Kreis Consulting is looking for up to £3.3m to add up to six pubs to Tomahawk pubs. This is an enterprise investment scheme that differs from most EISs by providing income through dividends, as well as the usual capital growth
The EIS was established in 2002 to buy and develop rundown pubs in the London area and has raised over £1.8m from investors. It currently operates two pubs - the Morgan Arms in Bow and the Duchess of Kent in Islington. These pubs aim to recreate a home from home environment customised for the locals as opposed to a branded pub chain.
The management of the pubs is outsourced to Geronimo Inns, which was founded in 1995 and currently runs 15 pubs within the M25 area. The directors of Tomahawk believe that tapping into Geronimo's experience and resources is more cost-effective than Tomahawk meeting the management costs. Under the terms of the management agreement between Tomahawk and Geronimo, Geronimo will only profit where Tomahawk's pubs are successful and dividend targets are met.
The pubs chosen by Tomahawk are mainly freehold pubs which enable investors to benefit from the value of each pub as a business and as a property. Although the directors want to add more pubs to the portfolio, their strategy is to do this in stages, making one or two pubs successful before buying more.
Although pub EISs are nothing new, Tomahawk is different to similar offerings such as Utopia Inns and the Capital Pub Company. The rival products are both looking to buy established pubs, some of which may be underperforming. In a sense this reduces risk as a customer-base is already there.
Tomahawk, on the other hand, is looking mainly at rundown pubs that can be improved. This approach uses less capital during the early stages, allowing dividends to be paid which is likely to be this EIS's main attraction for investors.