Maximise your German Real Estate Investment
Share in Germanyâ€™s No.1 Residential Property Portfolio Potsdamer Platz
“ Why should you put all your
money into one property, when you can invest in the whole city?
Our idea is very simple.... Propfund Germany is taking advantage of global economic conditions by acquiring tenanted residential property at record low-prices. We are inviting approximately 200 individual investors to share in the returns of approximately 500 properties, benefiting from economies of scale through buying property portfolios in Berlin and neighbouring cities. Mainstream and institutional funds are restricted in terms of the minimum size of portfolio they can acquire and are often unable to move quickly on some off-market opportunities; Propfund Germany has put together a more tailored fund that can source and quickly acquire smaller high yielding portfolios delivering greater value to its investors. Either through a SIPP or as a cash investor, there is an opportunity to share in a highly profitable self-financing portfolio of up to 500 properties worth over €30,000,000. An investment spread across so many different properties minimises investor exposure to the performance of an individual property thus significantly reducing the overall risk. An investment into Propfund Germany starts from €15,000. Returns from the fund will be paid to investors each year as an annual dividend payment. As a shareholder in Propfund Germany you will benefit from a forecasted dividend of 7-10% per year. Over a period of 10 years, investors can expect to earn up to 170% return over and above their initial investment. This return is quite simply achieved through the renting out and resale of the properties within the portfolio.
Fund Strategy The already successful strategy is based upon acquiring off-market small to medium sized residential portfolios of, on average, 30 properties in one building. Propfund Germany is governed by strict acquisition criteria, each portfolio has to be approved by more than 50% of the investors before it can be acquired. The properties that are acquired are always of high build quality with no renovation requirements. Before a portfolio can be presented to investors that portfolio must deliver rental yields of above 8% and the occupancy has to be a minimum of 80%. Properties are valued as a multiple of the annual rental yield, typically on the open market an investor would purchase a similar individual property for more than 16 times the rental yield, Propfund Germany only acquires property if the price is below 12.5 times the rental yield. This strategy ensures strong rental performance from the outset and in-built discount of at least 30% for its investors. Propfund Germany are raising approximately €10,000,000 from investors with a further €20,000,000 borrowed from a German bank on pre-approved and fixed terms. The interest rate of the mortgage is fixed, meaning there is no fluctuation throughout the term of the investment, and capital repayments will be made throughout that term reducing the overall borrowing. At no point will investors will be liable for this mortgage debt as these loans are on a ‘non-recourse’ basis to investors. Propfund Germany will manage the property portfolios for a period of 10 years, focusing on increasing the rental income and value of the portfolios. Upon reaching the 10 year exit point the intention of the fund is to sell all the properties either individually or as small portfolios, pay off the balance of the mortgage loans and distribute the profits between the investors. Propfund Germany shares in the profits at the end of the term and so are fully aligned with investor interests.
Share in a Prime Berlin Portfolio • • • •
Residential apartment blocks Over 500 units worth over €30 million 8% rental yields - minimum Low Purchase price: 12.5 times the annual rent • No renovation required • All buildings tenanted • Immediate income generating portfolios
Features of the Investment • Invest via SIPP or as a private investor • Invest from €15,000 in a tailor-made Property Fund • German Federal Financial Authority regulated– BaFin • Portfolio includes prime residential properties: Minimum 8% rental yields • €10m Private equity & min of €20m bank financing. • Trustee structure in place for investor safety
Why Invest in Propfund Germany? • Maximising German real estate investment returns • Returns paid to investors yearly – forecast 7% to 10% per annum • Investors can expect to earn 170% ROI over 10 years. • Safe and secure investment
Who can invest? • • • • •
Individuals making cash investments Individuals via SIPP Limited companies Offshore trust funds/companies Investment syndicates
“ Berlin - A City of Tenants
84% of all properties are rented
A very different residential market to the UK Unlike the British, the German population are not infatuated with home ownership; in fact Germany has the highest proportion of rented property in Europe averaging 57.4%, in Berlin this leaps to an average of 84%, nearly three times the average in the UK. Furthermore the German market is characterised by long rental terms of typically 10-15 years compared with less than 3 years in the UK. Berlin is currently seeing a net increase of residents with many governmental and large corporations relocating staff there from other German cities; this influx is driving rental demand and rents upwards.
A Population of Tenants Tenancy Rates in Europe
Rental Yields are Rising Berlin is one of the fastest growing capital cities in Europe, however it still has one of the lowest prices for rental, averaging @5.71 per square metre. Already attracting substantial inward investment, the rents in Berlin are widely expected to increase significantly over the next 10 years. Bringing Berlin more in line with the rest of Germany, this alignment in the market signifies a real buying opportunity with strong fundamentals supporting the rise in rental yields.
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Germany - Rental Index (Monthly Euro/sq.m)
Property ownership & valuation Much of Germany’s rented property is owned in portfolios by large institutional investors and pension funds and as such it rarely comes onto the open market for sale. However, Propfund is able to acquire these off-market portfolios from these institutions at below market value through the long standing relationships they have established in this sector. The method of valuing a property in Germany is dictated by a multiple of the rental yield. This compares favourably to the British marketplace, where demand for a property very much dictates the valuation. By purchasing portfolios of properties, Propfund Germany are able to negotiate and acquire these properties at a much lower price than if they were buying individual properties, creating buying-power and value for its investors.
“ With Propfund I can
spread my investment across hundreds of properties in Berlin
Fund Acquisition Criteria Propfund Germany 1 will acquire over 500 properties in prime locations in Berlin and neighbouring cities. The acquisition team have very strict criteria when sourcing properties for their residential property fund. In order to generate a minimum of 170% return on equity for their investors, only high yielding properties will be purchased into the fund. Prime Residential Buildings - Fund Criteria
High rental income
Low purchase prices
Up to 90% ltv
Rental Yields – Minimum 8% Only blocks of apartments generating a minimum of an 8% rental yield at the time of purchase will be acquired into the fund. This ensures the fund only acquires high income portfolios with a proven tenancy track record. Purchase Prices – Maximum 12.5 times the annual rent Institutional investors will calculate the purchase price of a property as a multiple of the rental yield. This means German property prices are generally much lower than other cities in Europe. Propfund will pay a maximum of 12.5 times the annual rent which is known as the “purchase factor”. By applying this low purchase factor, investors can be assured that all the properties in Propfund have been purchased at the lowest possible price ensuring maximum potential for capital appreciation.
Occupancy – Min 80% rented at time of purchase Propfund does not acquire development sites or projects in need of renovation. They only acquire apartments blocks which are already 80% occupied with tenants, avoiding the risk of vacancy rates or additional capital investment for renovations. All tenant contracts are reviewed prior to purchase ensuring that the monthly rental income is secure and will continue to generate a minimum of an 8% rental yield. Bank Financing – Up to 90% LTV This portfolio will be financed from €10,000,000 in private equity and a minimum of €20,000,000 in bank financing. Banks value property based on a multiple of the rental income. Because Propfund is committed to purchasing only very highyielding property we have agreed preferential bank financing terms with leading German financial institutions. Specific terms include: • 30 year term – capital and interest repayments • Interest fixed for 10 years (term of the fund) • Non-recourse to shareholders • Up to 90% loan to value Profit on Equity – Minimum 7% Each building in the fund will generate a minimum cash surplus of between 7% – 10% pa. This will ensure that the fund pays annual dividends to shareholders as outlined in our forecasts. Cash surplus is calculated by deducting all the annual expenses for the mortgage, property management and maintenance and the cost of managing the fund from the rental income. Due to the high income that the portfolio generates from the rental income each year, there will always be a cash surplus which will be distributed to shareholders as a percentage of the equity they invested.
Investment Portfolio Propfund Germany only buys high yielding property at well below market value, as can be seen by the portfolios that have already been identified or acquired below. All properties entering the fund must be built, tenanted and require no renovations to generate an immediate return for the investors. Each portfolio has to be presented to and approved by more than 50% of the investors before it can be purchased. Propfund Germany’s acquisition team has very strict criteria when sourcing suitable portfolios, this ensures the fund can maintain its forecasted annual dividend payment and achieve its return on investment at the end of the term. Acquired Properties
73 units Centre Portfolio Brandenburg
19 units Mariendorfer Damm Berlin Acquired
€2,700,000 (Factor 9.31)
Current Rental Income:
Equity from Propfund:
Yield on Equity:
€1,450,000 (Factor 10.28)
Current Rental Income:
Equity from Propfund:
Yield on Equity:
Current Portfolio Performance
Units Acquired to date Portfolio value Rental Occupancy
92 Units €4,150,000 97%
Average Rental Yield 10.23% Equity from Propfund (19%) €780,748 Annual Profit forecast 10.13%
Properties Approved for Acquisition
6 units Bahnhofstrasse Berlin (Pankow) Acquisition Approved
48 Units Beusselstrasse - Berlin (Charlottenburg) Acquisition Approved
€460,000 (Factor 11.44)
Current Rental Income:
Equity from Propfund:
Yield on Equity:
€1,675,000 (Factor 11.22)
Current Rental Income:
Equity from Propfund:
Yield on Equity:
Return on Investment Fuelled by a growing German economy, low unemployment, GDP growth in 2010 of 3.6% and rising rents in Berlin, we can confidently predict and substantiate excellent returns for our investors.
ROI Forecast based on €15,000 investment over 10 years
An illustration of investment levels and projected returns for Propfund Germany are set out below.
Creating wealth for shareholders
Earn an average dividend of €1,050 per year for 10 years. (Assumes 7% per annum)
PLUS €15,000 lump sum after 10 years
PLUS your initial investment back.
That’s a total of €40,500!
See examples below.
Proceeds Combined ROI from Sale
An illustration of Propfund investment levels and projected returns are set out below:
Total Annual Payments (70%) (Assumes 7% per annum)
€10,500 (€1,050 pa)
Profit from the property sales (100%)
Total profit over 10 years (170%)
(€2,100 pa) (€3,500 pa) (€7,000 pa) (€17,500 pa)
(Excluding initial equity)
Total returns over 11 years (270%) (Including initial equity)
Explanatory notes for illustration above:
Investing through your SIPP
• Equity invested: Invest from €15,000
You can choose to invest in Propfund Germany via a SIPP or as a private investor. Propfund Germany has been accepted by multiple SIPP providers including: • Pointon York • Lifetime SIPP • Guardian Pension Consultants
• Montpelier • Rowanmoor
• Investment period: 10 years. Early exit options available. • Total Annual Payments (70%): Cash surplus generated each year from the rental income, assumes 10 years at 7% per annum. • Profit in year 10 (100%): Proceeds from the sale of the portfolio in year 11 will be returned to the investors. Estimated profit – 100% of the initial equity invested.
“ Grow your SIPP
investment by 170% over the next 10 years
• Total profit over 10 years (170%): Combined profit including annual dividend (70%) and the proceeds from the sale of the portfolio (100%). • Total returns over 10 years (270%): Combined profit including initial equity invested in the fund.
Why Germany? Germany is Europe’s leading economic ‘engine’ with the 3rd largest economy in the world. Boasting a population of over 82 million, Germany is the largest country in the European Union with a labour force of almost 39 million – including over 4 million entrepreneurs. The economy is characterised by small and medium sized enterprises which make up 85% of all companies. As a result, the economy is particularly flexible, varied and competitive with a gross domestic product of €2.2 trillion.
Berlin - A Hub for International Corporations
Germany is also home to many large, international companies having either regional or global dominance in the automotive, aerospace, logistics, pharmaceutical and chemical industries. International business continues to be attracted by Germany’s excellent infrastructure, transport links, robust legal framework, favourable tax structures and flexible workforce. German companies also lead the field in advancing the development of IT, nanotechnology, optoelectronics, medical equipment, renewable energies and biotechnology.
Why the Eurix Group?
Since its foundation in 1996, EURIX has emerged as one of the market leaders in Real Estate, Property Management & Lettings in Berlin. The group is made up of experienced multi-lingual staff, each of them bringing expertise in the areas of property acquisition and investment, property and asset management, lettings, renovations, finance and insurance. The Group currently manages over 1000 properties in Berlin worth over €65 million and is a trusted advisor and valuer to some of the largest US Property Funds in Germany. The group is also the preferred supplier to Germany’s largest network of financial advisors – ASG & Formaxx. Fully regulated by BaFin – the German Financial Regulator, Eurix is also a member of Germany’s Real Estate Association – IVD.
Customer security, service and convenience Regulation: Propfund Germany has been vetted, approved and is regulated by the German Financial Regulator (BaFin) and we have committed ourselves to the highest levels of industry regulation.
Customer Care Staff: An English-speaking dedicated customer care division is available to liaise on all matters with its foreign investors.
Trustee: Propfund Germany has put an internationally recognised trustee structure in place for its foreign investors, this ensures complete transparency and access to information and paperwork on request from its English-speaking staff.
Options and conditions for early exit:
Prospectus: A 64 page detailed investment prospectus has been prepared identifying how the fund is operated and managed on behalf of its investors. Research: An intensive 18 months of research and planning was conducted prior to launching Propfund Germany.
• Propfund Germany should be viewed as a 10 year investment in order to achieve the best possible returns for its investors. • Investors are able to transfer ownership of their shares at any point to another individual at an agreed price, subject to completion of the appropriate paperwork and notifying the fund manager. • Investors are able to sell their shares to Propfund Germany when funds are available, the most recent share valuation, less a transfer fee of no more than 10%, will be used as a price guide.
• Invest in a portfolio of tenanted buildings in Berlin and neighbouring cities at heavily discounted prices • 170% ROI forecast over the 10 year term of the investment • Investors receive a return of between 7% - 10% each year • Invest from just €15,000 • Capital appreciation returned to investors once fund portfolio is sold at end of 10 year period • Fully managed fund with English-speaking trustee structure in place • Propfund fully regulated by the German Financial Regulator (BaFin)
Getting Started The process for joining the fund is very straightforward. Please follow the steps below and if you have any questions, don’t hesitate to contact your Adviser who can guide you through the process.
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Read a copy of the investment prospectus. Decide the amount you would like to invest. Complete the Investment Instruction and return this to your advisor. The Trustee signs the necessary documents and returns copies of these to the investor. Once you have received the documents you need to transfer the funds to the Propfund bank account. Receipt of funds is first confirmed by email. Once the 14 days “cooling” off period has expired, conformation of funds along with a share certificate is sent to you by post, this completes the investment process.
Disclaimer: This information serves only as an announcement of the closed property fund Propfund Germany limited company and is NOT a public offer according to German law, § 9 (VerkProspG) for a sales prospectus. This document has been produced from known data and information and is accurate to the best of our knowledge. Any decision to invest should be made only after careful consideration of the investment prospectus which was published on the 4th of December 2008.
Propfund Germany 1, GmbH & Co. KG, Breite Straße 39b, D - 13187 Berlin