’s1987 memo, Newman began lining up funds.Money, people and buildingsIncorporation papers were filed in 1988 and independentoperations began in 1990 with $1.7 million in preliminarysupport from the Chicago Community Trust. Laterthe IFF would take over the two existing loan funds and,as its by-laws allowed, take on development projectsand even ownership of properties. In 10 years, theorganization would develop a loan portfolio approaching$25 million and make its mark on lower-incomecommunities across Illinois.The IFF has built and owns seven child care centers–beautiful light-filled buildings financed with tax-exemptbonds—and is building more in neighborhoods89

across Chicago. Staff members recommend three orfour new loans at each month’s loan committeemeeting, helping agencies build medical clinics, housingfor people with disabilities or AIDS, charter schools,job training centers and offices. Technical assistancehas been a specialty from day one, but now the IFFis considered the expert on facilities questions:how much they should cost, how they should be built,whether the demand is there for the services beingoffered. Research, public policy work and managementtraining for nonprofits are also part of the mix, notsimply to protect the loans but to help borrowers moveon to bigger endeavors and to advance the status andscope of the nonprofit sector as a whole.What does this look like? It is financial tables andloan files, blueprints and contracts, memos by thehundreds and proposals stitched together under deadlinepressure, just like at other nonprofit organizations.The offices have a hint of a big bank’s elegance, but amongstaff there is a definite social-purpose attitude. Boilit down and you can describe the work with three words:money, people and buildings.10

What morecan we do forthe nonprofitsector...?Chuck HillIFF Board member and Executive Vice President,Federal Home Loan Bank of Chicago

2Balancingrisk andrewardAround a conference table, 18 IFF boardmembers and staff listen with rapt attention as vicechairand treasurer, Rhonda Hopps walks them throughthe proposed year 2000 budget. Like a storyteller, theAllstate Insurance Company investment analyst brings tolife each grey column of numbers, pointing out interestingspikes and valleys and putting each one in perspective.There’s $500,000 allocated to a new “board designatedendowment,” she notes, which will bring both financialstability and flexibility down the road. There’s a jump instaff costs. “Money well spent,” Hopps argues, for five newemployees.Then she calls attention to the real eye-popper:a $10 million projection for loan volume in 2000.“This will double our disbursements,” she says,checking faces to gauge reaction, “but we think it ismanageable.” Jane Bilger doesn’t flinch, though as theorganization’s director of finance and lending it is herresponsibility to move those dollars. “It’s a goodstretch number,” Bilger affirms, smiling with a banker’sconfidence. Hopps then concludes with a flourish,directing attention to the bottom line of the projectedstatement of position. “We’re looking at a $46 millionorganization next year.”Started with two staff and borrowed office space, theIllinois Facilities Fund has grown at a rate that would25

make a venture capitalist smile. The loan portfolio hasinched up from under $3 million in 1991 to almost$25 million in 2000. The staff has grown to 25 (“mostlyType A personalities,” notes staffer Joe Neri), there issubstantial cash available for debt reserve and new loans,and the company has diversified its offerings while stayingin a focused niche. As for what the organization hasaccomplished, the cumulative numbers are impressive:by leveraging an estimated $64 million in total capital, theIFF has helped create and maintain 3,500 jobs, develop2.4 million square feet of space and improve facilitiesserving nearly two hundred thousand clients, annually.Still, it’s a little known story. In a discussion of theIFF’s fundraising needs, board member Mercedes Laingof Bid4Real.com identifies one of the IFF’s biggestchallenges: “It’s hard to reduce our work to a sound biteor a heart rending story,” she notes, “even though wemake a big difference in peoples’ lives.”Better places for peopleThat was especially true in the early days, before evidencebegan showing up across metro Chicago and in Peoria,East St. Louis, Bloomington and Rockford. Lendingin disadvantaged communities wasn’t unknown, but itwasn’t high-profile either. So in the early days, boardpresident James Brice, a retired senior partner at ArthurAndersen & Company, and executive director Loguespent a lot of time explaining what exactly the IFF did.The easiest approach was to talk about a recent borrower.In the course of the story, the three core elementswould surface: money, people, buildings.The first loan was for $200,000 to the North AvenueDay Nursery to convert a handsome building acrossfrom Wicker Park into a child care center. It was thebeginning of an IFF specialty, though the toddlers andparents who walk through the doors each morningdon’t even know the IFF exists. The second transactionwas with WilPower Inc. of suburban Glencoe, $32,000at 5% as a second mortgage on a house for mentallyill adults. This would become another IFF trademark,a second position (which puts the IFF at more risk) tobridge a financing gap.Six more files rounded out the first year’s portfolio,bringing it to $958,000. The funds created child carecenters, homes for developmentally disabled adults, aresidence for prison parolees and administrative officesfor a youth organization. Seventeen folders were addedin 1991, bringing loan receivables to $2.75 million. Eachclosed loan, of course, created a flow of interest back tothe IFF. This revenue reached $92,000 in 1991 and$266,000 the following year. This different kind of bankwas clearly open and doing business.2627

Relationships and riskLike every lending institution, the IFF is built on risk.But where a typical bank protects its real estate loansprimarily with a claim on the property being mortgaged,the IFF uses a different formula. It will take collateralwhen possible, but it looks primarily at cash flowfrom government payments, judging whether they willbe adequate to service the loan and if the year-to-yearappropriations are likely to continue. It also looks closelyat the borrower’s management, the makeup of its boardof directors and its ability to raise funds. In everycalculation there is the question of benefit: will the projecthelp low-income individuals and communities?The IFF was created to provide loans that traditionallymany banks won’t touch. Building a facility on adistressed inner-city street may bring excellent benefits—many IFF projects have become anchors of revitalization—but the immediate market value of the finishedbuilding may be far less than the outstanding liability.Compounding that problem is the limited equity ofmany nonprofits and the unsure nature of governmentappropriations. Even though bankers today are far morereceptive to community development lending than inthe past, these factors often add up to three strikesagainst the agency. The IFF was created to incorporatethese risks and balance them against a strong base ofknowledge of the borrowers, of government and of thesocial needs of Illinois residents.The IFF’s most radical departure from traditionalunderwriting is its approach to borrowers of limitedmeans. When banks and mortgage companies stretchto serve these customers—as they sometimes do—they will usually increase the interest rate a point or twoto help cover costs if the borrower defaults. The IFFfigures it differently; if the organization is managing onflat revenues, why siphon away funds and further cutinto cash flow? “Repayment is more likely if paymentsfit comfortably within the known revenues,” arguedloan officer Liz Olfe Feldman in a 1994 presentation tothe loan committee. Rates on IFF loans stay about 1.5%below what a bank would charge. There is no variancebased on risk.Getting a loanThe loan process typically begins when one of the fourloan officers handles a telephone inquiry. The callinvolves a quick screen to make sure the project willbenefit a disadvantaged community and to determine ifthe borrower is strong enough to use a conventionalbank. If the match sounds right, the agency fills out anapplication and the loan evaluation process begins.There is a site visit, meetings with key people, an3031

analysis of the program or services in the target buildingand the need for those services, discussion of fundingstreams and the organization’s overall financial situation,and a thorough analysis of the construction or renovationplan. About 90 percent of loans are covered by collateralor other securities, but as Jane Bilger points out, “Wedon’t lend based on collateral because we aren’t interestedin owning the building. We look at the history and theability to repay, and part of that is what kind of financialand management systems do they have in place?”The IFF often becomes guide and consultant toborrowers, particularly if they have limited experiencewith mortgages and construction. The IFF recommendsarchitects and builders, provides checklists for whatneeds to be done, even makes suggestions on how toattract a bank loan. When necessary, it discourages orrejects what it considers an ill-founded constructionplan, a bad building choice or a too-ambitious expansion.“We visited a building that an applicant wanted to rehaband before we got through the front door the architectannounced that he had just spent $200,000, because thelintels over the windows were rusted and would haveto be replaced,” remembers Joe Neri. “We found thema better building.”When the underwriting fundamentals are covered,the loan officer writes a summary and takes it to theboard’s monthly loan committee meeting, where almostall loans are approved. The grueling final leg beginswith a letter of requirements followed by a pre-closingmeeting at which the IFF walks the borrower throughan inch-thick binder known as the borrower’s book. Itcontains lists of responsibilities on both sides, samplecontracts, even procedures on maintaining a validproperty tax exemption. “Not everyone likes us at thisstage,” admits Bilger, “because we’re tough and veryrigorous. They might not understand why we insist on aperformance bond from the contractor. We tell them itis to protect their own interests, and ours.”Workouts and bad loansThe system works. Thanks to ongoing monitoring thatincludes semi-annual reports from all borrowersand aggressive follow-up when agencies turn up on the“close monitoring” list, only five of nearly 200 totalloans have been written off. At $185,000, losses havebeen so slim that the board has periodically encouragedthe staff to take more chances on promising borrowers.If an agency does get into trouble, the IFF tailors a“workout” to prevent a default. When a homelessservices agency couldn’t make its payments, the IFF paidfor a business consultant and established a grace periodwhen only interest would be due; the following year,3233

full payments were flowing again. Another default—a management failure—couldn’t be saved, but the IFFrecouped most of the $98,000 balance by selling theproperty. Results were less favorable when one of theChicago charter schools closed. “All that was left,”reported loan officer Marcus Weathersby, fighting backa grin in his presentation to the loan committee,“were bookcases and a few brooms.”Loans in a social contextWhatever the outcome, the lending process hasgenerated new ideas and programs as the contact withborrowers (and even those unable to borrow) promptsquestions about what more can be done to serveIllinois’ human service agencies.The overwhelming need for child care facilities, forinstance, prompted the IFF to become a developer aswell as a lender. The need to understand its markets ledto research studies that documented tremendous needsamong Illinois’ 5,000 nonprofits. This in turn expandedIFF’s public policy work, especially in child care butalso across the nonprofit sector, because management,financial stability, government support and programquality are all threads of the same cloth. Finally, as loanvolume grew year to year, the IFF would face an internaland ongoing fiscal need: how to raise more funds forlending. These challenges began emerging within thefirst two years of the IFF and increased as the organizationscaled up for its first major leadership role: the ChildCare Facility Development Program.Illinois Facilities Fund loan productsBridge Investment (Community Asset Builder)Allstate Child Care and Education FundCharter School Loan FundElgin Area Facility Action ProgramFacility Improvement LoanFacility Line of CreditResidential Mortgage ProgramNew Visions3435

Illinois Facilities Fund Loans Closedas of June 30, 2000Agency Name Project Location Loan Purpose Loan Amount19907720, Incorporated Chicago Acquisition of occupied house for mentally ill adults. 84,000Chicago Commons Chicago Acquisition of a day care center. 157,000Chicago Administrative Services Chicago Acquisition and renovation for administrative space. 125,000Cornerstone Services, Inc. Joliet Renovation of four houses for developmentally disabled adults. 80,000Hull House Association Chicago Renovations to space for infant and toddler center in Orr High School. 162,088New Earth Child Care Chicago Renovation of child care facility. 50,000North Avenue Day Nursery Chicago Renovation of agency-acquired building into a child care center. 200,000Proviso Day Care Center Chicago Renovation of child care facility. $44,200St. Leonard’s House Chicago Renovation of house for parolees. 50,000WilPower, Inc. Northfield Second mortgage on house for mentally-ill adults. 32,000Youth Service Project Chicago Acquisition of building for expansion of offices. 200,0001991Aunt Martha’s Youth Service Center, Inc. Park Forest Acquisition of property and home for a foster home for teenage girls. 220,000Bethel New Life, Inc. Chicago Construction of 23-unit building for congregate care for 75,000low-income elderly.Cathedral Shelter of Chicago Chicago Renovation of agency owned building to expand services and meet codes. 252,619Catholic Social Services Belleville Renovation of property for emergency shelter for children 0 - 12 years. 112,500CEDA of Cook County, Inc. Arlington Heights Acquisition of an apartment building for transitional housing 160,000for families.Chicago Abused Women Coalition Chicago Refinance mortgage. 34,917Hephzibah Children’s Association Oak Park Renovation to expand children’s residential program. 300,000Korean American Community Services Inc. Chicago Refinance and renovation of building to reduce costs and 260,000increase earned income.New Hope Center Dolton Renovation of church building for program space. 60,000New Hope Center Dolton Acquisition of church building and parking lot contiguous to 204,027agency’s main program site, to provide day care for developmentallydisabled pre-schoolers.The Night Ministry Chicago Acquisition and renovation of building as a shelter for 350,000homeless youth.Outreach Community Services Carol Stream New construction of community assistance center. 100,0004243

Illinois Facilities Fund Loans Closedas of June 30, 2000Agency Name Project Location Loan Purpose Loan Amount1991Teen Living Program Chicago Acquisition of a six-flat for homeless teens who are wards $260,000of the state.Trinity Services, Inc. Joliet Refinance of two houses serving autistic adults and 203,000developmentally disabled adults.Trinity Services, Inc. Joliet Refinance of a home for disabled adults. 152,00019927720, Incorporated Chicago Purchase and renovation of a property to house mentally ill adults. 200,000Center on Deafness Northbrook Purchase of property for school for the hearing impaired. 200,000Cornerstone Services, Inc Chicago New construction to expand elderly services. 100,000Cornerstone Services, Inc. Joliet Addition of a second floor and installation of fire alarm system 100,000for CILA site.Hull House Association Chicago Fire protection system in infant and toddler center in Orr High School. 41,000Methodist Youth Services Chicago Purchase and renovation of property for residential therapeutic 188,000group home for boys.New Hope Center Calumet City Purchase of three residential facilities for CILA programs. 201,800Wilpower Inc. Wilmette Refinance two residential properties. 39,750Trinity Services Lockport Purchase of property to be used as a CILA home for developmentally 173,000disabled adults.19937220, Incorporated Chicago Refinance property for developmental disability facility. 78,321Ezzard Charles Montessori Day Care Center Chicago Purchase and renovation to expand child care facility. 171,906First Presbyterian Church of Chicago Chicago Renovation of child care facility to meet city and state fire codes. 124,376Hull House Association Lawndale Finance construction of an additional means of access to the property. 15,960Hull House Association Chicago Increase approved loan for the renovation of space in the 109,544Berry Memorial Methodist church for use as a child care center.4445

Illinois Facilities Fund Loans Closedas of June 30, 2000Agency Name Project Location Loan Purpose Loan Amount1993Methodist Youth Services Chicago Completion of renovations for a residential group home for boys. 38,000Methodist Youth Services Chicago Acquisition of property to be used for Residential Diagnostic 236,500Assessment Group Home.People's Housing Chicago Renovation of agency owned property for administration and $200,000community programs.Reba Place Day Nursery Evanston Acquisition and renovation of property to expand child care services. 101,050Reba Place Day Nursery Evanston Renovation of child care services. 114,524The Resurrection Project Chicago Renovation of agency headquarters including administrative space 450,000and school and child care programs.St. Leonard's House Chicago Renovations to administrative building. 50,000SOS Children's Village Lockport Construction of an activity center located in a children's village. 200,000Youth Service Bureau of Illinois Valley Ottawa Renovation of agency owned property to be used to house 110,000administration and direct services.1994Chinese American Service League, Inc. Chicago Acquisition and renovation of a property to house the agency’s 35,000headquarters and elderly center.Claretian Associates Chicago Acquisition and renovation of a property to house the agency’s 180,000administrative offices.Community Response, Inc. Oak Park Acquisition and renovation of a property to be used to house 162,000HIV positive, low to moderate income people.Ezzard Charles Montessori Day Care Center Chicago Increase approved loan for child care center. 181,906Glenkirk Foundation Arlington Heights Building improvements to school for developmentally disabled $156,175children and adults.Jamal Place, Inc. Chicago Purchase and renovation of property to house a therapeutic 250,000residential home for pre-teen and adolescent boys.Janet Wattles Foundation Rockford Acquisition of a property to house female adolescents with emotional 166,950disturbances.NIA Comprehensive Center for Chicago Acquisition and renovation of administrative and program space 200,000Developmental Disabilities, Inc.for agency serving the developmentally disabled.Sinai Family Health Centers Chicago Renovation of two floors of the property to relocate the agency’s 300,000Madison Family Health Center.4647

Illinois Facilities Fund Loans Closedas of June 30, 2000Agency Name Project Location Loan Purpose Loan Amount1994Sullivan House Chicago Renovation of existing property which houses a school and 200,000young mother and foster care programs.Test Positive Aware Network, Inc. Chicago Renovation of leased property to relocate meeting room space 50,000to serve clients with HIV/AIDS.Trilogy, Inc. Chicago Renovation of administrative and program space for the mentally ill. 100,000Trinity Services New Lenox Down payment for the acquisition of a property to be 35,000used as a CILA home for four individuals.Trinity Services Wilmington Downpayment on a residential property to be used for a 24,000CILA program.19957720, Incorporated Chicago Acquisition and renovation of property for the mentally ill. 207,500Association House of Chicago Chicago Acquisition and renovation of property for a group home for boys. 147,600Bloomington Day Care Center, Inc. Bloomington Acquisition of two existing for-profit child care center locations 315,000for conversion to nonprofit centers serving primarilylow-income children.Cathedral Shelter of Chicago Chicago Acquisition and renovation of property to be used as program $500,000and administrative space for substance abuse programs.Catholic Social Services Belleville Refinance existing IFF loan. 51,681El Rincon Supportive Services Organization Chicago Acquisition of leased property for clinic serving substance abusers. 250,000Erie Neighborhood House Chicago Renovation of administrative space for multi service agency. 250,000Ezzard Charles Montessori Day Care Center Chicago Refinance of debt on current property for child care center. 387,116Greer's Residential Center Chicago Construction of residential facility to serve pregnant and 230,676parenting teenage girls.International Learning Center Markham Acquisition and renovation of rented property for early childhood 107,000development center.Jamal Place, Inc. Chicago Additional loan principal for renovations to a home for teen boys. 325,000Korean American Community Services Chicago Refinance previous IFF debt with additional principal for 197,917community services agency.Reba Place Day Nursery Evanston Refinance of IFF debt for child care center. 98,6024849

Illinois Facilities Fund Loans Closedas of June 30, 2000Agency Name Project Location Loan Purpose Loan Amount1995The Resurrection Project Chicago Renovation of administrative space for community development agency. 88,000Trinity Services, Inc. Wilimington Acquisition of property and construction of a CILA home 32,000for developmentally disabled adults.Trinity Services, Inc. Joliet Additional loan principal for construction of a CILA home. 48,0001996Abraham Lincoln Center Chicago Acquisition and renovation of previously rented Head Start sites. 171,000El Rincon Supportive Service Organization Chicago Renovation of agency’s headquarters for substance abuse programs. 50,000Family Guidance Centers, Inc. Chicago Acquisition and renovation of property to house program and 500,000administrative space to serve substance abusers.Howard Brown Health Center Chicago Acquisition and renovation of property to house program and 500,000administrative space to provide health care and wellnessprograms for people with HIV/AIDS.Hull House Association Chicago Renovation of property to house program space for a transitional 212,600living program.Hull House Association Chicago Renovations to property for administrative space. 32,200Hull House Association Chicago Renovations to a transitional living program for teens who 132,700are wards of the state.Instituto del Progreso Latino Chicago Installation of fire alarm system to bring facility to code. 20,000Matthew House Chicago Renovation of vacant building to serve as program headquarters 500,000for homeless service agency.Options, Inc. Niles Acquisition and renovation of property to serve as a residential 165,000care site for males with disabilities.Pioneer Civic Services, Inc. Peoria Acquisition and renovation of a vacant school for use as rental 500,000space for a variety of nonprofit human service agencies.REBOUND, Inc. Waukegan Construction of residential facility for teen male offenders as an 517,625alternative placement to incarceration.The Resurrection Project Chicago Refinance of property debt for a facility offering supportive 50,000services and housing for homeless women and their children.Teen Living Program Chicago Refinance of previous IFF debt. $163,367Youth Attention Center, Inc. Jacksonville Acquisition and renovation of agency headquarters and program 30,000space for child welfare agency.5051

Illinois Facilities Fund Loans Closedas of June 30, 2000Agency Name Project Location Loan Purpose Loan Amount1997Academy of Communications and Technology Chicago Acquisition of equipment for charter school. 82,000Charter School, Inc.Academy of Communications and Technology Chicago Acquisition and renovation of site for charter school. 545,055Charter School, Inc.ACORN Charter High School Chicago Start-up costs for charter school. 19,200ACORN Charter High School Chicago Renovation of site to serve as a charter school. 60,800Chicago Anti-Hunger Federation Chicago Renovation of property to serve as administrative headquarters 500,000and food distribution center.Chicago Health Outreach Chicago Renovation of residential space for program serving mentally ill 80,000and homeless clients.Chicago Preparatory Charter High School Chicago Acquisition of equipment for a charter school. 85,000Chicago Preparatory Charter High School Chicago Start-up costs for charter school. 20,000El Rincon Supportive Services Organization Chicago Refinance IFF loan with additional principal for the renovation 109,313of agency headquarters.Friends of Battered Women and Their Children Chicago Acquisition and renovation of site to serve as program and $241,000administrative headquarters for supportive services agency.Horizons Children’s Center Wheeling Facility improvements to child care center. 87,210Jamal Place, Inc. Chicago Renovation of basement to serve as additional program space as a $60,970group home for boys.Lawndale Community School Chicago Acquisition and renovation of rented space to serve as a school 300,000for community youth.Older Adult Rehabilitation Services (OARS) LaGrange Acquisition of building to serve as administrative and 354,000program headquarters.Options, Inc. Morton Grove Acquisition and renovation of a residential home to serve 227,000as a CILA site.Options, Inc. Mount Prospect Acquisition and renovation of a residential home to serve 208,700as a CILA site.Options, Inc. Glenview Acquisition and renovation of a CILA home. 282,820Park Ridge Youth Campus Park Ridge Renovation of program and administrative space for child 200,000welfare agency.5253

Illinois Facilities Fund Loans Closedas of June 30, 2000Agency Name Project Location Loan Purpose Loan Amount1997Perspectives Charter School Chicago Start-up loan for charter school. 20,000Perspectives Charter School Chicago Equipment for charter school. 20,000Pioneer Civic Services, Inc. Peoria Renovation of a community center. 57,000Seguin Services, Inc. Cicero Refinance of parking lot for agency serving the disabled. 100,000Sinai Family Health Centers Chicago New construction of a health clinic. 400,000South East Asia Center Chicago Acquisition and renovation of a building to serve as multi-service site. 300,000Southeast Chicago Development Commission Chicago Renovation of administrative space for community development 30,000corporation.Triumphant Charter School Chicago Acquisition of equipment for charter school. 71,500Triumphant Charter School Chicago Exterior renovation of site to serve as a charter school. 92,270Triumphant Charter School Chicago Interior renovation of site to serve as a charter school. 192,500Victor C. Neumann Foundation Chicago Acquisition and renovation of program and administrative space 500,000for agency serving people with disabilities.1998Carole Robertson Center for Learning Chicago Construction of child care center on leased property. 550,000Champaign County Association Champaign Acquisition and renovation of property for the 135,000for the Mentally Retarded (CCAMR)developmentally disabled.Chicago City Theater Company Chicago Renovation of leased space for agency administration 115,000and programming.Claretian Associates, Inc. Chicago Renovations to community development corporation's 10,000administration building.Community Health & Emergency Services, Inc. Cairo Acquisition and renovation of community health care clinic. 80,000Des Plaines Valley Community Center Summit Renovation of leased space for agency headquarters 70,000and programming space.Inspiration Cafe Chicago Renovation of leased space for homeless food program. 139,0005455

Illinois Facilities Fund Loans Closedas of June 30, 2000Agency Name Project Location Loan Purpose Loan Amount1998Instituto del Progreso Latino Chicago Renovation of agency headquarters and refinancing of 166,372IFF debt for educational services agency.Intuit: The Center for Intuitive and Outsider Art Chicago Refinance of short term financing for acquisition of site 210,000to serve as agency administration and program space.Lawndale Christian Development Corporation Chicago Acquisition of vacant land and construction of child care center. 550,000New Hope Center South Holland Acquisition and renovation of CILA home to serve 127,950developmentally disabled adults.Options, Inc. Des Plaines Acquisition and renovation of site to serve as a CILA home. 215,975Our World O'Fallon Acquisition of property and newly constructed building $500,000for an adult day services program.Perspectives Charter School Carbondale Leasehold improvements for charter school. 280,114Rainbow House Chicago Refinance of women’s shelter. 125,000Renz Addiction Counseling Center Elgin Acquisition and renovation of site to house agency 470,000administration and programs.Respite House, Inc. Naperville Renovation of home to serve as short term residential care 350,000for medically fragile children.Rockford MELD, Inc. Rockford Renovation of agency headquarters for youth services agency. 30,000Search Development Center, Inc. Chicago Acquisition and renovation of site to serve as group home 275,000for adults with developmental disabilities.Southwestern Illinois Area Agency on Aging Shiloh Acquisition and renovation of agency headquarters. 275,000Triolgy, Inc. Chicago Renovation of agency headquarters and program space. 394,840University of Chicago Charter School Corporation Chicago Acquisition of furniture and equipment for charter school. 100,000University of Chicago Charter School Corporation Chicago Installation of fire alarm system in charter school. 169,275Youth Job Center of Evanston, Inc. Evanston Acquisition and renovation of site to serve as agency’s 309,550administrative and program headquarters.5657

Illinois Facilities Fund Loans Closedas of June 30, 2000Agency Name Project Location Loan Purpose Loan Amount1999Academy of Communications and Technology Chicago Improvements to facility for charter school. 100,000The Advantage Group Foundation, Ltd. Crystal Lake Acquisition and new construction of substance abuse 444,000counseling center for youth and families.Catholic Social Services Belleville Leasehold improvements and equipment to medical services building. 100,000Community Health and Emergency Services, Inc. Chicago Acquisition of property for women’s health clinic. 205,000Ecker Center for Mental Health, Inc. Elgin Acquisition of mental health center. 266,640Infant Welfare Society of Evanston Evanston Renovation and expansion of child care center. 135,905Jane Addams Resource Corporation Chicago Facility improvements for administrative and program space 67,856for job training, education, and industrial programs.Lawndale Community School Chicago Renovations to school for code compliance. 25,000NorthSide Community Health Resource Facility Chicago Acquisition and renovation of health care clinic. 500,000Parc Westchester Acquisition and renovation for new agency headquarters 495,000and program site.Roseland Christian Health Ministries Chicago Aquisition of equipment for primary health care facility. 100,000School for Little Children of Evanston Evanston Renovation of space for child care center. 147,200South Chicago Parents and Friends Chicago Renovation and expansion to program and administration 23,642of Retarded Children, Inc.facility for persons with disabilities.South Chicago Parents and Friends Chicago Renovation and expansion to program and administration 343,000of Retarded Children, Inc.facility for persons with disabilities.South Side Help Center Chicago Acquisition of building for relocation of agency outreach facility. 320,000SouthStar Services Chicago Heights Acquisition and renovation of program space for 150,000developmentally disabled.Victor C. Neumann Association Chicago Acquisition and construction of special-use townhouses for 500,000developmentally disabled youth.Will County Community Action Joliet Acquisition and renovation of agency headquarters. $90,000Building CorporationYouth in Crisis Berwyn Renovations of agency headquarters for youth assistance. 114,000Youth Service Bureau of Illinois Valley LaSalle Refinance agency equity for school renovations. 109,3005859

Illinois Facilities Fund Loans Closedas of June 30, 2000Agency Name Project Location Loan Purpose Loan Amount2000Community Health and Emergency Services, Inc. Carbondale Acquisition of property for women’s health clinic. $205,000New Hope Center South Holland Acquisition of a residential facility for developmentally disabled adults. 192,500Pioneer Civic Services, Inc. Peoria Acquisition and renovation of property to provide operating spaces 245,000for nonprofits.School for Little Children of Evanston Evanston Improvements to space for use as a child care center. 147,200South Chicago Parents and Friends Chicago Renovation of property serving developmentally disabled 343,000of Retarded Children, Inc.adults and chldren.South Chicago Parents and Friends Chicago Refinance of property serving developmentally disabled 23,642of Retarded Children, Inc.adults and children.Triolgy, Inc. Chicago Renovation of administration site including a newHVAC system. 210,000Victor C. Neumann Foundation Chicago Construction of a group home for teen boys. 500,000Youth in Crisis Berwyn Refinance and renovations for youth counseling facility. 114,000Young Women’s Leadership Charter School Chicago Renovation of space for charter school. 400,0006061

The bricks were laid andthe mortar cured in the spiritof giving...that spiritwill breathe life into thesebuildings and strength intothose who work in them.Cordell Reed, IFF Board member

3Takingchild careup anotchThe school bus drivers come first to theCircles of Learning on North Main in Rockford, droppingoff their children before 6 a.m. Next come factory workerswho punch in at 7:00, then certified nurse’s assistantsand retail workers. While teacher Cindy Carlson spoonscereal into an infant’s mouth, other workers are arrivingat the Nia Family Center 90 miles away on Chicago’sWest Side. A mechanic in oil-stained jeans brings in hisdaughter as Beulah Miller hurries to her secretarial job.“In this building my children are safe,” says Miller. “Mymind and my heart are at ease.”1994 was a good year for children and their parents inIllinois. Five new child care centers opened that year as partof the IFF’s first major constructioneffort, the $21.7 millionChild Care Facility Development Program. Conceived in1991 as a way to rapidly create new child care capacity, theproject represented by far the most complex undertakingin the short history of the IFF, and as each center openedits doors, it was proving to be a spectacular success.Involving dozens of individuals including architects,builders, government officials and nonprofit agencydirectors, the project was a test of the IFF’s capabilities,pushing it into new and demanding areas of expertise fromchild care design to construction management. But afterthree years of effort it positioned the IFF as a can-doorganization with the stamina and know-how to not only67

create public-private partnerships, but to inventnew ways to strengthen the nonprofit sector in Illinois.Child-level windowsSeven centers were built under the program, five fromthe ground up and two from the shells of older buildings.Costing $1.3 million to $6 million each, the centers aredoused in light from large windows, filled with colorsand shapes and fitted out with thoughtful details such asindustrial kitchens, windows between rooms at child leveland half-walls around the bathrooms for easy supervision.Designed by the architectural firm Boyer/Hoppe &Associates, each building is distinct, colorful andresponsive to local needs. The three-story ChristopherHouse facility in Chicago’s Uptown is squeezed upwardfrom a small urban lot, while the New Horizon Familyand Child Development Center in Decatur has a largeinternal courtyard and a series of peaked roofs to mimicits residential neighbors.Serving 150 to nearly 300 children each, includinginfants and Head Start classrooms, the centers are bigenough to provide economies of scale and to chip awayat the waiting lists in their communities. But as theIFF would learn in coming years, they would be only asmall first step toward providing quality child care thatis affordable to families of modest income.Innovative financingIn 1990 when the U.S. Congress allocated $27 millionfor child care in Illinois, Sue Howell of the IllinoisDepartment of Children and Family Services (DCFS,now the Department of Human Services) knew the statewasn’t ready. “The big hurdle was that we didn’t havefacilities,” she remembered, “but we weren’t thinking ofa big construction program, just a lot of rehabilitationand program expansions.” It didn’t take long to realizethat wouldn’t be enough.Logue had advanced the notion for several yearsthat a single large loan or investor could finance such aconstruction effort. Sue Howell and others helpednegotiate the State’s promise to repay debt if the IFFwould assume the liability for construction. The IFFhired Carol Rubin, a deputy to the chief of staff of MayorRichard M. Daley, to make things happen. Rubin puttogether a prospectus for $11 million in loans and set upmeetings with area banks and other investors. But theresponse was cool. There were no takers.The fallback was tax-exempt bonds, a tool familiarto many business community board members long usedby health care and other institutions, but out of reachto small agencies lacking the financial resources to backthe bonds. Equity was needed, so the executive committeeat the Chicago Community Trust pledged $2 million, the6869

largest single-payment grant in memory. Logue linedup the Illinois Development Finance Authority (IDFA)to issue the bonds and Christine Kelly of William Blair& Company to sell them. “We call this type of deal a ‘storybond’ because it doesn’t carry a AAA rating,” said Kelly.“You have to tell the story to sell it.” With equity from theTrust and other foundations plus a $1 million IDFA loanas a reserve, Kelly told a story that had the IFF as its institutionalanchor. It sounded good to money market fundsthat could use a 12-year stream of 7.4% interest, and theybought the $12.73 million package. It was enough to start.Ready, set, buildChild care agencies were eager to get involved with aprogram that would build them a brand new facility;it was up to the IFF and DCFS to select the agencies thathad the management savvy and experience to handlea major expansion. A screening committee reduced44 applicants to 21. Site visits whittled the list to 14.Then a fresh team of national experts spent four days ina Printers Row hotel to pick the seven finalists.With money and partners in place, architects JonathanBoyer and Heidren Hoppe upped their pace, shuttlingamong the agencies to hammer out design details.The IFF recruited a blue-ribbon construction team,including Teng & Associates for engineering, Stein &Company to manage budget and construction, and PepperConstruction as general contractor for six of the sites.For the partner agencies, the IFF organized a four-weekmini-business school to prepare them for opening day,when budgets and staff would be far bigger, withmanagement challenges to match.Construction proceeded like it always does: anendless series of small setbacks, detours, meetings andbudget discussions, including some hard-foughtbattles over amenities like extra drinking fountains thatJonathan Boyer and the child care agencies had toultimately give up. Boyer remembers some “very darkdays” when he feared the designs would be compromised,but Carol Rubin, while pressing relentlessly to keepthe project on time and budget, cultivated a good-naturedrelationship among team members. Stein contributed“value engineering” that protected elements like finemillwork by shaving costs elsewhere. Pepper Constructioncame through with high-quality work that could stand upto a daily beating. The child care agencies were gracefulabout cutbacks and dug around for other resources.The give and take “gave almost a spiritual quality to theresulting buildings,” remembered architect Hoppe,a sentiment shared later by teachers in the classrooms.7273

Learning processBuilding the child care centers was a formative periodin the IFF’s development. Not only was it the first handsonconstruction effort, but it opened the door to largescalefinancing approaches and suggested that lendingwould be complemented by parallel activity in real estateservices, public policy and nonprofit management.This was reflected in a broadening of expertise on theIFF board to guide new policies and programs.The project made clear that these areas weren’tsuperfluous “add-ons” to the IFF’s lending mission butessential elements of helping the nonprofit sectorduring a period of tremendous opportunity and seriouschallenges. In an IFF study on the financial health ofthe nonprofit sector five years later, more than half ofthe responding agencies said they were makingfundamental changes. Facing competition, growth indemand for their services and falling governmentsupport —sometimes all at once—agencies were beefingup their management and attempting to diversify theirsources of revenue. That was the next challengefor the IFF as well; it needed a larger pool of grants andlow-interest investments to support the transformationof the nonprofit world, even as it continued its supportthrough real estate consulting services.80Tyree Bahar andJuvan Lewis add the finalpiece to their tower atEzzard Charles MontessoriSchool, an IFF borrower.

Child Care Facility Development ProgramCommunity MennoniteEarly Learning Center,MarkhamAffiliated withCommunity MennoniteChurch of Markham186 children served;$1.9 million project costEast St. Louis FamilyDevelopment Center,East St. LouisManaged by Leslie BatesDavis Neighborhood House150 children served;$1.3 million project costErie Community Center,ChicagoChild care managed by ErieNeighborhood House,clinic managed byErie Family Health Center205 children served;$6 million project costNew Horizon Family and ChildDevelopment Center, DecaturManaged by Decatur Macon CountyOpportunities Corporation176 children served;$1.9 million project costNia Family Center, ChicagoManaged by Chicago Commons156 children servedplus 68 in Head Start;$2.6 million project costCircles of Learning onNorth Main, RockfordManaged by Circles of Learning153 children served;$1.7 million project costUptown Family and ChildDevelopment Center, ChicagoManaged by Christopher House223 children servedplus 68 in Head Start;$2.6 million project cost86

We are bringing new sourcesof financial capital todistressed are as,so neighborscan lend to neighbors.Robert E. RubinFormer U.S. Secretary of the Treasury

4RaisingthestakesThe IFF started out with the easiest kindof money: $1.75 million in grants that could be lent outto support ongoing operations. Operating grants werein hand to get the first loans out the door, and there wasan expectation of additional support from the ChicagoCommunity Trust. But it was understood from thebeginning that the IFF couldn’t grow without findingother sources of funds.The crunch came quickly. To make the most of itsequity, the IFF kept lending terms short—five to eightyears—so that principal repayments could accumulatequickly and be recycled into new loans. Even with$405,000 from United Way and a $120,000 no-interestloan from the Harris Foundation, money was goingout faster than it was coming back. By 1992 discussionsabout fundraising were under way, and loan officerLiz Olfe Feldman later put the situation in writing:“The IFF is running out of capital to lend.”There were three options. Like its counterpartsin commercial lending, the IFF could “buy” moneyto lend it out again at a higher interest rate. Thesecond approach was to pursue more equity grants thatprovided funds “free of charge.” In the middle wasa Program—related investment, a very-low-interestloan, from philanthropic organizations, that wasalmost as good as an equity grant.93

After numerous discussions at the board and stafflevel a decision was made to go after all three types ofinvestments.Finding inexpensive fundsIn its first four years, the IFF’s overall cost of funds wasan enviable 0.8 %, while it charged about 7% onits loans. The resulting margin of 6% net interest wasimpossible to maintain. Inquiries that began in 1992with foundations and financial institutions revealedno immediate prospect for equity grants, but there wasa possibility of program-related-investments, or PRIs,from foundations.The John D. and Catherine T. MacArthur Foundationcame through first, committing a $750,000 PRI in1992. The McCormick Tribune Foundation followedwith a $600,000 PRI the following year. The agreementscalled for 3% interest and no principal payments, withthe balloon payment not due until 2004 at the earliest.The two investments represented the IFF’s firstinterest-paying obligations, but the costs were low andthe arrangements weren’t a major departure becausethey took place within the “family” of nonprofitinstitutions. Breaking into the commercial lendingworld was another matter. When the IFF visited five ofChicago’s big banks, looking for money that it couldrelend to nonprofits, there wasn’t even a nibbleof interest. The idea took root only when the IFF storyreached the desk of Continental Bank’s Fran Grossman,who knew the nonprofit world and was a pioneer inthat bank’s community development lending programs.She shepherded the application through the bank’supper levels and in 1993 the IFF closed on a loan of$1 million. As expected, the bank funds were moreexpensive than equity grants, at 5.6% over three years,so they provided only a slight margin to cover expenses.But the loan opened the door to the downtownbankers. They would become key partners in the future.In the meantime, Olfe Feldman and Logue foundother willing partners. The Polk Bros. Foundationprovided a $200,000 grant to the loan program; theBlowitz Ridgeway Foundation pledged a series of five$200,000 PRIs, and the Calvert Strategic Growth Fundinvested $100,000. All were at low interest rates. Whilediluting the original equity-rich pool, this new waveof investments nevertheless kept the cost of funds low.But with $2.1 million approved for new loans in 1994,and $3.5 million the following year, the money was sooncommitted, and the push for loan capital continued.9495

Banks and the U.S. TreasuryAs hoped, the relationship with Continental Bank(nowBank of America) was expanded in 1995. FranGrossman and senior vice president Mary White Vasyswere receptive to IFF new director of finance andlending Karen Seabury’s pitch for another, bigger loan,but they wanted other banks to be involved withthem.“Syndication to share risk was done all the time inreal estate, but it was still very cutting edge to do it with anonprofit borrower,” remembered Vasys. “We knewhow to find the right people at the other banks, and whenwe went to them with Trinita Logue and Karen Seabury,they could look at the IFF’s track record and see that it wassomething they could respond to.” The “bank consortium”ultimately included Bank of America and five otherbanks – Cole Taylor, First Chicago NBD (now BankOne), Harris Trust and Savings, LaSalle National andSt. Paul Federal – which committed to purchasing up to$10 million in trust notes collateralized by IFF loans.The consortium agreement was a huge boost to theloan program at a critical time, but it was not inexpensivebecause the interest and principal were passedthrough to the banks. The IFF retained only a 0.75%administration fee. And so even as the IFF increased itslending power, it also had to find a lower-cost counterweightto this commercial borrowing, ideally anothersource of no-cost equity grants. The best prospect forthat lay in a national movement to elevate the status andfinancial strength of “community developmentfinancial institutions” (CDFIs), a category that includedthe IFF and similar loan funds as well as communitydevelopment banks such as Shorebank. The CDFImovement received a boost when President Bill Clintonexpressed admiration for work done by Shorebank inhis home state of Arkansas. With Clinton’s go-ahead,the US Treasury began seeking ways to create a networkof such banks across the United States.This put the IFF in a sensitive situation. Alongwith other unregulated lenders such as micro businesslenders, the IFF wanted the program to includeunregulated agencies that could be more flexible thanbanks in meeting the needs of low-income communities.Logue got involved early with other communitydevelopment advocacy groups, preparing positionpapers and testifying at hearings as the CommunityDevelopment Financial Institutions Act was conceivedand moved through Congress. “There were momentswhen we were at odds with the banks, which we really didnot like because they were and continue to be ourpartners,” Logue remembers. “But we wanted to makesure the nonprofits were included, along with the banks.And in the end they were.”9697

It was a remarkable process because it redefinedthe delivery system for capital in the United States, saidMark Pinsky, President of the National CommunityCapital Association, which represents the interests ofnonprofit financial services providers. “When I gotinvolved in the field in 1990, when the IFF was just formed,the work of the nonprofit financial institutions wasn’tconsidered relevant to the mainstream economy,” Pinskyremembered. “But during those negotiations, people inthe White House and in Congress listened to what we hadto say, and ultimately the CDFI Program was built aroundsome of our ideas. The extent and scale of the victorywas astounding.”In 1996 when then-Secretary of the TreasuryRobert Rubin announced the first 31 awardees for CDFIfunds, the IFF received $900,000. By 1999 the CDFIprogram had invested $3.4 million in the IFF’s workand a proposal for an additional $2 million was in thepipeline. Granted without interest and requiring a oneto-onematch of other funds—which led to a $1 millioninfusion from the State of Illinois, among other newinvestors—these federal investments represented thegreatest expansion of IFF equity since the original largegrants from the Chicago Community Trust.Money in, money outIn coming years, the IFF would further diversify itsoverall funding mix. A 1996 campaign chaired by boardmember Susan Pritzker dramatically boosted corporateand foundation support for operations, expanding thelist to three dozen donors. In 2000 the list will easilyexceed 50 donors for general operating and specialprojects. Cordell Reed, another longtime board memberand former chair, opened more doors, first working hisway around the boardroom table, requesting personalcontributions that reached $22,000 in 1999, then framinga campaign to reach family foundations and individualinvestors. The first two results of that effort were a smallgrant from the Speh Family Foundation and theMorrison Foundation.Success with loan program investors in turn attractedadditional investors whose own missions requiredthe IFF’s skills and resources. The IFF respondedaggressively to this “market” for its services, proactivelypursuing the opportunities and creating new loan“products” to meet specific needs.When the Hyatt Corporation and Circus Circusopened the Grand Victoria Casino riverboat, for example,it set up a foundation with a geographic focus on the oldindustrial city of Elgin. Even before the foundation was104105

Funders ofSpecial Projectsand OperationsAmerican National Bank FoundationThe Aspen InstituteBank of America IllinoisBank One CorporationBauer FoundationBlowitz Ridgeway FoundationThe John Buck CompanyChase Manhattan Bank FoundationThe Chicago Community FoundationThe Chicago Community TrustChicago Cotillion Charities FoundationChicago Title & TrustChicago Tribune FoundationCitibank F.S.B.Cole Taylor BankCommonwealth Edison CompanyCommunity Memorial FoundationDesign Industries FoundationFighting AIDSRichard H. Driehaus FoundationFannie May FoundationFel-Pro/Mecklenburger FoundationField Foundation of Illinois, Inc.First Bank IllinoisFirstar CorporationThe Ford FoundationThe Freddie Mac FoundationLloyd A. Fry FoundationGATX CorporationThe Grand Victoria FoundationHarris Bank FoundationF.B. Heron FoundationLaSalle Bank N.A.The John D. and Catherine T.MacArthur FoundationThe McCormick TribuneFoundationMichael Reese Health TrustHarold M. and Adeline S. MorrisonFamily FoundationNear North National GroupThe Northern Trust CompanyJohn Nuveen & Co. IncorporatedNicor GasPeoples EnergyPepper Companies, Inc.Polk Bros. FoundationPrince Charitable TrustsThe Prudential FoundationSara Lee FoundationSt. Paul Federal BankThe St. Paul Companies, Inc.Albert J. Speh, Jr. and Claire R. SpehFamily FoundationSteans Family FoundationTCF Bank IllinoisUS BankWilliam Blair & CompanyWPWR-TV Channel 50 FoundationContractsChicago Department of HumanServicesCity of Chicago, CommunityDevelopment Block GrantDay Care Action CouncilIllinois Department of Children andFamily ServicesIllinois Department ofMental HealthIllinois Planning Council onDevelopmental DisabilitiesInvestors and Fundersof the Loan ProgramAllstate Insurance CompanyBank of America IllinoisBlowitz-Ridgeway FoundationCalvert FoundationThe Chicago Community TrustChicago Public SchoolsCitibank, N.A.Community Memorial FoundationLocal Initiatives SupportCorporationLloyd A. Fry FoundationDavid K. Hardin Generativity TrustThe Grand Victoria FoundationThe Harris FoundationF.B. Heron FoundationIllinois Department of Commerceand Community AffairsAuthorityThe John D. and Catherine T.MacArthur FoundationMcCormick Tribune FoundationManufacturers BankNorthern Trust CompanyPolk Bros. FoundationUnited Way of Metropolitan ChicagoU. S. Department of the TreasuryCommunity Development FinancialInstitutions FundBank ConsortiumMembersBank of America IllinoisCole Taylor BankBank OneHarris Trust and Savings BankLaSalle National BankSt. Paul Federal BankPro-bono legal counselSidley & Austin for Family ResourceCenter PartnershipIllinois Development Finance112113

The IFF will become thepreeminent financialand development servicesprovider for u ndercapitalizednonprofits.IFF vision statement, 1998

5HammersandhardhatsIf there is one thing that Trinita Logue isabsolutely sure about, it is that most nonprofit organizationsshould think three times before taking on big realestate projects. Sitting at the round table in her office, sheasks a simple question; “Even if they have the funds, whyshould nonprofits try to become experts in constructionif it is going to divert them from their core mission?”Most nonprofits won’t do more than one major rehabor new construction project in 20 years, Logue points out,“So they spend a whole lot of time on it and then can’t usewhat they’ve learned. They’ll get a much better paybackputting energy into improving management or learninghow to raise funds, because they’ll always have to do that.”Joe Neri has worked both sides of the issue.He was associate director at The Resurrection Project,a Pilsen community development organizationthat managed large construction projects including achild care center; it is one of the IFF’s largest borrowerswith four loans. Now Neri is director of the IFF RealEstate Services division. “We know the architects, wehave relationships with builders and we know howconstruction works,” says Neri. “We also understand thenonprofit world’s governance and funding environment.So even if some nonprofits are capable of doingconstruction management, you have to ask if that is thebest use of their time.”119

Paint-bucket chairsAcross the hall from Neri’s office is George Marquisos’desk, piled high with rolled-up blueprints and constructionpaperwork. As Real Estate Services Manager,Marquisos is the most hands-on of the division’s fourmembers, and today he is checking up on the MarwenFoundation project. He jumps in a cab with a rolled blueprintin his hand and five minutes later leads the way intoa brick loft in River North. It is 10 days before the lease runsout at Marwen’s current facility, where more than 2,200inner-city students are enrolled in drawing, painting,sculpture and printmaking classes. The new space is clearly not ready, but there are workers everywhere,knifing drywall compound onto the walls, welding thestaircase and installing sinks in the mixed-media room.The table for today’s meeting is a sheet of plywood,with five-gallon paint buckets for chairs. Marquisos sitsdown with contractor Jeff Berry and architect DanWheeler of Seymour Goldberg and Associates. Thoughthere are no drawing tables or art benches yet, theawesome timber beams and exposed brick walls suggestthat this room will change the lives of many young people.Eight-foot south-facing windows give spectacularviews of Loop skyscrapers, and the CTA trains that passthrough the Chicago Avenue station seem close enoughto draw the faces of the commuters.Formerly a small scale developer himself, Marquisosis known at this meeting as the “owner’s rep,” and inthat role he reels off a series of questions about lastminute details for architect and builder. What’s the planfor the coat hooks? Wood pegs or metal? Did the heatingcontractor finish the vent work? When will the temperedglass be cut for the stairwell? Should the Levelorblinds be silver or grey? Contractor Berry is under thegun because Marwen must move in 10 days and resumeclasses soon after, but he files each item mentally andseems ready for the push. He has lined up a weekendcrew to clean floors, he says, and is preparing storageareas in the basement. Not everything will be done, butthe move will happen. As everyone stands up to adjourn,they talk about paint colors and share a laugh about thecircles of drywall dust on the backsides of their pants.A sense for buildingsExperience in the tricky and expensive world of realestate development is one of the most valuable assets theIFF has built over the years. Its worth became obvious assoon as Larry Cleland got involved in 1990. One ofseveral retired executives who volunteered with the IFFthrough the Executive Service Corps, Cleland perusedloan files and went into the field to look over thefacilities of prospective borrowers. In a few minutes120121

he would see things that others missed: an inflatedappraisal, for instance, or a poorly conceived floor layout.Bringing that kind of expertise permanently onto theIFF staff became a goal before the first set of child carecenters was finished, augumented by board memberssuch as Dan Azark of Hyatt Development Corporationand Bill Jones from LISC.A bit of technical assistance was always part of theIFF loan application process, and sometimes chewed uphundreds of hours as IFF staffers helped a borrower solveunexpected problems. Turning such work into a payingproposition made good business sense, but it didn’tgel until late in 1996 when the Chicago Department ofHousing hired the IFF to study its program to fundrenovations for nonprofits. Joe Neri was soon hired asdirector of the Real Estate Services division, and he foundplenty of work: analyses of community child care needs,feasibility studies on building proposals, and small jobshandling acquisition contracts, permits and schedules.The common thread is specialized knowledge, which iswhat Neri looked for as he built up his staff.The division’s current director, Gabriella DiFilippo,is the nonprofit world’s equivalent of a downtowndeveloper. She did most of the preliminary work forCommunityHealth, a $1.3 million project that involvedthe IFF from start to finish. DiFilippo worked withthe agency finding and purchasing a suitable building,financing the buildout with a bank loan and a $500,000second position IFF loan, and selecting the architectand general contractors. She then turned the projectover to Marquisos for construction management whileshe started over again, this time for a new child carecenter in the Back of the Yards.With as many as 10 projects underway at any onetime, the division has confirmed broad demand for itsservices, but one type of agency wasn’t fitting into theIFF’s offerings. Logue and Neri both had encounteredagencies that badly needed better facilities but weretoo weak financially to pursue them. “One group spentseven years talking about the critical need for anew home, but just couldn’t do it,” says Logue. “So wedesigned a program to help them get started evenbefore they had financing in place.”Out on a limbThe first participant in the Community Asset Builderprogram is Southwest Women Working Together, aprovider of services to battered and abused women.Working from cramped offices with inadequate privacyfor counseling sessions, the 25-year-old organizationnonetheless provided educational, emotional andsocial support to 13,000 women in 1999. It had solid130131

Agencies served by Real Estate ServicesClient1996Chicago Department of Human ServicesThe Ounce of Prevention Fund1997Gads Hill CenterCarole Robertson Center for LearningChicago Department of HousingChicago Family Health Center (formerly Claretian Medical Clinic)Chicago Public SchoolsGrand Victoria FoundationIllinois Department of Children and Family ServicesInterfaith Housing Development CorporationLawndale Christian Development Corporation1998Chicago CommonsChicago Department of Human ServicesChicago MOSTChildren’s Home and Aid Society of IllinoisCity of Evanston, School District 65, Child Care Network of EvanstonGATX FoundationIllinois State Board of EducationNorthside Community Health Resource FacilityThe Resurrection ProjectWoodlawn Preservation Investment CorporationProjectHead Start facilities assessmentFacilities assessmentConsulting on new child care centerDevelopment of a 270-child family resource centerAnalysis of and recommendations fornot-for-profit facility rehab programFeasibility analysis of new expansionProject management for charter schoolsChild care needs assessmentConstruction/renovation of seven child care centers—1992-97Child care needs assessmentDevelopment of a new 247-child family resource centerConsulting on new multi-purpose facilityCity-wide child care needs assessmentThree after-school classroom makeoversDevelopment of a family resource centerChild care needs assessmentChild care needs assessment1998 charter school applicant reviewNew facility feasibility assessment and development of new health clinicDevelopment of a new family resource centerChild care needs assessment and new facility recommendations136137

Agencies served by Real Estate ServicesClient1999Community and Economic Development Association of Cook CountyEvanston School District 65Grand Victoria FoundationMarwenSuburban Job LinkThe StorehouseProjectChild care needs assessment of 51 Cook County municipalities1999 charter school application analysisApplicant review — facilities, management and governanceDevelopment of a new family resource centerProject management for build-out of new program spaceNew facility feasibility assessmentNew facility feasibility assessment2000Chicago MOSTThree after-school classroom makeoversChicago Public Schools 1996, 1997, 1999, 2000 charter school applicants review —facilities, management and governanceDepartment of Human ServicesManagement of Children’s Capital FundLeslie’s PlaceNew facility feasibility assessmentSouthwest Women Working TogetherProject management of renovation of new facilityThe Resurrection ProjectConsulting on organizational developmentTwo Rivers Head StartChild care facilities assessment and expansion analysisfor Dekalb, Boone, Grundy, Kane and Kendall Counties138139

When I came to the oldfacility I always knew I waspoor, but here I feel just likeeverybody else.A client at CommunityHealth

6BuildingnonprofitmuscleThe waiting room is always full on Tuesdaynights at CommunityHealth, a free medical facility on aworn stretch of Chicago Avenue, but tonight the coucheshave been pushed to the side and the children’s playhouseis serving as a coatroom. More than 200 guests,mostly in business attire, are celebrating the facility’sgrand opening, a $1.3 million investment in health carefor Chicago’s uninsured and working poor residents.The mood is triumphant.Joy Glazer, an LPN who is director of clinical services,remembers opening the first tiny facility in 1993. “Wedid no advertising but the first week we had four patientsa night. It rose to 20 the second week and we’ve beenbusy ever since.” In 1999, the free services provided by300 volunteer doctors, nurses and attendants attracted10,000 patient visits. For this kind of load, eventhe group’s second facility, a converted union hall, waswoefully inadequate. “It was hanging lightbulbs andhalf-walls around the exam rooms,” Glazer remembered.“In comparison, this building is like working in heaven.”Behind the terra-cotta façade of Community Health’sfirst permanent home are 12 private exam rooms, alaboratory, pharmacy, patient education room, volunteerlounge and offices. The Illinois Facilities Fund provideda $500,000 second-position loan and managed theconstruction. Honoring the volunteer culture of the145

organization, the IFF staff also turned out to help paintthe yellow and white walls. “This space is changing theculture of our organization,” says Roberta Sharpiro,executive director. “Our volunteers love working here,but more importantly, they love what the facility allowsus to do for patients. We can serve our patients withdignity. And it is opening up the way we think about ourwork. We used to let the space constrain us.That restriction is gone.”Nonprofits on the riseHelping nonprofits make a leap in quality has always beena central IFF goal, but accomplishing that often takesmuch more than a loan. For the IFF to be an informed andeffective lender, it has had to steep itself in the shiftingnature of the nonprofit world and grapple with theforces that can make or break any organization: markets,cashflow, government policy and management.If knowledge is the foundation of the IFF’s approach,research provides the building stones. Before theIFF incorporation papers were even signed, the fledglingorganization had commissioned its first study, ananalysis of the needs of Illinois children under the state’scare. The Chapin Hall Center for Children at theUniversity of Chicago documented that institutionsand group homes were losing government supportand that family-oriented foster homes were becomingthe placement of choice. But the study also noted thatthere would always be a need—and accompanyinggovernment support—for group homes that serveespecially disturbed children and those teenagers whowould resist a family setting. This knowledge gave theIFF enough confidence in its first three years to makefive loans for these types of facilities.“The lesson is that we should always do research to beaware of the needs of the nonprofits and whether therewill be long-term commitment from government orother sources,” says Logue. “We have to understand thewhole nonprofit world, including real estate but alsoprograms and funding and mission.”The next study laid out a huge potential market forthis knowledge-based lending. A 1991 survey of 472Illinois human service agencies, by Loyola University’sKirsten Grønbjerg, documented massive facility needs,including widespread building code and safety issues,plus a lack of government funding streams that could betapped to make the improvements. This suggestedthat agencies had to use their financial resources wisely,become better fundraisers and even get involved inchanging government policies.146147

Andy Teitelman,Vice President,MetropolitanFamily Services and IFF staffmember Elizabeth Evans.The toilet toursPublic policy was inserted into the IFF’s everyday workby the Child Care Facility Development Program.Designing seven centers from scratch forced the IFF andits partners to learn the minute details of local, state andfederal regulations. It was an eye-opening experience.Federally funded Head Start classrooms, which wereintegrated into several of the centers, had different rulesthan state-funded child care classrooms. Head Start wasa half-day program – though most working parents needfull-day coverage – and it had different requirementsfor teacher certifications and age groupings. This forcedvery creative staff shuffles across the 12-hour workdayof a typical child care center, and absorbed managementand financial effort that might have gone into moreconstructive work.While the integration of Head Start remainsunresolved, and even more of a challenge as welfarereforms force mothers to work, it was pint-sized toiletsthat launched the formal public policy mission. Teachersinterviewed by the architects identified bathrooms as aneveryday problem area because they were often too faraway and hard to supervise. Architects Boyer and Hopperesponded by designing toilets next to the classroomswith half-height walls that allowed at-a-glancesupervision without leaving the other children. It was a149

fine idea, but Chicago’s building code didn’t allow it.The IFF got the city to grant variances for the three centersbuilt in Chicago, and after the construction dust settled,they set out to permanently change the code.Public policy director Karen Muchin led city officials,including the Building Department’s Cheryl Thomasand Graham Grady, on what became known as “the toilettours.” They visited a child care center whose bathroomsmet the code, pointing out that teachers made the longtrips away from the classrooms many times a day, andthat children often stood in a dark hallway to wait to usethe toilet. Then they showed off the half-wall design atthe Christopher House facility in Uptown, where manychildren no longer asked to go to the bathroom; they justused it when they needed to. It was a convincingdemonstration (especially for parents of young children),and was part of a long list of other suggestions. Over atwo-year period the city became a responsive partner,revamping its regulations and paving the way for thecurrent generation of child care centers. They are betterdesigned,safer and less expensive to build while respectingboth children’s needs and those of adult caregivers.IFF staff memberDebbie ZimaHalf-finished workThese nuts-and-bolts issues proved easier to resolvethan many others, including the Head Start regulations150

Investment in the nonprofitsector has the potentialto dramatically improve thefinancial and social stabilityof our commu nities,our cities and our country.“We believe,” IFF strategic plan, 1994

7APermanentinstitutionThe mood is a bit tensein the IFF conferenceroom where executive directors and project leadersfrom eight nonprofits have gathered for another sessionabout who they are and what they are doing. Convenedby the IFF and facilitated by the Minnesota-basedNational Center for Social Entrepreneurs, this 18-monthgroup process, called the Chicago Project for NonprofitEntrepreneurs, is designed to help participating agenciesidentify and develop new sources of earned income.But the meetings are about much more than money, andthat’s why there is an edge to today’s discussion.Selected from a large pool of applicants and eachpaying $10,000 to participate, the agencies range from afull-service organization with multiple fields of expertiseto smaller agencies that serve a single target population.What they all share is an awareness that their worldis fast-changing and that being prepared for the futuremeans thinking hard about mission, funding, skills andmarkets – thinking, that is, like an entrepreneur.So the meeting has taken a detour as participantstalk about how their staffs have reacted to the “self audit”that measures attitudes about subjects like making moneyand taking risks. Staff members at one organizationworried they were going to be fired. At another, someonecomplained that he had never been asked to think about163

markets before. “They are trying to shift mentalitiesand overhaul their organizations, and that can getuncomfortable,” says the IFF’s Jill Levine. “Doing it as agroup makes it easier, because they can talk about it andlearn from each other’s experience.”Pressure on nonprofitsThe world has changed since the 1991 Grønbjerg studyshowed Illinois nonprofits struggling with facility needs.Today’s situation is worse. The shift in responsibilitiesfrom the federal to local governments has hada pressure-cooker effect on the nation’s more than1 million nonprofit organizations. They are being askedto do more than ever before while facing growingcompetition from business, government and othernonprofits. Stitching programs together with balingwire is no longer feasible, as several Chicago nonprofitslearned in the 1990s when their management andfinancial structures collapsed. Survival requiresprofessional management, ingenuity, a keen nose fortrends and strong financial underpinnings.“You might have to eliminate some programs that areexpensive to run but aren’t serving your mission, andyou may have to learn how to grow quickly to serve a newmarket,” says Trinita Logue. “Sometimes it is going tobe very hard to make those decisions.”Not making them may be even more dangerous.A 1998 IFF study cosponsored by the Donors Forum ofChicago, Illinois Nonprofits: Building Capacity for the NextCentury, found that of 441 Illinois nonprofits surveyed,more than half reported that their greatest concern waspressure to expand programs without the necessaryfinancial resources. Most faced regular deficits anduncertain income streams. Cash flow problems were thenorm, and less than one-fifth of organizations had acash reserve equal to four months or more of operations.“There is nothing wrong with having a surplus at the endof the year and building up some reserves,” says Logue,“but most nonprofits aren’t yet thinking that way.”New Visions is another IFF loan designed to pushthat process along. A partnership with Shorebank,it goes beyond the Nonprofit Entrepreneurs project byhelping agencies not only develop revenue-generatingideas but providing financing to get the ventures offthe ground. Drawing on expertise from the participantsthemselves Shorebank, local businesses and businessschools, the IFF hopes to make an initial round ofbusiness-development loans that will leverage $2 millionin subsequent investments from Shorebank and otherfinancial institutions.“That’s exactly the type of work that communitydevelopment financial institutions should be doing,”166167

notes Mark Pinsky of the National Community CapitalAssociation. “They should be working around the marginswhere mainstream financing isn’t available, findingniches where they can add value.”Another growth spurtThe IFF has been remarkably successful at finding suchniches, Pinsky adds, and at developing a staff that can takepioneering ideas and make them work. That willingness topursue opportunities, however, is putting the IFF into thevery situation faced by some of its borrowers. Enteringits second decade, the IFF faces another period of rapidgrowth that will surely test the organization and its people.A few days into the year 2000, director of operationsDebbie Zima was directing movers and telephonetechnicians in new space that nearly doubled the size ofthe IFF’s offices across from the Sears Tower at 300West Adams. Filling two sides of the building, the spaceprovides room for 28 staff members and several positionswaiting to be filled. Three offices are set aside for thedevelopment staff, which is diversifying the IFF’scorporate, foundation and government contributionsto support a $4.5 million annual operating budget. Threenew desks are allocated to the Children’s Capital Fundbringing the booming Real Estate Services divisionto seven, thanks to strong demand for its constructionmanagement services. Three more are being filled bythe new Center for Early Education Management andFinance.The loan program remains the most immediate andimposing task, with its $10 million goal for 2000, buta challenge of equal magnitude was added in February2000, when Chicago Mayor Richard M. Daley announcedcreation of the Children’s Capital Fund. Like the ChildCare Facility Development Program that began in 1991,the new project is a massive and unprecedented effort tobuild child care facilities, and as before, the IFF will bethe central player. This fund’s goal is to create licensedchild care for an additional 5,000 children within thenext two years. The Children’s Capital Fund, directed byIFF veteran Joe Neri, will blend $11.6 million from thecity with the $5 million already committed by Allstate tobuild or renovate 24 licensed child care facilities inunderserved neighborhoods. The IFF will work withparticipating nonprofit agencies to round up $13.5 millionin additional private capital and will manage design andconstruction. It goes without saying that the IFF’s fullrange of expertise – in finance, construction, public policyand nonprofit management – will be brought to the task.If the IFF once was something like a traditionalfinancial institution, that is no longer an adequate description.Today the Illinois Facilities Fund is part banker, part170171

A Ten YearFinancialHistory of theIFF

1991 1992AssetsCash $ 2,475,000Grants Receivable 1,853,000Loans Receivable 2,946,000Other Assets 111,000Total Assets $ 7,385,000LiabilitiesDeferred Revenue $ 1,819,000Loans Payable 120,000Other Liabilities 53,000Total Liabilities $ 1,992,000Net Assets $ 5,393,000ExpensesFire Alarm Program $ 469,000Other Expenses 309,000Total Expenses $ 778,000Change in Net Assets $ 170,000This was the IFF’s first audit after receivingtax-exempt status.IFF loan funds are segregated on the balancesheet. Repaid principal is returned to the loanfunds; interest is recorded as operating revenue.The roots of the IFF reach back to the 1979 energycrisis, but IFF operations as a separate corporationbegan in 1988. In 1990, when tax exemptstatus was received, the assets and liabilitiesof the Chicago Community Trust loan programswere moved to the IFF. Cash from Trust grantsand loans receivable show a strong balancesheet in the first year.In 1991, the accounting format categorizedfuture grant commitments as deferred liabilities.This number includes grant commitmentsfrom the Trust and the Illinois Department ofChildren and Family Services, which made agrant towards the initial administrativecosts of the Child Care Program.Loans payable reflects the IFF’s firstProgram Related Investment, from the HarrisFoundation, made in 1990 for $120,000.AssetsCash $ 3,511,623Grants Receivable 1,411,879Loans Receivable 3,731,020Cash for Construction 15,509,798Construction in Progress 232,006Other Assets 550,944Total Assets $ 24,947,270LiabilitiesDeferred Revenue $ 3,783,095Loans Payable 858,000Bonds Payable 12,730,000Other Liabilities 1,467,713Total Liabilities $ 18,838,808Net Assets $ 6,108,462ExpensesProfessional Fees $ 193,393Other Expenses 590,718Total Expenses $ 784,111Change in Net Assets $715,462The IFF received a Program-Related Investmentfrom the MacArthur Foundation.Both assets and liabilities jumped significantlywhen the IFF borrowed $12.7 million to buildchild care centers. Assets are high at year-endbecause funds were borrowed in November;draws began the following year. Additionalfunds were contributed and borrowed to supportthis program, which eventually brought $22million into seven new child care centers infive cities. The program was a partnership withthe State, which agreed to repay constructiondebt after new buildings were open. The IFFraised funds to cover the cost of interest duringconstruction, creating an incentive to movequickly, so the IFF could obtain the savings.An increase in size and sophistication isreflected in an increase in fees to legal and otherconsultants.Five staff operated the IFF; two were dedicatedsolely to the Child Care Program. Revenues were$876,000 in 1992, of which $402,000 camefrom interest income.The City of Chicago contracted with the IFF tobring child care centers into compliance withnew fire safety regulations related to alarmsystems. Funds were used for IFF staff and tocover the costs of contractors and fire alarmsystems. More than half of operating expenseswere related to the Fire Alarm program.176177

1993 1994AssetsCash $ 5,179,320Grants Receivable 789,432Loans Receivable 3,990,978Cash for Construction 9,873,222Construction in Progress 4,099,340Capital Lease Receivable 2,709,010Other Assets 605,045Total Assets $ 27,246,347LiabilitiesDeferred Revenue $ 2,719,676Loans Payable 2,225,667Bonds Payable 12,730,000Other Liabilities 2,670,019Total Liabilities $ 20,345,362Net Assets $ 6,900,985ExpensesInterest Expense $53,645Other Expenses 1,080,515Total Expenses $ 1,134,160Change in Net Assets $ 792,523High cash levels reflect new funds for lending,even though the loans outstanding didn’t growmuch this year. The MacArthur PRI from theprevious year and additional IFF loan fundswere committed to Erie Family Health Center,but the project was held up for almost two yearsdue to serious building and fire code issues.As part of the Child Care Program negotiationswith the State, the IFF agreed to turn over title ofthe buildings to the child care centers after thedebt on the buildings was repaid. IFF executiveand finance committee members decided torecord the buildings as capital leases so theycould be depreciated on the IFF balance sheet asthe debt on the buildings was repaid by theState, rather than as traditional real estateaccounting calls for, which would be a longerperiod. In this way, the buildings will have novalue on the IFF’s balance sheet when they areturned over to the child care centers.The appearance of the capital lease item reflectsthe completion and opening of child care centers.Capital leases recorded as of December 31, 1993were for the East St. Louis and Rockford buildings.AssetsCash $ 2,091,386Grants Receivable 517,416Loans Receivable 5,281,283Cash for Construction 6,841,262Construction in Progress 1,892,524Capital Lease Receivable 10,608,419Other Assets 475,822Total Assets $ 27,708,112LiabilitiesDeferred Revenue $ 1,874,489Loans Payable 2,058,333Bonds Payable 12,730,000Other Liabilities 3,687,836Total Liabilities $ 20,350,658Net Assets $ 7,357,454ExpensesInterest Expense $683,334Other Expenses 1,039,009Total Expenses $ 1,722,343Change in Net Assets $ 456,469The IFF reaches a milestone— $5 millionin loans. This includes 46 loans to 37nonprofits. The Polk Bros. Foundationmade a capital grant to the loan program.Four buildings were completed and openedin 1994 (Decatur, Markham, West HumboldtPark and Uptown). This is the last yearof construction accounts. Construction iscompleted.Interest expense becomes a significant costof doing business for the first time, goingfrom $53,000 in 1993 to $683,000 in 1994.This represents construction period interestand interest payments on foundation debtas well as interest on the $1 million loanfrom Continental Bank.Cash for construction is decreasing,Constructionin Progress is increasing, and Capital Leasesis increasing as construction is completed.In addition to the debt for construction of childcare centers, Loans Payable reflects that the IFFbegan borrowing from foundations, includingMacArthur and McCormick. Continental Bankmade a loan of $1 million which was the firstnon-foundation investment.178179

1995 1996AssetsCash $ 3,271,271Grants Receivable 364,463Loans Receivable 7,398,432Bond Funds held by Trustee 2,096,634Capital Lease Receivable 11,423,626Other Assets 507,455Total Assets $ 25,061,881LiabilitiesLoans Payable $ 2,771,000Bonds Payable 11,825,000Other Liabilities 1,506,959Total Liabilities $ 16,102,959Net Assets $ 8,958,922Expenses $ 2,530,421Change in Net Assets $ 1,601,468bond issue documents required all related fundsto be held in a trust. These funds consist ofconstruction contingency funds which were heldfor subsequent corrections and funds required toguarantee full and timely payments (providedby IFF equity and a loan from the IllinoisDevelopment Finance Authority, the issuer).This amount includes $1.5 million of “assetsreleased from restriction,” a new categoryon nonprofit financial statements as a resultof changes in Generally Accepted AccountingPrinciples. Grants that were previouslyrecorded as deferred revenue are now recognizedwhen committed. Net Assets swell to showgrants made in previous periods for operationsand special projects, essentially a “catch-up.”The Deferred Revenue category in Liabilities iseliminated but the Change in Net Assetsgrows to reflect these grants.The IFF is beginning to broaden its work withnonprofits from lending and real estatedevelopment to public policy, education andresearch. This total also reflects significantinterest expense. Revenue from interest incomewas $742,180 this year.AssetsCash $ 3,093,619Grants Receivable 985,668Loans Receivable 9,512,462Bond Funds held byTrustee 3,078,930Capital Lease Receivable 10,494,277Other Assets 720,878Total Assets $ 27,885,834LiabilitiesLoans Payable $ 4,805,543Bonds Payable 10,855,000Other Liabilities 2,387,391Total Liabilities $ 18,047,934Net Assets $ 9,837,900Expenses $ 2,178,161Change in Net Assets $ 878,978The IFF received a grant of $900,000 from anew federal program, the CommunityDevelopment Financial Institutions Programof the US Department of the Treasury, whichwas received at year end.The Loan portfolio now exceeds $9 million,with 60 loans.In November 1995, the IFF completednegotiations on a Bank Consortium programthrough which six Chicago banks agreed tomake available up to $10 million for the loanprogram. The first Bank Consortium Note Sale tothe banks took place in March 1996.This was the first and only year of an operatingdeficit—unbudgeted investments were madein Resource Development staff to addressthe need for more diversified and unrestrictedresources from foundations, corporations andindividuals. As the IFF’s lending programis financed more by debt, net interest earningsdecrease proportionately, requiring contributedfunds for operations and special projects.After completion of the Child Care Program, the180181

19971998AssetsCash $ 3,907,406Grants Receivable 179,393Loans Receivable 12,798,279Bond Funds held byTrustee 2,416,719Capital Lease Receivable 9,480,869Other Assets 819,776Total Assets $ 29,602,442LiabilitiesLoans Payable $ 6,479,601Bonds Payable 9,810,000Other Liabilities 1,485,627Total Liabilities $ 17,775,228Net Assets $ 11,827,214ExpensesInterest Expense $ 1,084,455Other Expenses 1,324,238Total Expenses $ 2,408,693Change in Net Assets $ 1,989,314Cash and loans receivable both increase,reflecting the IFF’s ability to identify funds tomeet demand for lending. Repaid principalprovides $1.8 million of loan capital.Significant debt is now a standard part ofthe IFF’s balance sheet, as the Bank Consortiumprogram grows.The IFF staff reaches 17, as a new division, RealEstate Services, is launched. This division is aconsulting and project management businessdesigned to respond to high demand for theseservices and to use the expertise developed by theIFF during the Child Care Facility Developmentprogram. Interest expense is $1.085 million oftotal expenses, little changed from 1996.A Chicago Public Schools grant of $2 million forloans to charter schools was an opportunity tobuild Net Assets. During this first year of charterschools in Chicago, $1.2 million was drawnand committed to 11 loans.AssetsCash $ 7,680,284Grants Receivable 3,471,893Loans Receivable 14,357,126Bond Funds held by Trustee 2,518,182Capital Lease Receivable 8,377,617Other Assets 868,656Total Assets $ 37,273,758LiabilitiesLoans Payable $ 11,964,149Bonds Payable 8,690,000Other Liabilities 1,490,893Total Liabilities $ 22,145,042Net Assets $ 15,128,716ExpensesInterest Expense $ 1,178,618Other Expenses 1,646,754Total Expenses $ 2,825,372Change in Net Assets $ 3,301,502This high level of cash results from a$2.5 million loan from Northern Trust and$2.5 million in Bank ConsortiumNote Sales.CDFI grant of $2.5 million was recognizedbecause the award letter was received,even though cash was not received untilthe following year.This amount reflects the dramatic changein the commercial banking environment,which encourages banks to invest in lowincome communities. $2.5 million is a loanfrom Northern Trust Bank and $5.2 millionis the total of the Bank Consortiumdebt at year end. Other new investors are;Manufacturers Bank, Polk Bros. Foundation,and the Community Memorial Foundation.Interest expense is $1.1 million and staffgrowth for programs other than lendingcontinues.182183

1999 2000 ProjectedAssetsCash $ 10,452,873Grants Receivable 695,784Loans Receivable 17,959,988Bond Funds held by Trustee 2,136,809Capital Lease Receivable 7,176,470Other Assets 1,056,532Total Assets $ 39,478,456LiabilitiesLoans Payable $ 14,445,739Bonds Payable 7,485,000Other Liabilities 1,465,858Total Liabilities $ 23,396,597Net Assets $ 16,081,859Expenses $ 3,402,339Change in Net Assets $ 953,143Cash jumps due to the CDFI receivable movingto Cash and new commitments from Heron,Calvert, and the MacArthur Foundation to funda 27% growth in loans receivable over 1998.A grant of $1 million from the Grand VictoriaFoundation was the first loan equity restrictedto a geographic area. This foundation makesgrants in Elgin and the Fox River Valley. Within14 months the IFF exceeded $1 million in loanapprovals in this region.As with the large grant from the Chicago PublicSchools, this grant enables the IFF to maintaina conservative balance between debt and equityfor lending.AssetsCash $ 6,399,700Debt Reserve 1,238,000Board-RestrictedEndowment 500,000Grants Receivable 1,513,900Loans Receivable 26,977,800Bond Funds held By Trustee 2,104,100Capital Lease Receivable 5,894,500Other Assets 1,481,600Total Assets $ 46,109,600LiabilitiesLoans Payable $ 19,553,800Bonds Payable 6,190,000Other Liabilities 1,317,400Total Liabilities $ 27,061,200Net Assets $ 19,048,400Expenses $ 4,918,900Change in Net Assets $ 2,966,541This is a new reserve which is based on apercentage of all non-amortizing debt. It wasestablished due to the growing number oflarge investors.The Finance Committee of the Board alsoestablished a Board-restricted Endowmentwith accumulated operating surplusand returned equity from the 1992 bond issue.$27 million in loans;about $9 million morethan 1999.Growth of expenses reflects new staff in everyarea of the IFF and a doubling of office space.The Director of Public Policy is now a full-timeposition, reflecting the high priority placedon the IFF’s leadership role in assisting thenonprofit sector. The Center for Early EducationManagement and Finance was launched inJanuary as a 5 year program to work intensivelywith six child care center managers and boardmembers to increase revenue, increase salariesand benefits, and reduce turnover.Not reflected in the 2000 budget is the Children’sCapital Fund, a partnership with the City ofChicago. It is anticipated that this permanentprogram will have a staff of three by June.184185

Virgil Carr, President ofThe United Way.Big Bear, an early borrower inDolton, Illinois.Jim Brice, former Board Chair.IFF President Trinita Logue andBruce Newman, former Executive Directorof the Chicago Community Trust.1980198319861987Energy crisisFive foundationscontribute $620,000to capitalize the JointFoundation EnergyConservation Fund tohelp nonprofitsreduce energy costs.Money for buildingsChicago CommunityTrust grants $1 million toprovide capital expansionloans to agencies servingchildren.Revolving loan fundResearch beginson broadening the JointFoundation’s scope andrevolving the fundsto create a perpetual poolof real estate loans.Concept memoMemo by Trinita Logueto Bruce Newman andothers outlines a fundthat would make facilitiesloans and offer technicalassistance to humanservice agencies.186187

Board member Jeanette Bitter andJim Zacharias (deceased)Former staff member Liz OlfeFeldman and former Board memberJudge Joseph Schneider.The IFF staff in the early years.Child Care Facility Development ProgramBonds 1992 Series A closing.1988198919901992Filing the papersChicago CommunityTrust files incorporationpapers for theIllinois Facilities Fund.Research base Chapin HallCenter for Childrenat the Universityof Chicago completesresearch papers onresidential care servicesfor children inIllinois, identifying“a system in crisis.”IFF is bornIllinois Facilities Fundbegins operations with$1.7 million in initialsupport from the ChicagoCommunity Trust.Raising child-care fundsIFF raises $12.73 millionto build child care centersthrough tax-exempt bondsissued by the IllinoisDevelopment FinanceAuthority.188189

Mary White Vasysof Bank of America.Board member David Rubin (deceased)and former staff member Carol Rubin.Bill Goodyear of Continental Bank,Trinita Logue and Cordell Reed.IFF former staff members Jefferson Porterand Gina Caruso1993199419951996Borrowing moneyIFF closes on a $1 millionloan from ContinentalBank, the first time it hasborrowed commercialfunds to expand itsgeneral loan program.Blueprints and hard hatsIFF gains experienceas construction manager.Six new child carecenters are in operationand one more is underconstruction.Bank consortiumIFF negotiates a $10 millionagreement with six banksto bring needed capitalinto the loan program.Real estate servicesIFF formalizes its technicalassistance program to helpnonprofits with facilitieswork so they can stick totheir core missions.190191

IFF staff member Kristine Westerberg. IFF staff member Jennifer Williams. IFF staff members Jill Levine andGabriella DiFilippo.Wanda Newell of The McCormickTribune Foundation.1997First federal infusionU.S. Treasury awards$900,000 to IFFthrough its CommunityDevelopment FinancialInstitutions Program.Documenting the needMajor research effort withDonors Forum of Chicagofinds Illinois nonprofitsare being squeezedfinancially and many lackresources for upgradingtheir facilities.1999100 borrowers and countingIFF’s portfolio reaches100 active borrowers asmarketing efforts expandthe organization’s reach.Fundraising intensifies tomeet expected loangrowth.2000Allstate on boardThe IFF fills a gap for childcare centers by creatingThe Center for EarlyEducation Managementand Fianance, a five yearorganizationaldevelopment program.1998192193

Current BoardCurrent StaffPatrick H. ArborOctagon TradingDaniel AzarkSenior Vice PresidentHyatt DevelopmentJeanette BitterCommunity LeaderRobin S. CoffeyVice PresidentMetro Banking DivisionHarris Trust and SavingsBankDedra DeLaneyVice President,New BusinessThe Bank of New YorkJerry DincinExecutive DirectorThresholdsRupert M. Evans, Sr.President and ChiefExecutive OfficerInstitute for Diversity inHealth ManagementWilliam M. FitzgeraldVice President/Portfolio ManagerNuveen AdvisoryCorporationLinda Vernon GoldbergAssistant General CouncelShorebank Corp.Maurice GrantLaw Offices of MauriceGrantCharles M. Hill, Sr.Charles Hill& Associates, Inc.Rhonda L. Hopps, CFAPortfolio ManagerAllstate InsuranceCompanyWilliam H. JonesExecutive DirectorThe Fund for CommunityRedevelopment andRevitalizationPatricia L. KamplingTreasurerUnicom CorporationMercedes LaingVice PresidentBid4Real.ComJim O’ConnorDirector, Motorola VenturesMotorolaSusan PritzkerCommunity LeaderCordell ReedCommunity LeaderLois A. ScottChief Executive OfficerEdventions, Inc.Guy SummersPresidentFarrell Group, LLCPhilip R. Warth, Jr.President and CEOFirst Nonprofit CompaniesDavid P. AntiohoControllerMia BarriciniAssistant Director ofChildren’s Capital FundSarah BeyerAdministrative AssistantJane R. BilgerDirector of Finance andLendingSarah E. CarrollSenior Loan OfficerGabriella DiFilippoDirector of Real EstateServicesElizabeth EvansDirector of Public PolicyCherryl HoltDirector of Center for EarlyEducation Managementand FinanceJuanita V. LepeAdministrative AssistantJill R. LevineTechnical AssistanceLoan OfficerTrinita LoguePresidentGeorge MarquisosReal Estate ServicesManagerJanice MigalaAdministrative AssistantJoe NeriDirector of Children’sCapital FundMarnie O’ConnellAssistant Director of Centerfor Early EducationManagement and FinanceSimone QuinnAdministrative AssistantLinda RomanDevelopment/PRCoordinatorJeffrey SchefflerAccounting ManagerNichelle SimmsAccounting and InformationSystems AssistantEdgar VelazquezProgram AssociateLouisia WatkinsSenior Accountant ofAnalystMarcus WeathersbyLoan OfficerKristine WesterbergDirector of ResourceDevelopmentJennifer WilliamsReal Estate ProgramAssociateDebbie ZimaDirector of Operationsand PublicationsCurrent InternsAmy BevanLeniece DavisMatt HickeyAjnya PaiConsultantsMichael EvansRita GalowichLegal CounselSidley and Austin194 195

Former BoardFormer StaffJudy BlockJames J. BriceJohn C. ColmanVirgil CarrRonald DeNardAlison L. FallsAnita GreenMark HartzellPhyllis Douglass HayesJuju LienJohn LipscombStephen L. MartinesWilliam D. McGheeGwill NewmanGloria D. ReegCarol ReitanHarold RichmanMarion R. RichterDavid RubinLaurence E. RussellHon. Joseph SchneiderLee M. SmithJulie StaschCharlie A. ThurstonJames WebbJames ZachariasLynn AtchisonElvia AlvarezLyla BradleyGina Caruso, CPARajeev CharApurva ChitnisJa’Net DeFellDaniel DrakeJulie DeGraafDiane DuranteLiz Olfe FeldmanRobyn FreelCarol GaglianoKathleen GerdesAundre A. HesterMae HongAmy HawthornePom Scott LeeKaren MuchinAmi NagleRobert PalmerGreg PetersenJefferson PorterAnnemarie RancilioWilhemina RandallNoe ReyesCarol J. RubinKaren S. SeaburyJerome SchmahlLori ScottToni SmithFelipe VaglientyAllyson VincentLannie WassermanKatina WatkinsChandra WilsonOkeycha WinstonInternsNeedha BoutteCarolyn BurkeAryuwat ChaisiriCharlene ClarkNick DarrowCourtney DillTaylor LiesSarah LeungConsultantsDebra BauerThomas B. HarrisBen Mangan196

Produced by theIllinois Facilities Fund300 West Adams StreetSuite 431Chicago, Illinois 60606312.629.0060Copyright ©2000 IFFAll rights reserved.No part of this publicationmay be reproduced in anyform or by any electronic ormechanical means, includinginformation storage andretrival systems, without priorwritten permission fromthe Illinois Facilities Fund.Project CoordinatorDebbie ZimaWriterPatrick BarryDesignSam SilvioPhotographyBill BilsleyDavid CliftonCheri EisenbergGary GeigerSteve Hall, Heidrick-BlessingBarbara Elliott MartinDan RestPeggy VaGeriusCover PhotographyShane MorganModelRuben J.LepePrintingActive GraphicsChicago