Mencap’s property arm offers 3.25% return with latest bond

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Invest in property with a difference: Charity Mencap’s property arm launches third retail bond and promises a 3.25% annual return

  • Golden Lane Housing is the property arm of disability charity Mencap
  • It is issuing its third retail bond and promises a 3.25% annual return 
  • It offers an opportunity for savers looking to invest ‘according to their values’

By Angharad Carrick For Thisismoney.Co.Uk

Published: | Updated:

Everyday savers looking for an ethical home for their cash will have the opportunity to invest in disability charity Mencap’s property arm through its latest charity retail bond.

Golden Lane Housing, which specialises in renting accommodation to people with learning disabilities, is issuing a retail bond with an annual return of 3.25 per cent. 

Retail bonds are another way to invest directly in companies and are bought and sold through brokers and investment platforms. 

However, they come with risks and money isn’t protected in the same way as it is with a bank or building society. There have also been some high profile retail bond collapses in recent years. 

Golden Lane Housing provides supported housing for people with learning difficulties 

They are specifically targeted at ordinary investors and are separate from the larger corporate bond market dominated by institutions.

Golden Lane Housing’s new bonds will be issued by the vehicle Retail Charity Bonds and listed on the London Stock Exchange. 

RCB was launched by Cambridge-based Allia in 2014 to allow charities to tap into the bond market.

It has issued £300million worth of bonds for a variety of charities including care home operators and recently the Alnwick Garden Trust.

Golden Lane Housing became the first charity to issue a retail bond in 2014, offering a 4.375 per cent return, before offering a £18million 3.9 per cent bond three years later.

Neither bond has been redeemed yet but Golden Lane told This Is Money that they were both on track to be so.

Golden Lane Housing: What does it do and how can I invest?

Golden Lane Housing was launched by disability charity Mencap in 1998. 

It now has a portfolio of 1,189 owned and leasehold properties across the UK, as well as 16 managed properties.

The offer period for Golden Lane Housing’s 3.25 per cent bond is expected to close at midday on 16 July 2021.

The bonds have a minimum initial subscription of £500 and are available in multiples of £100 thereafter.

They will trade on both the main and Orb market of the London Stock Exchange and are eligible to put in Isas and Sipps.

The firms authorised to make the offer are: 

  • AJ Bell Securities Limited
  •  Arnold Stansby & Co. Limited
  • Equiniti Financial Services Limited
  • Hedley & Company Stockbrokers Limited
  • Interactive Investor Services Limited

 

The new bonds will be available to wholesale and retail investors and pay a fixed interest rate of 3.25 per cent until 22 July 2031. 

That is the expected maturity date, when investors should get their money back. But the final legal maturity date is 22 July 2033. 

If the payback date is extended beyond summer 2031, Allia says the interest rate will be hiked to 4.25 per cent during that period.

Investors are allowed to sell the bonds at any time – but this relies on a buyer wanting them. 

‘As with any bond of this type firstly investors need to assess the risks – either income not being paid at the level advertised, or not receiving all your capital back,’ Sarah Coles, personal finance analyst at Hargreaves Lansdown warned.

‘The rate of interest is a decent rule of thumb guide to how “risky” this bond is and 3.25 per cent is way above what you might get from a fixed savings account. 

‘But it is also not hugely attractive when you consider how inflation and price rises will dent the value of your capital over the term,’ Coles said. 

She suggested Golden Lane’s bond will be more attractive to investors who are ‘less concerned about returns and more interested in investing according to their values’. 

Social housing has become an increasingly attractive investment opportunity for many savers, with a handful of investment trusts operating in this area, including Triple Point and Civitas. 

‘The demand for investment opportunities that will create positive impact is growing continually, and the RCB platform plays a vital role in enabling charity borrowers to access that demand and raise funding for growth,’ Allia chief executive Adrian Bell said. 

John Verge, chief executive of Golden Lane Housing, said: ‘One of the biggest challenges facing people with a learning disability in the UK is a lack of access to suitable supported accommodation. 

‘Due to the chronic housing shortage, a significant number of people with a learning disability live in unsuitable residential institutions or with elderly parents and carers, and as a result face an uncertain future.

‘We are extremely proud of the work we do to help people live in the right house, in the right place, with the right support’.

Handy checklist: What do you need to know before buying mini-bonds and retail bonds?

* Any investor buying individual shares or bonds would be wise to learn the basics of reading a balance sheet. Read a guide here.

* When looking at bonds, research all recent reports and accounts from the issuer thoroughly. You can find official stock market announcements including company results on This is Money here.

* Check the cash flow is healthy and consistent. Also look at the interest cover – the ratio which shows how easily a firm will be able to meet interest repayments on its debt. This is calculated by dividing earnings before interest and taxes (known as EBIT) by what it spends on paying interest. A guide to doing investment sums like this is here.

* It is very important to find out what the bond debt is secured against, and where you would stand in the queue of creditors if the issuer went bust. This should be included in the details of the bond offer but contact the issuer direct if it is unclear.

* Consider whether to spread your risk by buying a bond fund, rather than tying up your money with just one company or organisation.

* Inexperienced investors who are unsure about how retail or mini-bonds bonds work or their potential tax liabilities should seek independent financial advice. Find an adviser here.

* If the interest rate is what attracts you to the bond, weigh up whether it is truly worth the risk involved. Generally speaking, the higher the rate on offer, the higher the risk.

* If the issuer is a listed company, before you decide whether to buy it is worth checking the dividend yield on the shares to see how it compares with the return on the bond. Share prices, charts and dividend yields can be found on This Is Money here.

* Investors should bear in mind that it can be harder to judge the risk involved in investing in some bonds than in others – it is easier to assess the likelihood of Tesco going bust than smaller and more specialist businesses.

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