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Smith & Williamson EIS targets Welsh pubs

Smith & Williamson is aiming to raise up to £8m for the British Country Inns 4 enterprise investment scheme which will invest in pubs in Wales and the Welsh borders.

The EIS will only be available to high-net-worth and sophisticated investors and was launched because the previous issue was over-subscribed. Like its three predecessors, it will acquire, develop and manage freehold or long leasehold pubs to generate profits and increase the capital value of the pubs in its portfolio. However, it differs in that it is the first since the smoking ban in public places became law in Wales.

BCI 1 raised £7.5m and is now fully invested with eight pub units. BCI 2 raised £7.8m and should be fully invested by the end of the year. It has already acquired three pubs in Somerset, Wiltshire and the Isle of Wight. BCI 3 closed last month, having raised £ 7.8m. It has already acquired a pub in Shropshire.

According to the directors of the EIS, the UK pub market has become fragmented due to anti-monopoly legislation, with no company having a dominant position. The directors believe there is scope to develop existing pubs into food-orientated places, since food is becoming an increasingly important part of a pub’s turnover. The directors also feel pub-restaurants will be enhanced by recent changes in licensing and the smoking ban, as most diners prefer a non-smoking atmosphere.

The management team will look for existing pubs in a character building, preferably with a garden. The pubs will be food led, featuring fresh local produce where possible and menus will be priced to attract return visitors. The target markets will be families at weekends and a mixture of business people and retired customers during the week.

It is likely the pubs will be located in ‘destination’ areas so that the pub will be the main focus of customers’ journeys. The management team intends to increase the level of business, make improvements through refurbishment and increase the overall portfolio value.

As an asset-backed EIS, this is lower risk than some schemes because the pubs are properties, which can be sold if necessary. Asset backing is useful because unlike EIS funds that diversify across a number of companies, investors in this single EIS will put all their eggs in a basket of pubs. Another factor for investors to bear in mind is that the scheme’s success depends upon the ability to find suitable pubs in and around Wales that can reach their full potential as pub-restaurants.

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