Update: two profitable realisations in a month for Wealth Club investors – MBO and property deals

In the last three years, Wealth Club investors have invested almost £3 million in four MBOs (management buyouts) and £4.7 million across nine property deals. 

In the space of a month, two of these investments – both arranged by Seneca Partners – have been realised and have returned capital and profit back to investors.

Past performance is not a guide to the future. These are high-risk and illiquid investments – you could lose all the capital you invest.

August 2022 saw the £10 million sale of a purpose-built property fully let to Tesco, delivering c.20% profit in less than two years. It is, in our view, not easy to secure a successful exit in these uncertain times.

Also in August, the first MBO backed by Wealth Club members – specialist textile wholesaler Whyte & Ivory – was successfully refinanced following record sales growth. Wealth Club investors’ loan notes were repaid in full with interest. Investors retain their equity interest in the company, so could potentially realise further profits on exit – not guaranteed.

More detail on each of these deals is below.

Property deal – c.20% profit in less than two years

This deal, arranged by Seneca Property in September 2020, was to buy a 4-acre supermarket and car park in Immingham, Lincolnshire. The site was entirely let to Tesco under a 25-year inflation-protected lease.

Seneca had completed the £8.25 million off-market transaction in early April 2020, negotiating a purchase price well below estimated market value.

At the point of investment, Seneca was aiming to give investors 10% of their capital back every year and sell the property in year five, aiming to deliver a capital profit at that point.

Less than two years later, however, in August 2022, the property was sold for over £10 million. Expectations are that this sale will result in returns of 1.2x net of all fees, which is well ahead of the timings presented in the original business plan.

Thus, an investment in September 2020 would have generated 10% capital repayments in 2021 and 2022 to date and a c.120% realised return for investors in August 2022. Source: Wealth Club. Past performance is not a guide to the future.

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MBO deal – capital repaid plus potential for further equity upside

Leicestershire-based Whyte & Ivory is a leading wholesaler of textiles and supplier of curtain linings and fabrics to international brands and retailers, covering the home and contract sectors.

In 2019, Wealth Club investors participated in the MBO deal led and arranged by the private equity arm of Seneca Partners. The funding was intended to help the founders expand the team and the company’s global customer base. Investors’ subscriptions comprised secured loan notes targeting a yield of 10% p.a. plus 30% equity interest.

In 2022, Whyte & Ivory achieved record £10 million revenue, with growth both in the UK business – which also exports to the EU – and the US business, through subsidiary Whyte & Ivory LLC, based in North Carolina. Indeed, in the last three years, US sales grew 650%.

In August 2022, the investment was successfully refinanced. The loan notes were repaid in full with interest. Investors still retain their equity interest in the company, so could potentially realise further profits on exit – not guaranteed.

Thus, an investment in 2019 would have generated annual interest of 10% in 2020, 2021 and 2022 to date, with full repayment of the loan and interest in August 2022 with equity still invested. Source: Wealth Club, August 2022. Past performance is not a guide to the future.

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