Clive Watson, John Roberts and David Bruce, the team behind Capital Pub Company and City Pub Company, is launching a new EIS fund, The City Pub EIS Fund, with the aim of investing £100m over the next three years in freehold and long leasehold managed pubs.
Initially, the fund will raise £25m across three to five separate companies in 2014/15 and then raise a further £50m over the course of the following two years. The equity will be augmented by a c£25m of debt funding.
The new fund, which will be managed by Watson, is looking to acquire 50 individual non-branded pubs based in affluent cities and large towns predominately in southern England.
It is intended that the equity issue will be supported by both institutional funds and by high net worth individuals. Each of the individual companies will qualify for EIS relief. Ram Capital is advising the fund.
Watson is currently chairman of City Pub Company and was previously chief executive of Capital Pub Company, an EIS vehicle that delivered a threefold return to its initial investors, and sold to Greene King for an enterprise value of £93 m in 2011.
Bruce, the serial pub entrepreneur behind the successful Firkin chain and Capital Pub Company and currently a director of West Berkshire Brewery and City Pub Company, will chair each company.
Roberts, previously a board director of Fuller’s and currently a director of City Pub Company, will be chief executive of each of the companies.
As with The City Pub Company, the business plan of the EIS Companies will be to focus on acquiring “high quality, unthemed, managed free of tie pubs which appeal to their local markets”.
The group said that at least 80% of the EIS Companies’ aggregate investment programme is expected to be in freehold pubs, with the balance being in long leasehold pubs, free-of-tie. It said that all pubs purchased by the EIS Companies will be refurbished, as appropriate.
Watson of the City Cub EIS Fund said: “We believe that we have identified an excellent opportunity, further enhanced this week by the latest proposed legislation by the Government, to acquire around 50 individual non-branded pubs, over the next three years, that cater to their own individual local market. We have created a corporate structure that will enable our investors to have the benefit of a proven strategy and a first class management team to deliver and realise the most from their investment.”
He said that the overall focus of the pubs will be to target a wide ranging consumer group.
“These pubs are expected to offer beer festivals, supported by micro-breweries with an emphasis on providing a good range of ales which are not available in most other pubs in their local market,” said Watson. “Staff will be recruited who have experience in operating high volume pubs that identify with their local communities. The majority of each EIS Company’s sales will be from liquor with a reasonable proportion from food sales.”
The company said that some pubs will be more family orientated and have a stronger food offering to satisfy local demand, sourcing food locally and supporting local beer and cider producers.
Watson said: “Menus will be individually created for each pub by local management, offering food which is cooked to order using fresh ingredients, highlighting where the food has been sourced. These particular pubs will offer high quality pub food.”
He said that each EIS Company will offer an “interesting and varied choice of traditional draught beers together with an imaginative selection of wines and soft drinks, so as to appeal to a wide range of customers”. Draught beers will be sourced from local brewers, and local wine merchants will also be used to help develop the “local appeal of the pub and to help support local businesses”.
Watson said: “The creation of a warm and friendly ambience is of paramount importance. The natural appeal and décor will be preserved as far as possible and sympathetically upgraded. Any improvement will be intended to blend in with the existing character of the pub and will not be designer-led.”
In September, the City Pub Company announced plans to raise a further £5m to £10m through the issuing of convertible preference shares as it targets an estate of 25 to 30 pubs. The announcement came as the 18-strong group reported that both EBITDA and sales more than doubled in the six months to the end of June.
Watson said the City Pub Company is likely to be sold to a rival or floated on the AIM market in around 2018.
