Downing Corporate Finance has unveiled the Downing nurseries enterprise investment scheme (EIS), which aims for capital growth by investing in children's day nurseries.
This EIS intends to raise £10m to finance the purchase and management of between 12 and 15 nurseries around the UK. The premises will mainly be freehold properties, which gives the EIS the security of having bricks and mortar behind it. The nurseries will be established during the next 12 months and will be managed by Nu Nu, a company that already manages five nurseries.
The childcare sector has been chosen because it is seen as a growth area. Many mothers with pre-school children return to work and this has created increased demand for nurseries, along with Government initiatives such as the Childcare Tax Credit. This allows eligible parents to claim up to 70 per cent of the cost of childcare.
Adventurous high-net-worth investors with capital gains to reinvest may find this EIS appealing, but they must be willing to hold onto the shares until the exit period in five years' time.
Downing nurseries could also face competition from other offerings in the same sector, such as Childcare Corporation 5, which has built up a track record through four previous share issues. Competition for suitable premises may push up the prices of prospective sites, which could have a negative affect on the performance of the EIS. There is also no guarantee that the childcare sector will continue to grow at the current rate over the next five years.