Music Fans Can Now Invest in Struggling UK Venues Via New Fund – Billboard

LONDON – Concertgoers are being offered the chance to become investors in a number of small grassroots music venues in the United Kingdom, providing a much-needed lifeline to the struggling sector.

The initiative is being run by U.K. charity Music Venue Trust (MVT), which launched what it calls a “world first” investment fund May 23 to raise capital from music fans that will then be used to buy out commercial landlords, effectively transferring ownership to the trust and local patrons.

The trust has identified nine grassroots venues in U.K. towns and cities that it intends to purchase this year, including the 200-capacity The Ferret in Preston and Glasgow’s 120-capacity Glad Café.

MVT says it needs to raise £3.5 million ($4.4 million) to purchase all nine venues, which also include sites in Derby, Newport and Hull, and cover associated costs. It plans to raise that cash through the sale of shares in a member-owned Music Venue Properties fund, targeted at music fans wishing to own a stake in their local music venue as well as what the trust terms “ethical investors.”

Share options begin at £200 ($250) and top out £100,000 ($125,000). Investors under the age of 25 can buy single shares at a discounted rate of £100 ($125). Organizers say investors will receive 3% annual interest, generated through rent returns and more efficient running of the businesses.

Venues purchased by the Music Venue Properties fund will be leased back to the current operators at a reduced rate, says the trust, providing venue managers with greater certainty about their future and the ability to plan ahead. The trust says it will also provide assistance with maintenance, insurance and repairs.

Rent will be set at around 6.5% of a venue’s capital value, meaning that an operator would pay around £65,000 ($80,000) per annum for a property valued at £1 million ($1.2 million). In contrast, many venue operators currently pay between 9% and 14% of a property’s capital value, equivalent to between £90,000 ($112,000) and £140,000 ($175,000) for a property valued at £1 million ($1.2 million), according to MVT.

“The issue of ownership of buildings underlies so many of the problems and challenges we face,” says Music Venue Trust CEO Mark Davyd. He calls the share program “a radical way to improve the economic model by taking the money that’s currently leaving the music eco-system and going out to private landlords, and instead investing it back into supporting venues and supporting artists.”

In the last 20 years, around 400 grassroots music venues have shuttered in the U.K., representing around 35% of the country’s total, according to the trust’s research. Notable closures in London include The Marquee, Astoria, 12 Bar Club and Madame Jojos, with many more small concert venues closing across the country in the same period, denying new and upcoming acts vital spaces to play and learn their craft.

Contributing factors include rising rents, high business taxes and the gentrification of surrounding areas leading to noise complaints and restrictive licensing conditions. The pandemic and accompanying shutdown of the live music industry further increased the pressure on already stretched venue owners and operators.

Davyd says in the past two years, the U.K. grassroots sector has acquired £90 million ($113 million) of new debt in the form of repayable government loans and outstanding payments owed to commercial landlords.

At present, more than 90% of the grassroots venues trading in the U.K. are owned by private landlords, with the average operator having around 18 months left on their tenancy agreement, says MVT. That means the majority of operators have little protection from the threat of future rent increases or the property being sold for redevelopment.

Unlike private investment funds or shares in a traditional company, the Music Venue Properties fund operates as a Charitable Community Benefit Society (CCBS) – a U.K.-specific charity enterprise whereby investors become member owners of the society/fund. Through purchasing shares, investors buy a stake in the legal entity that owns the music venue, with the Music Venue Trust acting as property landlord.

Shares are non-transferable and cannot be sold or traded with other investors – although investors will be able to withdraw from the trust after a period of five years and receive back their original investment plus any interest accrued. Interest is paid out annually from year two onwards.

“It basically stops a huge corporate company from coming in, buying all the shares, and saying we own all these venues now,” says Davyd. “It keeps the venues in community hands.”

Music Venue Trust is in overall charge of the society and controls 75% of votes at general meetings, with the remainder cast by investor members. Music Venue Properties was registered with U.K. regulator the Financial Conduct Authority in July.

As with any investment scheme, there is an element of risk involved in buying community shares, which unlike bank deposits are not covered by the Financial Services Compensation Scheme. The warning “please don’t invest any money you can’t afford to lose” features on the “Own Our Venues” prospectus, aimed at investors.

Nevertheless, the potential rewards are “much greater than the risk,” says Peter Cornforth, a real estate investment executive with over 30 years’ experience, who sits on the Music Venue Properties board.

“The grassroots venues that are under threat are under threat because the property has a greater value to a landlord than its current use,” says Cornforth. “From a risk point of view, you’re investing in an established business that will be paying an affordable rent, so it will have a better chance of being sustainable. In that sense, the downsides are fairly limited. The upside is that this is a safe and secure way of getting a modest income and the bigger pleasure and pride in saying that I supported live music venues.”

In the event that a live music venue owned by the fund has to close, the trust will sell the property freehold and either return shares to investors or reinvest the money back into the grassroots live music industry, says Cornforth. The model is scalable, so the more money raised, the more venues the trust will purchase. All rental income received from venues will be reinvested towards the expansion of the property portfolio.

Less than 48 hours after the share issue launched, 91 investors had contributed $180,000 ($225,000) via the trust’s Crowdfunder page.

“We want to buy hundreds of these venues using the same principle,” says Davyd, calling the community share offer the “most radical change to the grass roots sector in decades.”

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