A new investment vehicle from MBU Capital combines crowdfunding and socially responsible investing to impact community-focused real estate projects across the U.K.
The “Social Bond” focuses on a number of “social property strategies” including affordable housing, community regeneration and high quality housing for students and the elderly.
MBU Capital, a London-based independent investment bank, announced the Social Bond’s global availability on Wednesday. The bond was launched in January.
“Given the way it’s structured, [there’s] no global limitation,” MBU Capital CEO and co-founder Mohammed Iqbal told ThinkAdvisor by phone. “Anyone from anywhere can invest.”
MBU Capital says the Social Bond will offer participants a fixed 7% annual return over three years until maturity in December 2018 and, in addition, give its bondholders a 5% share of net profits from underlying investments.
An additional 5% of profits will go to a charitable cause of the bondholders’ choosing.
MBU Capital has structured its Social Bond as an honor-based pledge by collaborating with the ReGive Global crowdfunding platform. The pledge is then converted into a legally binding contract.
“Most analogous financial instruments, such as muni bonds, retail bonds and corporate bonds, etc., are very restrictive in terms of the regions that they can be marketed within and therefore limit geographies that can participate,” according to MBU Capital.
Once investors complete their social bond application through the ReGive platform, MBU Capital sends them a separate legally binding agreement (enforceable anywhere in the world) that makes their social bond fully protected by MBU’s real estate assets.
By structuring the bond through a global crowdfunded nonprofit organization, the Social Bond bypasses regulatory restrictions that could keep it from going global.
“We’re asking for a cause, and they are giving. It’s, effectively, the investor giving us money and us promising we’ll deliver the money. [We] send them a legal document saying we commit ourselves to providing returns,” Iqbal said. Adding, “Because we do it that way – it doesn’t fall under regulatory [pressures].”
By following this pledge plus legal agreement approach, MBU Capital is no longer restricted in terms of where it’s able to market its product and who is able to participate. While most conventional bonds have a high barrier to entry for participants, the Social Bond has no minimum or maximum capital requirement and its open to individuals, nonprofits and companies from anywhere in the world.
Iqbal said both the U.S. Securities and Exchange Commission and the U.K.’s Financial Conduct Authority had “liked what we were doing and had no issues.”
“For us that was a big thing, getting that approval to make [the Social Bond] a truly global issue,” Iqbal told ThinkAdvisor.
While available globally to investors, the London-based MBU Capital picked a geography it’s familiar with for its real estate investments: the U.K.
The Social Bond’s current active pipeline is valued at over £300 million ($430 million) and includes student housing developments (in Bristol, Birmingham and Reading), care home developments (in Titchfield and Chippenham), as well as housing developments (in Stevenage).
In addition, MBU says it has also identified a stable income producing pipeline consisting of affordable serviced offices and secondary shopping centers in and around London.
MBU Capital says it invests in high-yield U.K. property and real estate developments to generate “stable, protected profits for bondholders.”
“A lot of the investment opportunities that we are sourcing – a lot are distressed efforts, high-yield opportunities – so we are able to offer a very attractive return rate,” Iqbal said.
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