What is the period of the investment?
It is envisaged that across our portfolio of properties that they will be held for a 5 to 7 year period. We will also have negotiated a full cycle of lease renewals thereby allowing for rent increases & improvements in tenants’ covenants.
What returns are projected?
Our projections are based on a combination of rent increases & exit yield compression. Full details on these returns are contained within each offering document.
These returns are not guaranteed and the value of your investment may fall as well as rise.
What will generate commercial returns in Germany?
- Our buildings are purchased at a competitive price.
- In all cases we seek stability of rent roll and fully tenanted buildings.
- Rent increases – our projections are based on a typical total rent increase of 10% over 5 years (i.e. less than 2% pa compounded).
- Repayment of capital – because we target buildings with strong net rental surpluses this allows us to repay 3% (on average) of the bank loan amount each year without further contribution by investors. This in turn increases investor equity over a five year period.
- Macroeconomic conditions – there is a widespread view that Germany is at the early stages of a sustained economic recovery & that the full effects of the recovery period will have manifested themselves in the property market within the 5 to 7 years we foresee as the life of this investment.
How do I hold my share in the German syndicates?
You will acquire a shareholding in a Germany GmbH, a newly formed German limited company wholly owned by the Investors and Promoters. These shares will be held by an Irish nominee company on your behalf. The German GmbH will have contracted to purchase the property and borrow from the bank.
The relationship between the Investors, and the Investors & Promoters will be governed by a Shareholders Agreement which will deal with such matters as management of the syndicate, voting on key decisions, exit arrangements etc. The property may be sold and the syndicate wound up at any time within the next seven years with the agreement of the investors. However the syndicate cannot be prolonged beyond seven years without the unanimous agreement of all investors.
Upon payment of total investor funds you will sign up to the Shareholders Agreement via a Nominee Agreement. This will ensure that each investor’s identity is kept confidential from other investors.
What is the tax position for the German syndicates?
The German company is the owner of the asset and it will pay German taxes on any net taxable rents each year. The shareholders will have no annual tax filing requirements in Ireland or Germany unless the German GmbH pays a dividend which is not anticipated.
Then on exit, there are two possibilities:
1) The German company will be sold with the property therein i.e. you will sell your shareholding. This is the preferred option and would result in nil German tax and 20% capital gains tax for the investor on the share proceeds in Ireland
Or
2) The property will be sold by German company & then will be wound up to distribute the proceeds to investors. This would result in a combination of German tax and Irish capital gains tax of approx 34% on the proceeds ( assuming no German trade tax applies ).
Option 2 should be accompanied by a higher sales price as it would be more tax efficient for the next purchaser who would therefore pay a higher price. This would mitigate some or all of the additional taxes.
Who manages our German investments?
As an investor you will be concerned that both the management of the property & the management of the investment are fully dealt with on your behalf, in genuine turn-key hands off investment solution.
Property Management:
The property will be actively managed by Property Solutions GmbH, a separate property management company owned by our German partner Jens Caspar whose company manages a large portfolio of commercial & residential properties, primarily in the greater Stuttgart area. In addition to using an experienced team to provide the normal services related to rent & service charge collection, building management etc, Jens takes an active role himself in building relationships with the tenants and in planning and implementing a program of maintenance and improvement within each property to improve future value.
Investment Management:
Smerwick Management, a sister company of Youngfields, managed by Finbarr Flahive and Ciaran Desmond will manage the administration of the syndicate which includes co-ordinating all accounting, legal & tax compliance, liaising with the property managers, and reporting formally at least twice yearly to investors.
What are the main risks with German Syndicated investment?
We categorise our German Syndication offering as a low to medium risk. We make no representations as to the future performance of the investment, & there is no assurance given that the investment will achieve the target levels of return.
The risks are detailed within each investment memorandum, addressing the following specific areas:
- Target Returns
- Liquidity Risk
- Tax risks
What are the general terms of German commercial leases?
Leases are generally for maximum 5 year periods, which is common in multi-tenanted commercial properties in Germany. In many cases the tenants have options to renew thereafter. Lessees need to give 6 to 12 months notice generally if they wish to vacate at the end of a lease.
Are the buildings in good condition?
YOCP carry out extensive due diligence on each property which includes engaging an engineer. These reports are made available to the investors on request.