Micro-apartment project in Germany

1
Digitisation
of property purchase
process
2
Main idea digitisation of property purchase
process
Classic model
of property
acquisition
Buying property as a finance
instrument
A turn-key, all-in-one solution
1. Doing a research 2. Making an enquiry 3. Going
on a property location tour 4. Meeting lawyers
and tax advisors 5. Choosing the property 6.
Reserving the property 7. Signing the
agreement 8. Waiting for the ownership record

to be placed on the land
register
1. Opening the website 2. Purchasing a share in a
fund (1 share equals 1
apartment)
1. Less time spending 2. Less fees (no asset
transfer tax, no legal
fees)
3
Idea application

• Construction of micro-apartment complex in
  Germany
• Sale of units as shares of a fund to foreigners.

Initial conditions

• High micro-apartment liquidity on a 20-year
  horizon.
• 75 LTV (usually unavailable to foreign private
  investors).
• 1015 higher price than the market price.
• Higher yields in comparison to similar properties
  on the market.

• Core investors and Tranio enter the project via
  the SPV.
• The SPV obtains bank financing with low (1.5)
  interest rate and high (75) LTV.
• Foreign unit ownership is structured via SPV
  shares.
• Each SPV stock is associated with a particular
  unit.

Structuring
General thoughts

• Project budget 5 million of equity capital
  15 million of bank loan.
• The number of units under construction is 200.
• Our investor is expected to proceed with 100
  million equity in 1 year time.

Competence distribution

• Tranio gathers core investors, finds end buyers
  and manages all the communication with them.
• A German developer is in charge of property
  construction and asset management.

4
Risks
1. Bank 2. Fund 3. End clients do not buy the product 4. Exit liquidity for the end client
Obtaining a loan for the SPV on favorable terms The end client KYC and its costs The loss of control in the SPV (the end clients stocks are non-voting, which means no control is lost) Can we do the project without creation a fund? If it is a fund anyway, what are the costs to set it up and manage the operations? What restrictions would be imposed on us and the investors? What jurisdiction would we have to create the fund in? If strategically we meet the definition of a fund, we would like to design an initial scenario that would not require creating a fund at once (or with less participants, lower project costs, etc.) for the future investors to understand the scheme and become convinced that it works, after which we could attract more investors to more expensive projects. This project has a big potential upside of reselling units to foreigners at a high margin due to favorable loans, unavailable on the open market, and a small downside, as even in the case of realisation delay or end client absence, core investors obtain assets that are reliable and liquid on a long-term horizon. The client may exchange the stock for a particular unit with an additional payment equal to the volume of financing The SPV undertakes to "quickly" buy it out at a 10-20 discount on the effective market price The SPV undertakes to assist in reselling his/her stock to other investors
5
Whats next scenario

1. Working out a legal solution
2. Obtaining prior consent of a German bank
3. Negotiating the purchase of micro-apartments from
   an experienced German developer on a forward deal
   (-10 of the market price) or participating as
   an equity investor in a joint
   construction project (-15 of the market)
4. Negotiating the terms on which the management
   company (I-Live) is going to manage the building
   once it is commissioned and how the Management
   Company Bank Investor End Client relations
   are to be managed
5. Initiating the construction and (off-plan) share
   resale

6
Contracts to be designed to regulate project
relations

1. Investors Tranio (in the SPV)
2. Developer SPV
3. SPV end clients design an End Buyer Agreement
   implicating the conveyance of rights for units to
   them without the management
   company losing control over the SPV jointly with
   the bank

7
Top priority tasks
Designing an optimal legal solution a scenario
for the realization of a such a project and its
costs Identifying risks Holding negotiations with
developers Discussing the scenario with the
German bank
8
Contacts
44 20 3608 1267
Ekaterina Raznikova Partner Relations
Manager Tranio.com 7 985 187 59 29 Skype
liveraznikova
George Kachmazov Managing Partner Tranio.com 7
985 231 63 28 Skype solovey915