Downing Corporate Finance is raising an additional £5.5m for the Downing Nurseries EIS to fund the purchase and management of between four and nine nurseries around the UK, excluding London.
The EIS was established in March 2002 to build a group of children's nurseries and has raised £3m so far. Under the original share offer, the management of the nurseries was outsourced to a company called Nu Nu.
Downing is now in the process of acquiring Nu Nu, which allows the day-to-day running of the nurseries to be kept within the Downing group. There are currently six nurseries in operation, which generated a combined income of £1.3m and a gross profit of £400,000 last year.
The premises will mainly be freehold, which gives the EIS the security of having bricks and mortar behind it. Long leasehold properties will also be considered in the absence of suitable freehold premises. Geographically, sites are likely to be anywhere north of Watford. London is currently being avoided because the land costs are too high, but if a good deal came up Downing would consider it.
Downing says small operators have dominated the childcare industry the childcare but this is starting to change. The company thinks large professionally run groups will be more competitive than smaller players, particularly at the higher end of the market, which is more profitable.
The success of this EIS depends upon continuing demand for childcare and the ability of the company to find suitable sites at the right price. However, it is competing with Childcare Corporation 6, a similar EIS from a group which has a long track record. This long track record may help Childcare Corporation to negotiate prices for sites, but Downing may find this harder because it is a relatively new entrant.