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

Rental Yields – Minimum 8%

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 Germany 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.