Posh pubs: you drink in them, you can invest in them too

Written by Rebecca O'Connor on 6th July 2016

Who doesn’t fancy a 10oz steak, sourced from cattle bred only for beef and raised with their family herd on clean, green pastures, accompanied by a bottle of Madfish Cab. Sav. Merlot? Or if you are veggie, a lovely Gnocchi alla Norma, while cosying up to a fire and looking out over the English Countryside?

It’s possible we’ve just described how Nigel Farage has spent the last couple of days, but it’s also the type of food, drink and experience that Oakman Inn & Restaurants serve in their – let’s be honest – posh n’ lovely pubs in the Home Counties. This formula has earned them a reputation among locals and visitors as a no-brainer destination for a nice relax, some good company, and more-than-decent grub.

That’s why it is quite possible that many of the lenders backing a new £3.7 million bond – the Downoak Pub Bond, from Downing Crowd, are likely to be customers of the Akeman, the Akeman Inn, the Blue Boar or the Crown & Thistle – the four pubs that form the security for this bond.

Another reason is the rate and term: 6.25 per cent for early birds who invest before the end of July, with capital and interest repaid after a year. There is a £100 minimum investment. Customers will like that becoming an investor also entitles them to discounts off food. The security, means that if anything goes wrong, lenders have first charge over the assets, which can be sold to meet repayments due.

And something could go wrong. The success of the bond rests on Oakman being able to refinance the debt raised, ideally at a cheaper rate, in a year’s time. Investing is essentially taking a view on whether you think this is likely, from what you know and read in the Offer Document, which you can download when you register.

It’s hard to know. This type of investment does not come without risk, and it is up to individuals to decide for themselves if they are happy with that risk.

In light of Brexit, it seems unlikely that Oakman would suffer hard – it is a British business with British customers. It sources locally so no import hike (except on the booze) and has a genuine ethos of sustainability throughout the business.

Unlike the more down-at-heel pubs that have tended to suffer and close in the hard times, Oakman’s fairly affluent customer base is reasonably well placed to ride out the storm, even if they do decide to go out for a bite a little less often in the next few months.

The property values may fall as a result of economic uncertainty, but that would only become an issue if the bond failed and Downing had to recoup lenders’ money.

There is huge appetite for this type of bond in the current low interest rate environment, where the stock market also looks off-putting to many. Anyone with funds sitting in cash not wishing to place a bet on global markets might be tempted, especially given the relatively short term.

Downing Crowd, the newly launched crowdfunding arm of Downing LLP, an asset manager, found itself fending off investors for its first bond, Kenninghall Solar, which launched in March 2016 and sold out within 13 days.

The Downoak Pub Bond has already raised £470,000 of its £3.7 million target on launch day.

Julia Groves, head of crowdfunding at Downing, said: “We believe that this is an exciting, attractive and entrepreneurial way for Oakman’s many customers to stake an investment in their community pub. Crowdfunding has become increasingly popular over the last few years and Downing is developing crowdfunding that offers potentially attractive terms for both investors and borrowers. We believe that applying years of experience to debt-based crowdfunding and offering both attractive risk adjusted returns to investors and competitive finance for growing businesses, provides a genuine win-win situation for all parties.”

Peter Borg-Neal, Oakman Inns CEO, said: “We have worked with Downing since 2014 and this new financial initiative fits very comfortably with the way we work across all our communities. Downing apply the same level of due diligence to crowdfunded offers that it does in its normal venture capital business. Quite apart from the interest rate, we are really pleased that we can share our success with those investors who join us on our continuing and successful journey through the innovative Investors Loyalty Card.”

To find out more about investing, locals in Tring and surrounding areas are invited to Oakman’s Tring pub, The Akeman, to meet Peter Borg-Neal and Julia Groves on Thursday  July 14 at 7pm.