We all know that getting a socially-minded start-up off the ground faces many challenges – not the least of which is finding the right accommodation, in the right place, and at a price that’s affordable. And getting a social enterprise going can be especially difficult, if your landlord lacks sympathy and shows little support for the cause that means everything to you.
You need the Ethical Property Company.
Ethical Property started in 1982 with a single property in Bristol and was formally established in 1998. It raised, with the help of Triodos Bank, £1.2 million in a share issue in 1999; since then it has raised a further £13 million. An unlisted company but with several large and many small shareholders, it now owns or manages 23 centres across England, Scotland and Wales – a property portfolio valued more than £32 million, with almost 300 tenant organisations. It had a turnover of £4.1 million in 2014-15 and had an operating profit of £700,000.
It’s an explicitly social business – it claims that it only engages “in business activities which have a positive impact on society”. And that means it turns down tenants, too; it declined to accept as tenants 16 organisations in the 2014-15 period because they failed to meet Ethical Property’s ’s ethical criteria, which it calls the “Quintessentials” and which can be viewed here. According to its latest annual report, in the annual survey of its tenants, 100% of them felt Ethical Property’s rental charges were good value – 20% of them “very good value”. According to Penny Gardner, Ethical Property’s finance director, “the feedback from our annual tenant survey helps us to do better what we do. The headline social impact is: if they can work better by being in one of our buildings, then that’s a very good thing.”
According to Gardner, “part of the raison d’etre for the organisation, as well as delivering social benefit, is to demonstrate that you can do business in a different way. That you can operate in this way, and continue to make a profit – because we are a company and we have to make a profit to pay a dividend to shareholders. It’s about proving that you can do commercial business, but that you can do good as well,” she says.
This ethically-minded treatment of its tenants extends to its internal operations, too. Ethical Property carries out an annual staff survey. In 2015 98% of its 85 employees said they enjoy working or the company; 90% said they feel involved with the company; and 94% responded that they would “definitely recommend working for the company to a friend”. The ratio of highest to lowest paid employee at EPC is no more than 5:1, compared to 232:1 for FTSE 100 companies, 15:1 at local authorities, and 10:1 for charities with income more than £50 million. Ethical Property does its very best, in other words, to practice what it preaches. All Ethical Property staff is paid an hourly rate at least equivalent to the Living Wage. Its commitment to environmental good behaviour is also spelled out: all but one of its centres is now on a 100% renewable electricity tariff from specialist green electricity companies. “The principles of how we operate are absolutely core to the business. It’s top to bottom – our Quintessentials are clear that the CEO cannot be paid more than a relatively small multiple of what we pay our cleaners. We’ve been a Living Wage organisation since the scheme started and continue to be so,” says Gardner.
I ask Gardner what the future might hold for Ethical Property. She says that “one of the challenges for a property company is that if we are to grow – and we do want to grow because there is a huge demand for what we do – is that we are a capital intensive business. We are therefore looking for much greater amounts of capital than your average social investment. And yet, being unlisted is to some extent a barrier to investment, so the challenge is finding the right route to growth. I think that in the medium term we would look at potentially listing on AIM. Our ambition is to at least double in size by 2020. We want another couple of years of demonstrated growth.”
The current EPC flagship is a new development in Bethnal Green, which is about expanding the services EPC offers. The company disposed of what was its largest building, in Old Street in the centre of London. This became very prime real estate, although when it was first bought by EPC in 2004 it was quite a run-down area. Says Gardner: “By selling that building we’ve been able to buy a much larger building in Bethnal Green, which we are redeveloping at the moment. This will allow us to have twice as much space; that is quite transformative for our balance sheet. We want to have that fully achieved and showcased – by 2018 when it will be fully developed.” For those who want to learn more about the Bethnal Green development, details are available here.
For Gardner and Ethical Property, membership of the Social Stock Exchange is a key part of the company’s future growth. She argues that “the publicity and the networking and bringing more people in the investment world to the social investment table are incredibly important. Social investment is becoming more mainstream, but there is still a long way to go. The Social Stock Exchange is a platform for getting social businesses better known and for connecting people.”
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