EIS pub companies will be limited to fund raising of £2m from mid-July – a change which Close Investments believe will restrict the diversification of pub EIS companies. It is aiming to raise £8m through this offer, which will allow the company to diversify across 6-8 food-orientated freehold and long leasehold pubs.
The EIS will follow a similar strategy to the first imperial pub EIS and will share the same management team, Oriental International, which will trade as Eat Your Heart Out. It has identified the best locations for pubs through a combination of demographics and workforce data. Each potential site within the region will be assessed to ensure that there are enough target customers to make the opportunity attractive. Workforce data will be analysed to ensure there is a prospective lunchtime market while population data will also be analysed to ensure sufficient evening and weekend target customers.
The EIS will invest in premises that are already big enough to trade as successful pubs or those that could be refurbished or extended to a sufficient size. Premises must meet the existing EYHO criteria based on purchase price, character and size of building, refurbishment potential and local demographic factors. Growth will be derived from buying pubs with good prospects for increasing business and profits, growth of pub property values,
refurbishments and extensions to the properties and the creation of a group of complementary pubs that would usually be valued at a price greater than their individual value.
The EIS will look for pubs that are trading at a level below their full potential because they have been mis-managed or that refurbishment will enhance trading.
The directors say the UK pub market is a well-established, mature trading sector. The introduction of new licensing laws in November 2005 that increased trading hours, was a big change and now the industry is preparing for the introduction of the smoking ban. Drink led pubs are expected to be hardest hit but the directors of this EIS say the recent example of Scotland, where smoking in pubs is already banned, demonstrated that food-driven public houses will benefit from the smoking ban.
As an asset-backed EIS, this is lower risk than some schemes because the pubs are properties, which can be sold if necessary. This EIS will also have the diversity that may be unavailable to subsequent schemes.