Pelham House Bond

Capital is at risk and returns are not guaranteed.

Fixed term Bonds are not readily realisable and investors should expect to hold them for the full term.

Bond + Equity
Asset-backed
IFISA eligible

7.5% p.a.

Fixed return

5 yrs 6 mths

Term (Up to)

A company acquiring and converting a Grade II* listed hotel into an exclusive-use wedding venue. The investment comprises a fixed return of 7.5% p.a. with a share of potential upside on exit, targeting an annualised return for the investment (IRR) of c. 10%. Read more.

Raised: £1,159,136
Tranche 5 closes

Project

Pelham House Lewes Limited (“Pelham”), operated by Artemis Venue Services Limited (“Artemis”), is raising £2 million through this bond to acquire and refurbish Pelham House Hotel (“Pelham House”) in Lewes. It aims to refurbish and optimise Pelham House into an exclusive-use wedding venue. The Grade II* listed building has operated as a 36-bedroom hotel for over a decade and has already proven popular as a wedding venue.

The loan-to-cost (“LTC”) for the project is estimated at 74%, based on anticipated total project costs of £5.9 million. The loan-to-value (“LTV”) during the refurbishment (while Pelham’s trade develops) is estimated at 91%, based on a “turnkey”, ready-to-trade, valuation of £4.9 million provided by independent valuer Christie & Co. The LTV is estimated to fall to 49% as Pelham’s trade matures, around year five, based on the Borrower’s estimated exit proceeds of £9 million. This calculation includes pari passu funding provided by other Downing-managed funds.

By subscribing to the offer, you’ll receive a fixed rate bond, alongside shares in the business.

The Bond will have first-charge security over the bricks and mortar of Pelham House as well as the assets of the business. You’ll earn a fixed interest rate of 7.5% p.a. on the Bond for a term of up to six years, with interest payments deferred and compounded for the first two years to give the business time to develop. The Borrower has the option to start paying off the bond in part or in full from 27 November 2020. The management team of Artemis will invest £1.05 million of cash that will rank behind your capital. Artemis has arranged additional loan security of £500k should there be insufficient funds to repay the debt and/or interest on exit, or a default were to occur.

Shares will be given to you in proportion to your debt investment. While the shares have minimal value when issued, they entitle you to a share of any profit on the sale or refinance of the venue, after it pays its financial obligations to bondholders, Artemis and other creditors.

The Bonds and shares combined give an estimated IRR of c.10%, based on Downing’s estimate. However, the actual IRR will vary, depending on the timing and the value of the exit.

Please note that these returns are not guaranteed and there may be no value to the shares on exit if there is not a sufficient increase in the value of the business at that point. The return on the bond is not guaranteed and your capital is at risk.

About

The industry is estimated to be worth more than £10 billion annually, with the average wedding costing over £27,000 in 2017 - almost a 10% increase on 2016, according to research by hitched.com. Venue hire represents the largest of these costs, making up on average £4,354 per wedding. Overall the wedding market is growing, with current trends leaning towards civil ceremonies hosted within exclusive venues and hotels - as opposed to traditional church ceremonies. This trend is strongly beneficial for the hotel and venue market and revenues appear to be rising1.

Artemis Venue Services Limited (“Artemis”) is an experienced UK-wide wedding venue operator, providing sales and marketing services to 150 venues and catering and on-site management services to a further 10. Artemis provides these services through its subsidiaries Galloping Gourmet Limited and Country House Wedding Venues Limited which have a strong track record in the industry2.

"We find the wedding venue market a compelling opportunity for growth and can see Pelham House fitting well as a full-service venue, appealing to the millennial trend toward exclusive-use celebrations. We have worked previously with Artemis’ CEO Angus Hastie and believe he and his team are commercial, straightforward and bring a wealth of experience in the wedding sector. Considering the asset and the achievable business plan presented by Artemis, we feel Pelham House could be a great opportunity to earn strong, long-term returns on capital, if you are comfortable with the risk to your capital." David Martin Smith, Investment Manager, Downing LLP

1 Christie & Co valuation report April 2018

2 Artemis provided information