In 2014 Golden Lane Housing (GLH) faced a challenge. It was a problem faced by many voluntary organisations and social enterprises and it was this: how to get capital to expand and develop the business.
GLH is a leading charity providing housing for people with a learning disability. We have over 1,400 tenants nationwide in a range of houses and bungalows which we own or lease. In the good old days, we were able to buy properties using a grant from a local authority or health authority, topped up by a loan from a bank. But those days have gone: grants have all but disappeared and we can’t get bank loans on acceptable terms.
So we decided to look to a new way of raising capital. In 2013, we launched a bond which raised £10m and in 2014 we raised £11m in eight days through the first ever charity bond to be listed on the London Stock Exchange. We are using this money to buy and adapt housing across the country. Taken together, the two bonds are providing high quality homes for 220 people in 57 properties nationwide. Just as importantly, these properties are creating a lasting legacy for future generations of people with a learning disability.
We commissioned an external report into the impact of the bond properties. This found that for the tenants, the move had usually been a new lease of life for them, and they report increased confidence, learning new skills, wider social life and increased participation in the community. Parents reported significant improvements in their own physical and psychological health. And the overall cost to the public purse has reduced.
There are some important considerations for any other charities who may be thinking about going down this route:
- investors will be looking for a reliable income stream (in our case, rents from letting our properties);
- you will need to be able to show how you will re-finance the bond at the end of the term;
- it’s important to do some soft market testing beforehand, using an experienced intermediary, to allow you to set a rate that maximises investment at minimum cost – in our case, the fixed rate is 4.375% for a fixed term of seven years;
- time and expertise will be needed to take Trustees through the risks and mitigation, to do the financial modelling and to pitch to investors.
The macro-economic climate currently looks good for these types of bonds: low inflation means investors are less worried about inflation reducing the real value of their returns, and low interest rates means that investors may be looking to make higher returns away from traditional deposit and savings routes.
Bonds can offer a means of making private money work for public good. And it can provide great publicity for the organisation and what it stands for. In our case, two of our tenants opened trading on the London Stock Exchange – the first time this has ever been done by people with a learning disability.
Golden Lane Housing’s £10 million 2013 bond offer was advised by Triodos and its 2014 £11 million bond offer was advised by Retail Charity Bond plc, an initiative of Allia & Canaccord.