EMCO Capital Advisers is launching a Cayman registered alternative investment fund focused on investment in late night licensed venues in the UK.
The fund is aiming for exceptional returns to investors over a rolling two-year cycle.
EMCO Alternative Property Fund has been structured to achieve principally capital growth and some additional return from income via a portfolio of freehold entertainment venues in three ways:
1) Capital growth arising from the relicensing of premises whose license has been lost or withdrawn
2) Income arising from the granting of operating leases to EMCO Leisure Ltd (the venue operator) which will operate the venues
3) Capital growth arising from attaining “change of use” permissions on premises, for example planning permission for conversion to residential property. This third element also provides investors with a key risk management function in the event that having an entertainment venue is not attractive to a potential purchaser
Unless there are exceptional circumstances, each venue within the portfolio will be sold, either by private contract, or via trade sale or other means towards the end of a two-year period
The fund’s trading advisers are concentrating on building the investment portfolio from premises usually outside London which, after substantial due diligence and financial modelling, are found to share the following characteristics:
• Frequently distressed – for example in want of refurbishment, running at a loss, having no operating license – and thus buyable at a substantial discount to book value
• Likely to benefit from significant and immediate capital value increase on granting of an operating license
• Likely to benefit from significant and immediate capital value increase on granting of change of use permission
• Capable of generating useful income as a venue based on the adviser’s proprietary analytical model and experience of running entertainment venues
• Susceptible to longer-term capital value increase arising from the operation of a successful and popular entertainment venue
EMCO’s Emyr Hughes says: “The portfolio of venues, each to be held over a two-year cycle (and we hope and expect to start with at least six) will, operationally, benefit from efficiencies of scale due to a centralised management system being developed by the venue operator.
“We expect the fund’s investors to enjoy considerable opportunities for returns on the back of risk reduced by portfolio diversification and, moreover, by the presence of planning permission on each property. We see this as, potentially, a useful opportunity to achieve strong returns in a low interest rate environment.”