CAN has announced plans to launch a social investment fund worth £50m, following the growth it has seen in its investment portfolio.
The charity and social enterprise for office space, skills and social investment has also announced that it has doubled its owned social property assets under management by 120 per cent – to almost £40m.
CAN, which was formerly known as Community Action Network, revealed in its annual report that its net assets have increased by 525 per cent from £3m to £24m. It also stated that in eight years, it has gone from being totally grant dependent to achieving 99 per cent trading income. The additional 1 per cent allows it to do things it wouldn’t otherwise do.
CAN now provides office space for 1,400 individuals working for social impact.
As a result of this growth, CAN has announced its attention to seek additional capital to create a social investment fund – which it expects to be between £40m and £60m – to complement its existing social investment offering.
Stages of the fund
The first stage of the fund will be for CAN to work out how to release some of its equity. Andrew Croft, CAN’s chief executive, told Civil Society News said that he sees that being between the £10m to £15m range, which still leaves it with “a nice loan to value ratio”.
He said CAN will then use this own £10m to £15m to set up a debt-based fund.
The fund will then invest in social property for the sector.
He said that CAN is not particularly prescriptive in the kind of organisation that would be able to invest with them. He said it needs to be a social enterprise that is asset-locked. He said it would look at CICs, and CLGs, so "all of those organisations where they have a significant own use of premises requirement, or they are looking to do the same kind of thing that CAN does, where they may want house themselves and other people in a cluster".
He said he sees the core geography of fund one being London, and it would then look to invest in organisations acquiring premises that it would require itself.
Croft said there is a “huge de-risking element in that”. “If they run into trouble we have all of the core competencies to help them through those difficult periods. We have finance, we have sales and marketing, we have business development, we understand property for the sector and we can bring those skills to bear on those organisations should they run into trouble.”
He added that is if even further de-risked because “if their trustee boards or their CIC boards threw us the keys and felt they couldn’t cope for any reason, we would temporarily have a larger portfolio until we could turn it around and hopefully persuade their boards to take their keys back”.
He said that the idea is to fund organisations in which they have total core competence in funding them, which gives them a “unique proposition” within the social investment finance intermediaries market.
Croft said that the fund will work through a series of stages. First it need to find the “most appropriate way of releasing own equity”. It would then need to establish where the debt will come from to match it – which will also be asset-backed. And then, simultaneously, it wants its first investment so all three of them come together, and in investing in the first investment it will already have income against the fund.
He said the target to achieve all those goals is sometime in the first quarter of 2017, giving them just under a year to achieve its goals in equity release of £10m to £15m, leveraging £30m to £50m again, and having the first investment ready to go.
He added that it also thinks that £40m to £60m is a "very good sum in order to do a bond issue or a syndicated debt issue", once the fund is fully invested which would allow it to recapitalise and do the whole thing again.
Croft said: “CAN is mindful that we earn much of our income from sector organisations. So we’re incredibly pleased that our teams work to create huge leaps in our commercial property value can now be used in direct pursuit of our charitable objectives. Just as we have been on a journey to build our own sustainability as a successful, charity-based social enterprise, our success allows us to help other social ventures go on a similar journey.”
This story was updated on 03/02/2015 to show that leveraging would be between £30m to £50m.
