June 05, 2007 12:30am
Adult Firm Launch Hedge Fund
Source: AdultVest, Inc.
by: Suzy Kenly, Alternative Investor
Beverly Hills-based AdultVest, a firm that seeks to match adult entertainment businesses with qualified investors, is preparing to launch a hedge fund in the next 45 days.
The fund will be originating real estate loans to aid adult entertainment clubs' expansion plains in the U.S. And Canada. Founder Francis Koenig expects loans to range from $500,000 to $10 million.
"Many of these clubs are not able to obtain financing [for real estate] through banks because banks won't lend to adult-used properties," said Koenig. With over 3,700 gentleman's clubs in the U.S. And Canada , Koenig sees enormous profit opportunity. These banks and firms may be hesitant to put "dirt on their sleeve" and are "missing tons and tons of profit" he said.
Koenig shrugged off any negative impact the fund might have on his personal or professional reputation. "We have an opportunity to capitalize on a market that's been ignored," he said. "One of the reasons people have shied away is because things are done in a bootstrap manner [.] if they were done at a classier level, it would change people's perception."
The fund offers returns based on the amount invested. For yields of Libor plus 5%, the investment minimum is $5 million, for Libor plus 4% the investment minimum is $1 million, Libor plus 3% required $100,000, Libor plus 2%, $25,000. The fund will not charge fees.
If the club owner defaults, AdultVest can foreclose on property and buy the club itself. By lending 50% of the properties' value, the loans are very low leverage. "[it] makes it [a] highly secured asset," Koenig said.
In addition to the hedge fund, AdultVest manages two private equity strategies launched last year. Prior to forming AdultVest in September 2005, Koenig founded Koenig Venture Partners, a hedge fund incubator and seeder. He started his work with hedge funds early---as a researcher at his father's hedge fund firm New World Partners when he was 14.
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