The social justice and human rights centre at The Foundry represents a landmark in terms of social impact investment in property. Together with a small group of charitable foundations, Ethical Property has successfully raised over £12m to create a centre which supports the social justice and human rights movement.
These funds have been used to buy and redevelop a large building in London providing workspace to organisations involved in human rights and social justice issues as well as conference space, a café and community space open to the public. Having opened its doors on September 8th 2014 following redevelopment, The Foundry is home to tenants such as SolarAid, Disability Law Service, ADD International, Media Legal Defence Initiative and The Orchid Project.
The concept for The Foundry was born in 2010 following initial discussions between Trust for London and the Ethical Property Company. Shortly afterwards we joined forces with the Barrow Cadbury Trust and LlankellyChase Foundation and established The Social Justice and Human Rights Centre Limited.
From Ethical Property’s perspective, we were aware that it would be a very different project to our previous developments which had been wholly owned and funded via equity and bank debt. This would be a joint venture in which we had a significant but minority interest, and would lead on the development of the project and management of the building following its opening.
We also needed to establish demand - whilst Ethical Property have consistently high demand for our existing buildings, it was important for us to understand that specific demand existed in the Social Justice and Human Rights sector for such a building. We therefore spent much of 2011 speaking to organisations working within the sector to establish this demand and understand their requirements. Taking this into account along with investor interest we began to develop a clear vision for the project.
After much exploratory work, early in 2012 an Edwardian industrial building in Vauxhall was purchased for about £5m. This deal was made possible by a mixture of equity and fixed term loan capital, all from the core investors, with the addition of Joseph Rowntree Charitable Trust.
At this point the project still needed to raise over £6m for the redevelopment of the site. We did this through more fixed term loans with a secondary charge and senior debt from Charity Bank, Big Society Capital and Bridges Ventures.
Undoubtedly the fundraising element of the project was our biggest challenge. We started the project as the global financial crisis was unfolding – and had to decide early on whether or not to press ahead in the circumstances. But Trusts and Foundations have the benefit of the long view, and we were confident that in time the market would pick up and we would be able to provide a good return on investment.
The Foundry is clearly a strong and investable proposition: a property-based investment in the UK’s capital city, led by a group of organisations with an extensive experience in property investment, property management and social investment. These factors, combined with a clear social mission, enabled us to confidently approach other investors.
During the development phase we held discussions with a wide range of investors. It became apparent that there were many organisations involved in impact investment that were interested in investing, all of whom had different requirements in terms of financial return, legal structures and risk appetite. Our understanding of this developed over time, however we did manage to meet the requirement of different investors whilst still having a workable if complex capital structure. All Investors get a triple bottom line return; social, environmental, and financial. The financial return is in the form of a dividend and capital growth, or an interest payment, depending on the nature of their investment.
To ensure that the project delivers on its financial and social mission, we developed a performance matrix with clear target KPI’s and outcomes - based upon our experience at other buildings. We have identified four key objectives we consider critical to The Foundry achieving its broad aims. These are:
- To enable organisations to achieve more impact and raise awareness of human rights and social justice
- To offer an excellent quality ethically managed space
- To help support the regeneration of the local community
- To offer a sustainable return to investors
This will be regularly reported to the Board, and will be externally verified on an annual basis, using data collected from tenants and staff.
We did have to be bold throughout the process – we bought the building before we had all the funding in place to develop the site and we had to assess the risks of not being able to find enough tenants to fill the building in the aftermath of a recession. The Foundry Board’s commitment to its vision, flexibility in putting together the funding package and a lot of hard work has enabled this project to be completed, and a fantastic centre has been created for the promotion of greater social justice. For more information on The Foundry visit www.aplaceforchange.co.uk
Susan Ralphs is Managing Director at the Ethical Property Company, a social business that owns or manages 23 commercial properties throughout the UK for charities, voluntary groups and social change organisations. For more information visit www.ethicalproperty.co.uk.