The German Real Estate Bond will provide a fixed annual income of 6.5% to investors for a three-year investment period. The capital raised from the bond will all be allocated into German residential real estate at a maximum of 75% loan to value, based upon the current market value. Security will be held against the real estate assets in the form of a first charge.

The product is listed on both the Frankfurt and Zurich stock exchanges and is a freely transferable investment paying interest gross and can be held as a direct investment.  It is eligible for investments by SIPPs, SSAS, ISAs and Offshore Bonds. Repayment of principle and interest are made without deduction of tax. The bonds will be listed and are eligible assets under the Eligible Assets Directive and are transferable securities under UCITS rules. Although designed to be held to maturity, the bonds are available to be traded at any time throughout the term.

•   ISIN Number: GB00BYP78K91
•   SEDOL: BYP78K9 Frankfurt / BYP78N2 Zurich
•   Currency: EUR
•   Issue Size: EUR 100m
•   Target Market: German Residential Real Estate
•   Status Senior Secured Debt under English Law
•   Coupon: 6.5% p.a paid half yearly
•   Term: 3 year investment term
•   Listing: Frankfurt and Zurich
•   Eligibility: SIPP, SSAS, ISA, UCITS
•   Issue Date: 27th June 2017
•   Clearing and Settlement: Crest, Euroclear, Clearstream
•   Sponsor: Shenton International Limited
•   Issuer:
Shenton Finance plc
•   Arranger:
Bedford Row Capital Advisers
•   Security Trustee:
GRM Law Trustees
•   Website: www.shentoninternational.com

DE-resi-graph-combinedGermany is one of the most powerful countries in the EU.  It has a robust economy that has enjoyed steady growth for decades. In 2016, Germany overtook the UK to become the fastest growing G7 economy with an increase in GDP of 1.9%. The rise of GDP was driven by high consumer spending and this strong economic performance has helped Germany to achieve a record budget surplus of EUR 23.7 billion in 2017.

The German residential market has been very stable in its growth over many decades and has avoided boom and bust cycles with controlled lending on assets alongside adequate security and deposits.  Historically there has been a culture of landlords and tenants, however home ownership and therefore demand for additional supply of real estate is increasing every year.  This demand is not only coming from private German residents, but also from an increase in migrants, refugees and institutional money all driving demand in what is a restricted supply sector.

It is an investment sector which remains a good choice for risk-averse investors. Scarcely any other property market worldwide offers such high liquidity combined with such low volatility. Many independent reports point to the demand for residential property to remain high for the foreseeable future. From a private investor perspective it is driven by a stable economy for earnings and a low interest rate environment, whereas institutional investors are drawn to the historical safe haven of the ‘power-house’ economy of Europe.

From 2009 to 2016, real estate prices in Germany rose by 63% in the top tier cities (A Cities) and by more than 40% in the lower tier, B & C cities. There is an estimated requirement for at least 350,000 new homes in the top tier cities alone, where the metropolitan lifestyle has become increasingly attractive to students and young professionals. This is causing a wider gap between the current supply and increasing demand.

Below represents the track record of Shenton in Germany:

record-table

map

Investment security is one of the key elements of this investment product. All funds are initially received by the Issuer. Before the Issuer can send any funds to the developers they must receive authorisation from the Investment Committee of the Company to confirm that the investments comply with the investment mandate and that adequate security is in place.

Shenton has created a defined investment mandate for this product.

  • Lending will only take place if suitable security is provided
  • The Issuer will take first charge on assets which are independently valued with a maximum loan to value of 75%
  • The Issuer may take other assets owned by the developer as security rather than the project the investment is made into
  • In the event that the developer defaults on the secured loan, the Issuer has the ability to seize control of the asset and liquidate it to provide loan repayment

The procedure for establishing investment security includes the following provisions:

  • The Issuer will prepare all necessary documentation required for the secured loan according to the requirements of the local laws in place.
  • The Issuer will ensure a true transfer of assets and allow for the security over such assets to be perfected according to local laws including, but not limited to: a. property land registry certificate; and b. property land tax certificate.
  • The Issuer will pay all taxes and fees required under local law including, but not limited to:
    • notary fees;
    • stamp duty;
    • acquisition tax;
    • registration fees.
  • The Issuer will ensure that a director (or a proxy) attends in order to sign:
    • the public deed of purchase and sale;
    • the applicable income agreement.
  • The Issuer shall arrange for the registration of the asset and the issue of the Land Registry Certificate confirming ownership.