Press release | 17 December 2018

Downing Crowd Launches First Bond With Added Share of Potential Upside for Investors

Investment platform Downing Crowd has launched its first bond to offer investors an attractive fixed return of 7.5% p.a. plus the potential for added equity upside.

The Pelham House Bond has a relatively high estimated loan-to-cost (LTC) ratio of 74% and to allow the business to invest in its growth, Downing investors’ interest will be rolled up for the first two years – making it aimed at more sophisticated investors. To reward investors for taking on this higher level of risk, the bond will also give shares to investors in proportion to their debt investment. This equity entitles investors to a share in any potential upside over the term of the investment.

Pelham House, supported by the Pelham House Bond

The fixed return on the bond and the potential upside on the equity combined are estimated to generate an internal rate of return (IRR) c.10%1 although this cannot be guaranteed. The actual IRR will depend on both the value of the company and the timing of the exit.

Based on an independent valuation, the bond has a higher estimated loan-to-value (LTV) of 91% (to date no Downing Crowd bond has exceeded 75%). However, the LTV is estimated to fall to 49% based on management’s estimate of Pelham’s mature trade, around year five.

The bond will have first-charge security over the bricks and mortar of Pelham House, as well as the assets of the business. To help manage risk further for investors, the Artemis management team are committed to investing £1.55 million of cash that will rank behind Downing investors' debt.

Commenting on the launch of the bond, Julia Groves, Partner and Head of Crowdfunding, said:

“This offer is more complex than our standard bonds, therefore it’s likely to be better suited to more experienced and confident investors. However, both the quality of Pelham House as a venue and the strength of the new management give us confidence that this bond can provide generous rewards for investors who are able to take on the additional risk.”

“Enabling the potential for investors to benefit from the growth of a business as well as earning a fixed return is an exciting new direction for Downing. But, at the same time, this move continues to be backed by the same thorough due diligence and our 30 years of experience in seeking out high-quality UK businesses, with over £150 million of our £1 billion assets under management held in assets in the leisure sector2.”

More about Pelham House

The bond will support Artemis Venue Services Ltd in its acquisition and refurbishment of Grade II* listed Pelham House Hotel.

Pelham House, an attractive 16th century townhouse located in the historic town of Lewes in East Sussex, has operated as a 36-bedroom hotel for over a decade now. The hotel currently has wedding facilities for up to 180 guests, as well as an acre of land.

Artemis are experienced venue operators and plan to use the £2 million target funding from Downing to convert the hotel into an exclusive-use wedding venue, providing catering, bar sales and bedrooms for wedding couples and their guests.

  • 1 Source: This is based on Downing’s internal calculations and assumptions.
  • 2 Source: As at 31 August 2018.