It is commonly thought that to invest in socially aware and ethical funds is to make a compromise between returns and a sense of ease regarding the ethics of your investment. Bridges Ventures is aiming to break that narrative and become a property investor capable of returning private equity-style returns of more than 20% while deploying money into ethically sound assets. It is a pitch that earlier this month attracted £212m of capital.
The company was co-founded by Sir Ronald Cohen in 2002 as a venture capital company investing in ventures with a social or environmental impact. These included the Hoxton Hotel, EC2, in 2004. The motivation was to develop a high-quality hotel that could bring income into a deprived part of London. It ended up making a return of more than nine times its original investment of £2.1m when it was sold in May 2012.
Such success encouraged the company to create a property investment arm in 2009 headed by Simon Ringer, formerly of JLL and PRICOA Property Investment Management (now Rockspring). The division has grown to be about 50% of Bridges Ventures’ £600m business.
In addition to following a value-add strategy, Ringer, who is fund manager for all three of the company’s property funds, says: “We tend to invest in alternative sectors. We are driven by demographic trends and a needs-driven strategy.”
The firm’s investments are often made with a joint venture partner. Cardiff-based Castleoak, which has been a development partner on 14 of Bridge Ventures’ projects. Linking up with a partner allows the firm to bring in additional expertise and spread risk.
Urban regeneration
Bridges’ first fund, the Bridges Sustainable Property Fund, adopted an investment strategy aimed at urban regeneration. It started investing in the first quarter of 2010 and eventually invested in 12 deals.
Among these was an early student housing development, The Curve, E1, which the company developed alongside partner Chancerygate. The scheme targeted growth in the area from increasing student and investor demand and returned a healthy profit – the five divestments from this first fund have made average returns of 27%.
Bridges’ second property fund, the CarePlaces Fund, invested in homes for the elderly. Ringer says it is one of his proudest achievements, because it delivered 14 care homes and 850 beds for those with dementia, while generating returns of more than 20% as it enters divestment stage.
Investing in alternatives
Two weeks ago the company announced a final close of £212m on its third fund, the Bridges Property Alternatives Fund. As the name suggests, the fund invests in the alternatives markets, where it has developed a strong track record.
The raising was a landmark for Bridges. Ringer says: “We had a high proportion of investors re-investing with us because of the results we have had so far. But we also attracted overseas money for the first time, particularly US money.”
The company believes its success is in part owing to the relative lack of competitors looking to undertake socially aware investing.
“What we do tends to be outside the norm. In impact terms, there is no real competition. Threadneedle has its green office fund, but other than that there is not particularly any competition,” says Ringer.
50% of capital deployed
The fund has already deployed around 50% of its capital since its first £120m close in May last year, buying into a number of projects including an affordable housing scheme at the Old Vinyl Factory at Hayes, Hillingdon (pictured), in partnership with Hub, and an industrial scheme with Stoford in Wolverhampton. These projects reflect the diverse nature of the fund’s investments.
“All being well, we will be developing further funds,” says Ringer.
And with returns of more than 20% from its first two funds, and a similar target in the third, Bridges Ventures could be an example to other managers that it is possible to undertake ethical investments without compromising on returns.
