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Ethical Property Company Releases Share Issue Document

Leading social sector property company looks to raise £3.5 million

 

The Ethical Property Company today launched a £3.5 million share issue with the distribution of an investment document to more than 1350 existing shareholders and to selected qualifying new investors. Priced at £1 per share, Ethical Property is seeking to issue at least 3.5 million shares.

This will be Ethical Property’s fifth share issue since its foundation in 1998, and represents a significant fundraising for a social business. Ethical Property’s primary mission is to acquire, manage and develop properties that provide affordable workspaces to organisations working to promote social change. Nearly half of not-­‐for-­‐profits see property as the greatest threat to their long-­‐term stability.*

Susan Ralphs, Managing Director of Ethical Property, said: “This issue is being launched on the back of an outstanding period for Ethical Property. We reported strong results for the 2013/14 financial year, with an increase in operating profit of 15%.  We are forecasting operating profit to grow a further 13% in the year ending 30 September 2015. This growth, accompanied by a highly competitive occupancy rate of about 95% and award-­‐winning new developments such as The Foundry, positions Ethical Property strongly for the future.”

With a property portfolio valued at more than £25 million, Ethical Property has added over £9 million to Net Assets since its last share offer in 2010. In the year to September 2014, Net Asset Value increased by 31% to £1.24 per Share, and we forecast NAV to increase by a further 26% to the estimated £1.56 per share by the end of September 2015, on the back of independent property valuations and strong profit growth. At the same time, shareholders have benefitted from the payment of a dividend every year since 2001, even during the most difficult years of recession.

Proceeds from this Share Issue will fund expansion into growth markets such as Bristol, Manchester and Cardiff. Ethical Property has ambitious plans to double in size over the next five years, bringing its unique model of investing in city fringe locations to provide social change organisations affordable yet high quality office and meeting spaces offered on flexible terms. In doing so, it often helps to safeguard properties for continued community use.

Ethical Property also considers disposals where there is an opportunity to increase its social, environmental and financial returns. It is currently exploring the sale of its Development House site in Old Street London, rather than making the substantial investment needed to upgrade the building to meet the needs of Ethical Property and its tenants. The site offers significant redevelopment opportunities in one of the fastest growing markets in the UK, and could result in a possible profit of between £10-­‐20 million for the Company to re-­‐invest in London, although any disposal will be

complex and is dependent on uncertain market conditions.

ABOUT THE ETHICAL PROPERTY COMPANY

The Ethical Property Company is a social business that owns, develops and manages commercial property for use by charities, social enterprises, community organisations and campaign groups effecting social change. In 2013/14 the company provided space to over 1000 organisations in 24 centres across 9 cities in the UK. It is supported by over 1,350 shareholders, predominantly individuals as well as key institutions that are committed to social change and community development. Ethical Property Company shares can be acquired through ethical investment platform Ethex at www.ethex.org.uk/ethicalproperty.

The Ethical Property Company is part of the Ethical Property family, comprised of Ethical Property Europe, ETIC, Ethical Property Australia, The Ethical Property Foundation and Ethical IT. More information on the Ethical Property family of organisations can be found at www.ethicalproperty.co.uk.

* Charity Matters survey (March 2015)

This announcement does not constitute or form any part of an offer or invitation or inducement to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities in The Ethical Property Company Limited (Company) nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract therefore. No reliance may be placed for any purpose whatsoever (including without limitation for the purpose of deciding whether or not to acquire, continue to hold, or dispose of, securities in the Company) on the information contained in this announcement or on its completeness. No representation or warranty, express or implied, is given by any person as to the accuracy of the information or opinions contained in this announcement and no liability is accepted by any person for any such information or opinions nor does any person have any obligation or undertaking to update, review or revise any statement contained in this announcement whether as a result of new information, future developments or otherwise.

 

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Futurebuilders releases report showing average investment loss of 3%, but performance was “better than expected”

Last Wednesday Futurebuilders England launched a report by Boston Consulting Group looking back at the performance and management of the fund over the last 10 years. The report, entitled ‘A Tale of Two Funds’, found that whilst the investments lost 3% of their initial value, there were valuable lessons to be learnt from the experience.

Futurebuilders was set up to “persuade the voluntary and community sector to make greater use of repayable finance”, representing a new direction for lending that would, according to SIB CEO Jonathan Jenkins, “test new boundaries of how and where social finance could work.”

Between its launch in 2010, and closure in 2014, FutureBuilders England dispersed £145m to 369 organisations, £117m of which consisted of loans. According to the analysis, the typical Futurebuilders investee profile was a midsize charity with a turnover of ~£3 million, and the average loan size across the whole book was ~£500,000. Of the loans, approximately 20% of the capital is now closed (either paid down or written off) representing 40% of deal, and £47 million has been returned to the Cabinet Office.

The study highlights that, given the “pioneering nature of the fund”, the performance was more positive than might have been expected. The fund saw organisations that weren’t used to accepting loan finance through a period of major financial shock, which in itself was a significant achievement.

A “lack of clarity about the fund’s objectives” in the early stages was partly to blame, according to the report. Another contributing factor was the fact that the fund was regularly shifted between government departments.

Richard Gutch, chief executive of the consortium that managed the fund from 2004 to 2008, said: “Over the first four years we had three different government departments and four different contract officers, so we had to keep explaining Futurebuilders to them, which was odd given that they were ultimately responsible for it”.

Jonathan Jenkins believes the story of Futurebuilders spans and defines the early phase of the UK social investment market, and should act as a benchmark going forward. He said, “I believe passionately that this market can grow, and key to that growth is the sharing of the experiences of the pioneering organisations such as SIB. There are many pertinent lessons and benchmarks to consider, as we enter the second decade of large-scale social investment in the UK.”

By way of conclusion, the study by Boston Consulting Group offered six recommendations for designers and managers of funds:

  1. Be clear on objectives from the outset: Futurebuilders has been dogged by a lack of clarity over its objectives. Crucially, return expectations have never been made explicit.
  1. Take care when blending grants and loans: blending grants and loans allowed the perception to develop that grants were subsidising lending activity.
  1. Keep products simple: the simplicity of Futurebuilders’ main product (6% fixed rate loans) made the product easy to communicate and (relatively) simple to administer.
  1. Develop clear investment criteria – and stick to them: too much effort was spent chasing opportunities that would never be investible.
  1. Be transparent and engage other lenders: rightly or wrongly, Futurebuilders was viewed with suspicion by other lenders, which greater transparency would have helped to counter.
  1. Measure social impact alongside financial impact: measuring the social impact of Futurebuilders was not given much attention until after the fund had closed.
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Big Potential Advanced Fund launches with extra £10m

The Big Lottery Fund today launched the Big Potential Advanced Fund, expanding support and grants to VCSEs looking to raise social investment and bringing the total value of the Big Potential programme to £20m.

 

Big Potential offers support and grants to help voluntary and community organisations and social enterprises (VCSE) consider how social investment could help them grow their impact. Drawing on the success of the existing investment readiness fund, now in its 2nd year, the advanced programme is available to organisations looking to raise larger investments of over £500,000 as well as win contracts over £1m.

Geeta Gopalan, Vice Chair of the England Committee at Big Lottery Fund, said: “In these challenging times for the sector we believe that this increased investment will help even more VCSE organisations to access social investment, enabling them to grow their trading activity and hopefully become more sustainable.  We are committed to ensuring that VCSE’s are able to get the right support at the right time, and so the enhanced Big Potential programme is a very important piece of the wider investment readiness offer, that will complement a number of other programmes.”

The original fund, newly named the ‘Breakthrough’ route, will continue to support earlier growth businesses by offering preliminary and investment plan grants of up to £75,000. Meanwhile the advanced route will target “those that are clear about how social investment could work for them and can describe a potential deal or interest from investors and need help to close that deal.”

“Big Lottery Fund have shown that they are committed to this approach to funding VCSEs looking to raise investment and/or win contracts by providing £10million of additional funding for the Social Investment Business to manage” said Jonathan Jenkins, Chief Executive of the Social Investment Business, “We expect to continue to see VCSEs scale up their operation through this funding model; enabling them to significantly grow their impact on their communities and beneficiaries.”

Information on how to apply to Big Potential is available here.

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Third Space Learning secures £1.5m to accelerate growth

Online maths tutoring specialist, Third Space Learning, has secured £1.5m in Series A funding from Ananda Social Venture Fund and Nesta Impact Investments, bringing its total investment to date to £2.5m.

Online maths tutoring specialist and ClearlySo client Third Space Learning has secured £1.5m in Series A funding from Ananda Social Venture Fund and Nesta Impact Investments, bringing its total investment to date to £2.5m.

Launched in 2013, Third Space works with primary school children to help build confidence in the classroom and accelerate numeracy skills. Offering pupils one-on-one interactive maths lessons on content selected by their teachers, Third Space has an impressive track record for improving children’s progress in numeracy.

Founder and CEO Tom Hooper is passionate about the role technology can play in helping social problems, this being his second venture in education technology. He commented, “We have worked incredibly hard these last two years to validate what is an ambitious solution to a significant social and academic problem. We are very pleased that the commercial and academic traction we have delivered has won support from a number of very successful angel investors, and now, two of the leading social impact funds in Europe.”

Having previously participated in the Wayra startup programme and raised investment with Clearly Social Angels, amongst others, Third Space plans to use the extra cash to accelerate growth in the UK as well as launching online teaching centres worldwide. Headquartered in London, the company already has a team of over 200 maths tutors including specialists based as far as India and Sri Lanka.

The board of directors will now be joined by Ananda’s Lennart Hergel and Nesta’s Isabel Newman, who said “There is good evidence of one-to-one tuition being an effective way of improving numeracy; however the shortage of specialist Maths teachers and the relatively high cost of tuition can preclude those who need it the most from receiving it.”

“By improving access to quality maths tuition, Third Space Learning has the potential to improve the lives of thousands of young people. We are delighted to be able to help them grow their offering to many more schools across the country.”

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UKBAA awards ceremony 2015 a big win for impact investment

The UKBAA awards recognise the best in the British angel investing space – and their growing focus on social and environmental impact in investments reflects the demand in the angel investing world for a new way to see risk, return and impact.

As always, the UKBAA annual dinner was a glittering awards evening, with many of the UK’s most committed angel investors dining alongside the startups they have backed.

This year, their Social Impact Investment of the Year award saw a whole range of impact-focused businesses in its shortlist. The list included Eyejusters, whose self-adjustable glass give sight to those in the developing world, and Brain in Hand, whose app helps those with autism. It also included Resonance’s Social Investment Tax Relief investment into FareShare South West, which was highly commended on the night for breaking new ground in impact investing.

We were delighted of course to see our Clearly Social Angels (CSA) investment into Aduna win the award (our angels are pretty happy to have scored this hat trick – last year’s winner was CSA investee Third Space, and in 2013 it was one of the group’s first ever investments – into Playmob).  It’s incredible to see how many more of these deals are being done up and down the UK – UKBAA now report 1 in 4 angels have made impact investments. Recent research by consulting firm Cambridge Associates in collaboration with the Global Impact Investing Network suggested that impact investments, managed well, deliver market-rate returns, encouraging even more investors into this space.

Another win for impact investors was the shortlisting of Breezie for Best Angel/VC investment and our own Clearly Social Angel Meganne Houghton-Berry for Angel of the Year. There was a whole category for Eco Innovation, and a Women-Led Investment category featuring – among others – the brilliant Abundance Generation.

Individuals who lead organisations like these and those who invest in them are backing the big impact-focused businesses of the future, and their recognition in the mainstream of angel investing is hugely well deserved.

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