The Landlord’s Pension have always been great advocates of individuals taking control of their own pension funds and investing these funds as they see fit, rather than leaving that decision to a fund manager or insurance company. We have helped over 1,000 people do just that and the decision that the large majority of our clients have taken is to invest their pension in property in one way, shape or form.
This can be achieved through establishing a SSAS (Small Self – Administered Scheme) pension which gives the member the control and flexibility over their investment choices and allows them to purchase commercial property, make a loan to their company to start or accelerate their property business and/or invest in property bonds, a completely hands-off property investment.
With regard to the latter, my colleagues and I were invited to undertake an inspection visit to Germany to get a better understanding of Dolphin Trust, who offer one such property bond into which we and our clients have invested for a number of years. On a personal note I had a vested interest in this visit as I myself have invested both my own pension funds and cash into these bonds.
Below are my notes and opinions from the inspection trip in Germany with Dolphin-Trust
We flew out to Hannover, where the Dolphin Trust head offices are situated, the purpose of the trip was to get an updated perspective on where Dolphin-Trust were at having now been in full operation for over 10 years. One thing that has always intrigued me was how Dolphin Trust had managed to scale their business so efficiently, moving from small developments to large scale developments in a relatively short period of time. From our offices in Oxfordshire we had received the updates on developments and headline figures which all demonstrated the significant growth in Dolphin Trust’s business. One figure that stuck in my mind prior to the visit was that they had now completed on sales of over 1.6Bn Euros worth of residential property in German. An incredible feat within a 10 year period.
First stop was Dolphin Trust head office in Hannover, we were to meet with founder and CEO Charles Smethurst and his team for a Q&A session prior to visiting recently acquired sites and those currently under development.
I was incredibly impressed by Charles Smethurst’s calm and methodical approach to property and development. His emphasis was clearly on managing risk on behalf of the investors which he sees as the lifeblood of the business and paramount to the companies success to date but also a large part of the future growth and success of the business.
It was hard not to be struck by the sheer size of the organisation, Dolphin Trust employ a team of 40+ full time accountants and have separate departments who are responsible for their particular area of expertise. It was also very reassuring to see the level of due-diligence that is conducted on any perspective purchase, again with protecting investors capital at the forefront of the decision making process.
For those reading this article who are new to the Dolphin Trust proposition here are the basics:
Firstly, let’s deal with what the investment entails.
Dolphin Trust raise funds through both cash from hedge funds, family offices and private investors and pension investments and are approved to deal with pension investments by numerous UK based SSAS pension providers and trustees.
The model for this investment is to purchase existing listed buildings from the German government at a tax incentivised discount before converting these buildings into luxury apartments. They sell these properties off plan to higher rate German tax payers who also receive a tax incentive for the purchase.
Currently these “loan notes” offer:
2 and 5 year term options
Income and growth options
First legal charge on the asset
Fixed returns of between 10% and 12% per annum
Dolphin Trust GmbH, dealing with over 1.6 billion euros in property transactions is Germany’s largest and most respected real estate developer, focusing on the renovation of listed buildings and holds the highest credit rating achievable.
We finished our meeting in Hannover with a Q&A session where we got the opportunity to ask some of the most common questions we hear from prospective investors, below you will find a summary of the session;
Q: Firstly, why use private funding instead of banks?
A: German banks don’t generally lend a high LTV therefore substantial private finance is still required, combined with the time that German banks take to approve a lending decision it is more sensible to raise the funds through private investors for the initial purchase and development. This also gives Dolphin the ability to offer the 1st legal charge to the private investor.
Q: Wil the tax incentives be removed?
A: The German government work on a 5 year budget plan so this is assured at each budget. Bearing in mind that the German governments long term strategy is to utilise the huge supply of dilapidated listed buildings at no cost to the exchequer it is highly likely that this arrangement will continue.
Q: What exactly is the 1st legal charge and has it ever been enforced?
A: The investors (lenders) have a legal charge on the property purchased using their funds registered with the German Land Registry held by an appointed independent trustee, the same as a mortgage lender would and there has never been a default in payment so this charge has never been enforced.
Q: Will I actually own German property?
A: No, the property is purely the security for the initial loan and promised interest. As a UK citizen you are able to buy German property but unlike the German higher rate tax payer who purchases the off – plan Dolphin properties there is no tax incentive for direct purchase.
Q: Finally, will the supply of listed buildings run out?
A: Currently there are 1.2 million listed buildings available under this scheme in Germany and the government has the ability to reclassify further buildings in the future and with the regeneration of such buildings all over Germany a high priority to the authorities concerned there is plenty of scope going forward.
With all of the technical and theoretical information concluded it was time to see how this was put into practice.
We travelled to a recently acquired development on the outskirts of Hannover.
As I mentioned previously I have spoken to many property investors who had put some or all of their cash or pension funds into this type of investment and as I myself had “put my money where my mouth was” it was very reassuring to see where these monies were actually invested and the huge potential offered by these projects.
The building itself had so much scope for development, not to mention the acres of land surrounding the monastery for new builds, all reinforced by the fact that, as with all of the Dolphin Trust projects already had planning agreed.
At The Landlord’s Pension we have many clients who have invested, been repaid in full with substantial gains and re-invested in this project.
If you would like to find out more about this opportunity you can call us on 02039078400.