Maven Capital Partners — Appraisal of investment performance

Maven’s private equity approach on behalf of Investor Partners is to invest only in well established companies with proven management teams, where its clients can acquire a significant equity interest at a competitive entry price. Similarly, property transactions must clearly demonstrate the potential for attractive risk adjusted investor returns, through secured income and development gains. Maven executives maintain a close board level involvement with investee companies and property partnerships post investment, with the ultimate aim of achieving a successful exit and positive return for all shareholders.

Direct private equity and property investment is regarded as higher risk, so these investment opportunities are only available to professional clients and eligible counterparties as defined by FCA rules (see footnote on page 10). Investors confirmed by Maven as meeting those criteria can access Investor Partner transactions directly.

Maven has the experience and capability to make available a wide range of professionally appraised opportunities in the alternative asset space. Investor Partners are able to participate selectively to build a broad based portfolio in private equity and/or property. Maven has achieved an overall multiple of cost of 2.9x on realised investments over the period of analysis, suggesting that the co-investment opportunity with Maven offers the potential for eligible investors to generate strong returns. Maven’s track record of sourcing and making a range of new property investments across the UK, allied with six successful exits (four for Investor Partners, two for third parties), suggests that eligible investors should also consider these transactions given the underlying asset backing and development gain potential.

Maven has developed Investor Partners, a network of more than 250 professional client investors and eligible counterparties, including family offices, HNW individuals and wealth managers, who can access a range of private equity and property transactions directly, sourced through the Maven corporate advisory network across the UK, making financial commitments at a level of their choosing. Investor Partners are typically introduced to between six and eight fully vetted and professionally appraised transactions each year, with the opportunity to invest on an individual transaction basis (deal by deal), for a commitment of £25,000 or more per transaction.

Maven has a nationwide team of 55 investment and portfolio executives, backed up by 38 support professionals, in 12 key regional centres, including the senior personnel listed on pages 8 to 10. This team is introduced to around 400 private equity and property transactions per annum through corporate finance advisers across the country, and can demonstrate proven investment capability and expertise in a range of sectors.

Alongside its established private equity business, since early 2013, Maven has also built a specialist property business, investing in hotel, student accommodation, land and planning and office refurbishment projects, as well as commercial and residential portfolios. Maven now manages property assets with gross development value of over £300m across the UK for client funds, of which £140m is for Investor Partners, where many opportunities are sourced off market.

For investors and advisers considering direct investment in private equity and property, whether primarily for the potential returns or their merits as part of a portfolio allocation, investing with a proven investment manager such as Maven could be an attractive opportunity. With many of Maven’s investments, there is a significant allocation available for an Investor Partner pool to participate, occasionally alongside other Maven institutional client funds. It should be noted that direct investments made through the Investor Partner model do not attract Enterprise Investment Scheme (EIS) or Venture Capital Trust (VCT) tax benefits.

The Maven team is one of the UK’s most active and experienced SME investors, with some of the senior fund management team having been involved in private company investment since the early 1990s. Maven’s team believes that there are few if any other fund managers in the alternative asset space that are able to make available to investors the wide and varied range of transactions needed to build a broad based portfolio. Maven’s nationwide team offers multi sector investment expertise and UK wide coverage of the corporate finance market, with investment executives operating from 12 regional offices namely Glasgow, Edinburgh, Aberdeen, London, Manchester, Birmingham, Nottingham, Newcastle-upon-Tyne, Durham, Bristol, Reading and Preston.

Investor Partners have the opportunity to invest in later stage private companies, normally with an enterprise value (EV – equity value of entity at time of investment plus debt less cash) of up to £25m pre investment. New VCT investment rules, introduced by the UK government in 2015 to ensure that the UK is aligned with EU State Aid rules, have limited the types of transaction and age of companies available to VCTs, which have traditionally been one of the key sources of finance to SMEs. As a result, managers such as Maven, with access to high quality deal flow, now have the opportunity to make larger allocations available to co-investors, which were previously available to VCT clients.

Maven’s Investor Partners have invested circa £45m between January 2016 and December 2018 in supporting a number of Maven led transactions.

The two most recent transactions, where Investor Partners were offered the opportunity to investing alongside the Mavens UK Regional buyout fund were:

Additional investments include:

Investment in professionally appraised private companies, often with strong yield characteristics, can be attractive to investors as a means of mitigating the effect of over-exposure to the traditional main asset classes. Historically, private equity has been largely uncorrelated with prevailing main market volatility, and can be an important component of a diversified and successful investment portfolio.

Maven employs a highly selective investment appraisal process, where every prospective investment is subject to thorough due diligence, overseen by the Maven Investment Committee and making extensive use of expert third party experts who provide supporting commentary on the commercial opportunity. This diligence covers all relevant aspects of the company, its team, trading history and business model, before a decision is taken on whether an opportunity will be progressed and made available to Investor Partners. Where a transaction is successfully completed, Maven executives maintain a close board level involvement with each investee company throughout the period of investment, working supportively and collaboratively with management teams to add value and ultimately achieve a successful exit for all stakeholders

Since early 2013 Maven has established a specialist property investment business to take advantage of strong proprietary deal flow where Maven is regularly introduced to attractive investment and development opportunities across the UK, offering potential investment returns which often suit the risk profile of Maven investors. A team of eight executives based in Glasgow and London has been recruited with a range of property investment and property finance backgrounds and has a broad based collective expertise in development, asset management and financial structuring in a number of sub sectors of the UK property market. Due to its national office presence Maven is able to maintain a high profile in the regional markets, where its executives have established a network of local relationships with property agents, developers, professional advisers and financiers, enabling Maven to gain early access to new opportunities, in many cases off market or through word of mouth introductions. These property transactions generally have a development gain element and are available to Investor Partners who are looking for direct access to this asset class which may be viewed as lower risk given the underlying asset backing.

Since 2013 Maven has completed 27 investments in hotel, land and planning, student accommodation, residential and office projects, 18 of which were accessible to Maven Investor Partners. The remaining nine investments were on behalf of third party clients, where Maven acts as asset manager and manages the development of these properties through to sale.

Maven applies the same strict disciplines to its property investment activities as it has been applying successfully to private equity transactions since 2004, from the sourcing of transactions, through due diligence, deal structuring and Investment Committee approval, to active asset management and helping to develop an exit strategy.

For Investor Partners Maven will typically invest in property transactions with a gross development value of up to £15m, including an equity commitment of up to £6m by Maven clients.

Recent investments led by Maven include:

There is a very wide geographical spread of investments across the whole of the UK, from Inverness to Exeter. Regional presence and origination capability are key differentiators of the Maven offering.

Maven was established in 2009 following a buy out of the private equity division of Aberdeen Asset Management PLC (Aberdeen) by the senior team of that business, allowing the new independent Maven business to focus on transacting and managing private company investments. In forming Maven, the existing investment team migrated across to the new business, along with the transfer of the fund accounting, company secretariat, client reporting and sales & marketing functions.

The private equity business at Aberdeen comprised the original Aberdeen and Murray Johnstone private equity teams, and had been responsible for leading all private equity investments since 2004. The current Maven partners and senior investment/portfolio executives have been in place since that time, and Maven has now grown from 22 staff at inception to 93 investment and support professionals.

Since launch, Maven has developed a co-investment model, to allow professional client investors to self select on a discretionary basis.

The team has since built a specialist business and significant fund base, through both organic growth and the strategic acquisition of fund management contracts, and is now believed to be one of the UK’s most active SME investors. Maven’s team is able to provide finance in a range of transaction types, normally supporting established, profitable private companies with equity finance of up to £15m, and investing across a wide range of sectors and throughout the UK regions.

Maven’s strategy is to invest in dynamic, established private companies based in the UK, supporting the key executives of each business to execute their business plan to maximise investor returns and create value for all stakeholders. Maven will rarely invest in start up companies, preferring the greater certainty of a proven business model and an entry price which gives visibility of future ‘arbitrage gain’ when the business is sold. Maven provides equity and mezzanine finance, typically of up to £15m per transaction to businesses with enterprise values of up to £30m at the time of investment, and supports a range of transaction types including MBOs, acquisition finance, expansion or buy and build strategies, replacement capital and development capital.

Maven is a generalist investor, where a key feature of its strategy is a focus on investing across a broad range of industries, with no sector specific bias in sourcing transactions. The Maven team has however developed specialist knowledge in a number of sectors such as IT & telecoms, niche manufacturing, automotive and energy services, and has built an extensive UK network of non executive director candidates, entrepreneurs and industry contacts who have experience of growing SMEs and can offer sector specific expertise.

The Maven team is able to utilise its nationwide network of corporate finance advisors, and experience of the SME market built up over many years, to help source, analyse and execute the best transactions for investors. Each potential investment taken forward by a regional investment team is subject to a detailed presentation setting out the investment case to the full Maven Investment Committee, comprising senior members of the Maven team who have a wide range of industry, financial and commercial experience, and many years’ experience of buying, growing and selling businesses. Before a decision is taken on whether an opportunity is worthy of progression, the company, its team and business model are subject to a thorough due diligence process led by Maven and making extensive use of expert third party providers. As a result of this highly selective process, Maven typically invests in just four to six of these private company opportunities each year, deploying around £15m on behalf of Investor Partner client funds.

Maven also takes representation on the board of each investee company, either from its own investment team or from a panel of vetted independent directors, which will normally include the appointment of a chairman. This ensures that Maven can play an active role in the strategic direction of the business during the period of investment, and that investee companies benefit from the experience of professionals with a detailed understanding of how to help businesses succeed and create shareholder value. Maven places great importance on the relationship with each management team, working closely with the senior executives to ensure that each business fulfils its potential, through a combination of financial, strategic and operational support. The key objective is to add value and optimise performance by supporting the company in executing its business plan and exploiting market opportunities.

Maven applies a structured approach to sourcing and completing private equity transactions. The focus is principally on companies that have a strong market position, a history of maintainable earnings and the potential to generate both a regular paid income and a significant capital gain on exit.

Maven only considers investing in a business that:

Normally an element of each investment is made by way of secured loan stock, capable of generating a paid yield for investors of 8% to 12%. The aim is to drive an immediate income stream from each private company asset and target a total return of 2x to 5x cost over a holding period of three to five years, with the principal of the return coming at exit, normally via a trade sale or acquisition by a secondary private equity buyer.

Maven invests only in the UK market, and has developed a strong track record in the residential, hotel, student accommodation, land and planning and office space sectors. Maven’s approach is to offer professionally appraised property deals, typically structured to generate attractive returns through a combination of a potential development gain element and added value through acquisition and active asset management.

Opportunities generally cover (i) development of land or existing property, with Maven leading the transaction and managing the project to create an income producing property to sell or manage, or (ii) investment property involving an existing property, where Maven aims to add value and generate returns through active asset management, including rent reviews, lease extensions, opportunities for possible changes of use, or refurbishment.

Maven appraises a large number of prospective investments, but expects to invest in only around four to six property projects each year, and only in circumstances where it is satisfied that the transaction meets the risk/return profile of its investor base, typically raising up to £15m pa from Investor Partners in supporting those transactions. Every aspect of a prospective property investment is subject to a rigorous due diligence and approval process, to ensure that downside risk is minimised and healthy risk adjusted returns can reasonably be expected. At an early stage in the process, Investor Partners will receive an Investment Memorandum setting out the opportunity, which includes a market and project analysis, a summary of due diligence findings, forecast returns and timing of exit.

Maven applies the same disciplined approach to property asset selection as for private equity. Each property investment will typically be:

Depending on circumstances, property transactions are generally structured with Maven clients providing equity, alongside senior bank debt at a level of 50% to 65% loan to value. The aim is to generate a return in the range 1.3x to 1.8x the initial investment on development projects, and/or an IRR of not less than 15%, over a target holding period of two to four years (investment property projects may forecast a longer holding period, depending on the characteristics of the investment). Returns are likely to be crystallised from a sale of the property, although funds may also be released through refinancing or cash flow generated by the investment.

In each case Maven is the general partner (GP) or designated member of an investment partnership (a limited partnership vehicle) which owns the property. Maven as GP has overall responsibility for day to day management of the partnership, attending monthly meetings and project managing the underlying investment.

The expertise that Maven can access means that it has the capability to act as an asset manager on behalf of third party investors. This offering has grown in recent years to nine property management investments being or having been managed on behalf of investors, at the time of writing. Please refer to Appendix 5 for further information about this.

Furthermore, at the time of this report, three different investors have used Maven as an asset manager, with an additional investment in March 2019, which has not been included in the analysis. The principal client is based in Asia.

Risk management is a critical facet of Maven’s approach and is backed up by many years’ experience in understanding and managing the risks involved in both private company and property investment.

Key risk management protocols in private equity strategies include a rigorous investment selection process, a policy of investing only in well established companies with proven management teams and maintaining close involvement with investee companies post investment. Further downside protection is achieved through the use of a substantial element of secured loan notes in structuring private company investments. This generalist approach allows each client investor to build a multi sector and geographically diverse portfolio of holdings.

Property investments are also subject to a structured investment selection process, with Maven investing only in high quality UK opportunities located where there is an identifiable local market demand, and the likelihood of either a development gain or the ability to add value through active asset management.

Bill Nixon, Managing Partner: Bill splits his time between the Glasgow and London offices, and has responsibility for all aspects of the Maven business, including strategy, new investment activity and client management. At Aberdeen Asset Management (Aberdeen), Bill was head of growth capital and in the mid 1990s was head of the private equity team at National Australia Bank. With almost 40 years’ experience in banking, corporate finance and fund management, he is one of the most experienced smaller company private equity practitioners in the UK. Bill chairs the Maven Investment Committee.

Andrew Craig, Partner: Andrew joined Aberdeen in 2004, having previously been with Bank of Scotland corporate banking in Edinburgh where he was an associate director of integrated finance, working primarily on UK mid market buy outs. Prior to joining Bank of Scotland in 1999 he worked in business and corporate banking at Clydesdale Bank for ten years.

Andrew Ferguson, Partner: Andrew splits his time between the Birmingham and London offices and is responsible for new investments in the Midlands and southern England. He joined Aberdeen in 2003, having previously had co responsibility for the European operations of Freedom International, a Canadian investment company. Prior to that, he worked for CIBC in its investment bank, structuring debt and derivative packages to fund its European investment portfolio.

Stella Panu, Partner: Stella is based in London and is responsible for new unlisted investments, as well as Maven’s AIM portfolio. She joined Aberdeen in 2005, following three years as a corporate finance executive at London broker Seymour Pierce, where she advised companies listing on AIM and managed a VCT. She has also worked for PwC, The World Bank and the Raiffeisen Investment Fund.

David Milroy, Partner: David is responsible for new private equity investments in Scotland and supporting a number of Maven portfolio companies, and joined Aberdeen in 2007. He started his career as a scientist with GlaxoSmithKline then was a clinical pharmacist before moving into international consultancy with Deutsche Bank, followed by fund management roles in the life sciences and technology sectors.

Ewan MacKinnon, Partner: Ewan is responsible for sourcing and executing new private equity investments in the north east of Scotland, as well as energy services investments across the UK. Ewan joined Maven in 2009 having previously worked for Johnston Carmichael where he spent three years in the corporate finance team. Previously Ewan worked in industry, latterly as managing director of a multi store retail chain, before leading the disposal to a FTSE listed business.

Andrew Whiteley, Partner: Andrew is responsible for transacting property investments across the UK, principally in the south east of England. Andrew joined in 2013 to help develop Maven’s property investment business, having previously been co head of property at Hotbed, responsible for sourcing, structuring and executing property transactions as well as asset managing the existing portfolio. He started his career at Credit Suisse Asset Management, before moving to Jupiter Asset Management and then New Star Asset Management where he helped run its £2bn flagship UK commercial property fund.

Colin Anderson, Partner: Colin is responsible for transacting property investments and managing complex construction based development projects. Colin joined Maven in 2014 to help grow the property investment business, having spent over 10 years with the Royal Bank of Scotland, where he established and led the Corporate Development & Property Finance team for Aberdeen & North of Scotland region. Prior to RBS he worked with Ernst & Young in Glasgow and New Zealand in audit, transaction services and corporate recovery.

Suzanne Lupton, Partner: Suzanne has responsibility for administering the Maven Investor Partner business and provides general business support to the Maven team, including in areas such as investor relations and compliance. Suzanne joined Maven in August 2010 from Bank of Scotland Private Banking where she was responsible for managing a portfolio of high net worth clients. She has worked in financial services for 23 years.

Julie Glenny, Investment Director: Julie is responsible for transacting private equity investments across Scotland, as well as portfolio management activities post investment. She joined Maven in 2011 from Bank of Scotland, where she was a Director of Corporate Banking and held a number of SME transaction related roles.

Ryan Bevington, Investment Director: Ryan is responsible for new private equity investments across the north of England and sits on the board of a number of portfolio companies. He joined Aberdeen in 2007 having previously worked for the corporate finance private equity team of PricewaterhouseCoopers in Manchester.

Melanie Goward, Investment Director: Melanie is responsible for transacting new early stage and technology private equity investments across the South and South West of England and Wales. She joined Maven in 2016 from Finance Wales, where she was part of the technology ventures team and fund manager for the Wales Technology Seed Fund, providing funding to help businesses commercialise and bring to market innovative products and services across a range of sectors. Prior to this she worked as an investment director with Nesta Investments focusing on early stage healthcare investments, as well as in technology sector finance at Lloyds TSB Corporate, providing debt finance to high growth companies.

Michael Vassallo, Investment Director: Based in our Newcastle office, Michael is responsible for new investments across the North East of England and manages the North East Development Capital Fund and Finance Durham Fund. He joined Maven in March 2017 having previously worked for FW Capital in Newcastle where he spent five years in its SME investment team leading transactions across the North East. Previously, Michael worked at Brewin Dolphin in Newcastle and London where he spent over eight years in the investment banking team working as an associate director on a range of listed company fund raises.

Tom Purkis, Investment Director: Tom is based in Maven’s Birmingham and London offices and is responsible for sourcing and executing new private equity investments across the Midlands and the south of England. Tom joined the team in 2015 from Grant Thornton where he was an associate director in the M&A team in London. At Grant Thornton Tom advised on a wide range of private and public company transactions for both private equity and corporate clients. Prior to this Tom started his career in Business Restructuring before moving into Transaction Services.

Ramsay Duff, Investment Director: Ramsay helped to establish Maven’s property team after joining in 2011 following the acquisition of his previous business, HM Corporate Solutions, which he ran in partnership with Glasgow based commercial law firm Harper Macleod. Previously he worked with ING Barings and Charterhouse Securities in Edinburgh.

Richard Elliott, Investment Director: Richard is responsible for property investments with experience of raising and structuring debt packages. He was previously responsible for sourcing and executing new private equity investments and supporting companies in the Maven portfolio, and moved into Maven’s property team in early 2016. He joined Maven in 2011 from Bank of Scotland, where he worked in the joint ventures equity team, managing a portfolio of investments across the UK real estate sector.

Paul Johnston, Investment Director: Paul is responsible for managing property investments, as well as investor and developer relationships, and has a detailed knowledge of the UK hotel sector. Paul joined Maven in early 2016, after 12 years as a partner and director with The Hamilton Portfolio group, a diverse investment and advisory company based in Glasgow, before establishing his own advisory business, Bowmont Capital Partners. He has also been a director of a number of public and private companies, and previously worked with Ernst & Young.

These investments are intended for professional clients and eligible counterparties1 only. Investments will be subject to all of the general risks associated with investing in unquoted or private companies, and in property transactions.

An investment directly into an unquoted or private company, or into commercial property, carries a higher degree of risk than many other forms of investment and may be difficult to realise. Such investments are only suitable for investors who are able to evaluate and understand the risks and merits of such investment and have the resources to bear any loss that may result from such investments. Investors should be prepared to reduce this risk by building a diversified portfolio.

As shares in private companies are not publicly traded, they may be difficult to realise and investors are liable to be locked into such investments for a number of years. Investor Partners can only transact and exit on the same terms, and at the same time, as Maven. The same applies to property holdings where it is normally not possible to sell an individual share in a property investment partnership.

Investments in private companies are inherently difficult to value, with the primary value realised at time of exit. Maven values private equity investments in accordance with the International Private Equity and Venture Capital Valuation guidelines. Property developments can also be difficult to value until completion. Where necessary, investments will be valued in accordance with the Royal Institution of Chartered Surveyors (RICS) valuation standards.

Past performance is not a guide to future performance. Reliance on this information may expose the investor to a significant risk of losing any property or assets invested.

Since inception to December 2018, Maven has sourced, invested and realised 22 private equity investments. On this portfolio a 2.9x multiple of cost has been achieved and an IRR of 29.5%. During the same period, 34 private equity investments have been made, which have yet to be realised. As at December 2018, these unrealised investments have generated a 1.2x multiple of cost and a 5.8% internal rate of return.

Based on the data supplied by Maven, we have analysed the performance of these investments, which are listed in Appendix 1: Performance analysis of Maven’s initiated and realised private equity investments and Appendix 2: Performance analysis of Maven’s initiated and unrealised private equity investments. These show that Maven has achieved an impressive IRR in most cases, with a positive IRR shown by 21 of 22 (95%) realised new private equity investments and 18 of 34 (53%) of unrealised investments. This reflects Maven’s focus on investing predominantly in well established companies with proven management teams, as opposed to investment in seed capital/start up stage companies where greater returns are possible but the investment is subject to a higher risk of failure.

Maven has continued to build on its expertise and has made further investments, which are not included in the appendices, within the private equity and property markets. This demonstrates its ability to participate in suitable opportunities. Its further investments include:

Private equity

Investor Partners invested alongside the Maven UK Regional Buyout Fund, which led the MBO of CMS Window Systems, making Maven’s largest equity investment to date. CMS is a leading end to end provider of premium window and door solutions.

Property

The overall average multiple of cost was 2.9x and the average IRR of private equity investments initiated and realised by the Maven team from inception to December 2018 was 29.5% (see Appendix 1). Of the 22 realised investments analysed, 10 achieved an average multiple of cost of more than 2.9x. Exhibit 1 illustrates the range of returns achieved by Maven on realised investments up to December 2018.

There have been three recent exits from the Investor Partner portfolio. In October 2018 Maven exited from its investment in Castlegate 737 (Cursor Controls), a developer and manufacturer of human machine interface devices for some of the world's most demanding environments. The sale realised a 2.64x multiple of cost and an IRR of 37% for Investor Partners in just over three years.

Maven Investor Partners exited its investment in Indigo Telecom Group in December 2018 generating a return of 4.23x on the original cost. Maven led the management buyout of Indigo Telecom in 2016 and during the term of its investment supported the business with the strategic acquisition of Belcom247 in September 2017, together forming the enlarged Indigo-Belcom Group.

There was a profitable exit from Incremental Group, delivering a 3.15x return for investors and an IRR of 96%. Maven’s Investor Partner network invested in the business in 2016; since then Incremental has grown significantly. Incremental is a market leading digital technology services business, employing 125 people across five sites in Glasgow, London, Manchester, Inverurie and Northwich.

There have been 34 private equity investments made since inception that remain unrealised. At December 2018, these have generated an overall an average multiple of cost of 1.2x (see Appendix 2) and an average IRR of 5.8%. Seven unrealised investments are still valued on a cost basis, as they are at an early stage, versus the completed investment to divestment cycle for those investments that have been realised.

In addition, for unrealised investments a 15% liquidity discount is factored into the valuation when this is shown on an earnings basis. On exit, there is often a premium achieved on this conservative discounted valuation, as well as the receipt of any redemption premium (a pre determined amount payable on final repayment of the loan stock, and typically representing up to 30% of the amount of the loan). Of the 33 investments that are unrealised, 13 are valued on an earnings basis and, of these, 10 are showing a positive IRR. Provision against cost has been made in respect of nine holdings.

Exhibit 2 illustrates the performance at December 2018 on unrealised investments made by Maven since inception.

Since the inception of Investor Partners, there has been participation in 56 private equity transactions between 2007 and December 2018. This track record, summarised in Exhibit 3, demonstrates a healthy return on both realised and unrealised investments, with overall performance to December 2018 recording an average MoC of 2.9x and 1.2x respectively. Readers should note that these performance data have been calculated before payments to Maven for annual and performance related fees under the co-investment agreement.

IRR (internal rate of return) is an annualised compound percentage return, which is calculated by time weighting the amounts received (income and capital) plus, where unrealised, the current valuation in relation to all amounts paid to acquire the investment. The overall realised and unrealised portfolio averages (as shown in Appendices 1 to 4 and in Exhibit 3) have been calculated as if all transactions were one investment.

MoC (multiple of cost) is a straight calculation of total value (= income + proceeds + unrealised value) divided by total cost. An MoC of 1 equates to no gain/loss on the investment, whereas an MoC of 2 equates to a 100% gain in comparison to total cost. This metric is not time-weighted.

Maven has a team of eight senior executives covering the UK property market who have extensive experience of completing transactions across a range of sub sectors. This report aims to provide some analysis of those investments.

Maven targets a typical holding period of two to four years, with each property investment structured to generate attractive returns, typically offering a development gain element or the potential to add value through active asset management.

The first co investment property investment was made in 2013, with four profitable exits for Investor Partners achieved to date. It should be noted that property investments tend to be held for less time than private equity investments. They are asset backed which helps to reduce risk but the shorter holding investment periods usually results in these investments generating lower returns.

The Maven property team has completed 27 investments at time of publication, of which 18 have been accessible to Investor Partners, in locations throughout the UK. These cover a wide geographical spread and comprise development projects involving hotels, student accommodation and commercial offices, land and planning, as well as an investment in a portfolio of office accommodation. Maven has also completed nine investments in the capacity of asset manager on behalf of a third party overseas investor, which are excluded from this analysis.

The summary below, and tables at Appendices 3 and 4, list the realised and unrealised investments made by Maven’s property team since 2013. Of the 18 investments made by Maven for Investor Partners to date, four have been realised, as shown in Appendix 3: New property investments (realised).

The overall average multiple of cost was 1.77x for the four property investments realised by Maven and the weighted average IRR achieved was 26.25%. The IRR is higher than would be ordinarily be anticipated, due to the investment in 333 Bath Street being exited within one year. Transactions are structured with the aim of achieving an IRR of greater than 15% at the point of exit.

There have been four exits within the property portfolio (see Appendix 3) which could be accessed by Investor Partners. Two of these exits have been since the end of March 2016. During October 2018 Maven Property sold Marketgait Apartments, a 116 bed purpose built student accommodation development in Dundee. The asset was sold for £9.5m generating a return of 2.37x for Maven Investor Partners in just over three years. Maven purchased the property for £1.55m in April 2015 and, following a comprehensive £5m internal refurbishment, Marketgait Apartments opened for the start of the 2016/17 academic year. It should be noted that Marketgait Apartments used to be called Courthouse Apartments.

In the same month, Maven Property completed the £14.5m sale of Hotel Indigo Glasgow, a 4 star, 94 bedroom hotel and restaurant in the centre of the city, generating a return of 1.93x for investors The structure of the transaction included the sale of the Freehold (in Scotland ‘Heritable’) interest in the hotel to a Ground Rent Fund and of the resultant long leasehold interest to Heeton, which acquired the trading business of the hotel. There has been little precedent in structuring hotel sales in this way, but Maven’s significant experience of hotel development funding structures has enabled it to split these two interests in the hotel and drive additional value for its investors.

We have listed the unrealised investments (as at December 2018) in Appendix 4: New property investments (unrealised), based on the data supplied by Maven. In total, 14 of the 18 property investments for Investor Partners are either completed or they are BPRA investments requiring longer investment.

As returns are not currently in the public domain for any of the unrealised investments, it is not possible to show meaningful IRR or multiples of cost. This reflects the relatively short holding period of the unrealised property portfolio. It should be noted that Maven will typically value property investments at cost until such time as full realisation proceeds are able to be disclosed. Carrying values may be prudent as a consequence of this approach.

The main criteria and details included in the agreement between the Investor Partner and Maven are:

The Investor Partner must be, and remain eligible as, a professional client or eligible counterparty as defined by FCA Rules (see footnote on page 9). An Investor Partner is required to inform Maven if they cease to meet either of those criteria.

Opportunities to invest in later stage private companies with a value of up to £30m pre investment: private equity investment opportunities are primarily in companies with an enterprise value of up to £30m (few of Maven’s transactions have an EV in excess of this). Maven will provide its fully researched Investment Committee paper, or equivalent report, to Investor Partners when an opportunity is offered. Maven has full discretion to decide not to proceed with any investment.

Opportunities to invest in property transactions with a gross development value of up to £15m: for property investment, the transactions will typically be in assets with a gross development value of up to £15m, including an equity commitment of up to £6m by Maven clients. Similarly to private equity, Maven will provide a fully researched investment paper to Investor Partners, and Maven has full discretion to decide not to proceed with any investment.

Investment unit size – typically £25,000 to £500,000 per investee: the amount of investment made by an Investor Partner in any one transaction (i.e. in any one investee entity) is typically between £25,000 and £500,000. Subject to shareholder preemption rights, the Investor Partner is entitled to participate in follow on investments in any of their portfolio companies on a pro rata basis with Maven. Each transaction is made through subscription to units in a limited partnership, which is managed and operated by Maven as general partner (GP). Each Investor Partner is provided with a half yearly investment report, which contains details of each of their holdings.

Fees payable to Maven: in respect of a private equity transaction, Investor Partners pay to Maven a general partner profit share (GPPS) of 1.75% pa on the amount invested, which can be offset against any ongoing income distributions as detailed below.

For property investments, Maven charges an ongoing management fee to the property investment partnership (in respect of regular strategic and asset management activities); no fees are charged directly to Investor Partners as they are reflected in the overall capital return.

Income from investments: income generated from the loan stock element of private equity investments is distributed half yearly to the Investor Partner and is paid net of Maven’s GPPS for the respective period. For property investments, any surplus income generated within the property investment partnership may be available for distribution on a semi annual basis.

Disposal or return of capital: each Investor Partner is required to dispose of the whole or the same proportionate part of its investment in any one investee entity on the same terms and at the same time as Maven.

Maven is entitled to 20% of the profit on return of capital: to ensure that the investment team is incentivised to optimise investor returns, Maven, as the GP, is typically entitled to 20% of the excess over cost on an investment (the “carried interest” at exit) on any return of capital. This is calculated as the total receipts less the aggregate amount invested in that investment. This structure ensures that there is an alignment of interests with the underlying Investor Partners.