Transaction Loans and Capital Loans
Creative financing for land protection.
Colorado Conservation Trust supports two loan programs that help bridge the timing of funding to complete conservation transactions. CCT views its loan program not just as a land protection tool, but also as an integral part of our organization’s suite of capacity-building investments for local land trusts. Successfully navigating the borrowing process adds significant credibility to local land trusts that often struggle to establish a track record of fiscal responsibility in the eyes of major donors. CCT’s due diligence process also serves not only to mitigate our risk in the transaction, but also improves our knowledge of the needs and capabilities of land trusts around the state for other capacity-building investments.
Transaction Cost Revolving Loan Fund
In the summer of 2004, Colorado Conservation Trust’s Transaction Cost Revolving Loan Fund was created to provide a fund allowing land trusts to offer assistance to landowners through an advance, or loan, on their anticipated sale of a conservation easement state tax credit. Like any real estate transaction, conservation easements have considerable upfront costs. Many land rich/cash poor landowners find it difficult to pay these up-front costs (appraisals, legal fees, baseline inventories). This could ultimately preclude them from taking advantage of the state’s transferable tax credit incentive for land protection. The due diligence costs for a single donated conservation easement transaction, depending upon the size and complexity of the deal, may exceed $35,000, while bargain sale transactions average nearly $50,000—most of which must be paid prior to the landowner realizing any economic benefit. Today, the need for bridge-financing to cover these upfront costs of land protection continues to grow. Colorado Conservation Trust currently offers 0% interest loans of up to $20,000 to qualifying organizations to help them meet this financing gap experienced by many landowners. Since the program’s inception, CCT has made over twenty loans to seven different organizations totaling over $300,000, and resulting in the protection of over 8,000 acres. While CCT does not track donated values for all transactions due to landowner confidentiality issues, a survey of 2008 transactions demonstrated that $225,000 in CCT transaction cost loans leveraged over $9.8 million in donated conservation value.
Capital Loan Fund
Urgency often dictates the timing of conservation work: a critical parcel heads for auction, a family member dies and an estate dissolves, a business divests of its real estate assets. In each of these instances, it is critical that the conservation community be flexible with its resources to complete urgent transactions when permanent financing for the transaction may not yet be secured. Colorado Conservation Trust’s Capital Loan Program works with land trusts and local government open space programs to provide the financing and skills needed to accomplish the conservation goals. Through sharing expertise, flexible security and payment terms, low interest rates, and an efficient approval process, Colorado Conservation Trust offers a unique lending experience that suits the needs of local government and nonprofit groups around the state.
In 2010, Colorado Conservation Trust launched its individual conservation lending program as an alternative philanthropic vehicle for donors. Through lending funds to support specific identified projects, individual conservation lenders can play a direct role in land protection transactions while also earning a modest philanthropic return on investment.
For more details on any of the efforts of the Revolving Loan Program or to apply for funds, please contact Patrick Holmes, conservation program coordinator. (pholmes@coct.org)
Moving Forward into 2011
The status of the current capital markets and the related difficult lending environment has resulted in unprecedented demand for CCT’s loan programs. High impact loans in 2011 will continue to be a CCT program focus. Additionally, identifying innovative ways of funding land conservation remains a priority for CCT. Moving forward with the loan program, we will continue to seek motivated funders and lenders to pursue important conservation opportunities, especially those where potential lenders have personal connections to specific landscapes.