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Do I also pursue charitable purposes with an investment?

If charitable purposes is understood as the altruistic donation of funds without receiving anything in return, for example the construction of a well in a rural community, then we are not pursuing charitable purposes. However, 5 – 10 % of the investment funds are available for investments that particularly serve the common good. Insofar, we are basing our calculations on yield expectations that at least correspond to the European yield level. Here too, asset preservation has highest priority.

Apart from this, we believe that we are also making a positive contribution to society through all of our investments. Within the framework of investments, we obtain services from various service providers. In this way, we provide work locally for the following professional groups in particular: architects, engineers, designers, construction workers, craftsmen, intermediaries, evaluators and property managers. We thus also insofar make a positive contribution to the people in Rwanda & Tanzania.

Does the corona crisis endanger my investment?

In December 2019, the respiratory disease COVID-19 was first detected in the Chinese city of Wuhan. From there the virus spread throughout the world. In Rwanda & Tanzania the virus was first detected in March 2020. The Rwandan government decided on various measures to counteract the further spread of the virus. In particular, it ordered the temporary closure of certain shops, schools and universities and travel restrictions (so-called lockdowns). The Tanzanian government’s measures were somewhat less comprehensive, in particular no general business closures were ordered.

The International Monetary Fund (IMF) expects growth rates of only +3.5 % for Rwanda and +2.0 % for Tanzania for the year 2020 (as of May 2020). In contrast, global growth will fall by -3.0 % and German growth by -7.0 %. This illustrates the high economic stability of Rwanda & Tanzania. With an investment in ‘MLC Properties East Africa’, portfolio risks can thus be effectively limited.

 

Source: IMF, May 2020

 

Does the locust infestation endanger my investment?

Heavy rainfall at the end of 2019 led to good breeding conditions for the desert locust (schistocerca gregaria). Since the beginning of 2020, flocks of this locust species have been migrating over the northern part of East Africa, among other places, and have posed major challenges for local food production. In Africa, according to FAO, the countries Ethiopia, Djibouti, Eritrea, Kenya and Somalia are severely affected. Less affected are the countries Sudan, South Sudan and Uganda.

Due to different climatic and soil conditions, Rwanda has not been affected by locust swarms at all and Tanzania has been minimally affected. For this reason we assume that the current locust infestation in the northern part of East Africa will not have a negative impact on agricultural production in Rwanda & Tanzania. Accordingly, we do not anticipate economic burden on these economies.

Further information can be found on the website of the Food and Agriculture Organization of the United Nations (FAO): http://www.fao.org/ag/locusts/en/info/info/index.html

 

Source: Food and Agriculture Organization of the United Nations (FAO), 2020

Are preconnected property transactions possible?

Preconnected property transactions are situations, where a real estate fund does not acquire land or properties from the open market, but from a company or person who is associated with the management company, in particular another group company, a shareholder or manager or a close relative. Preconnected property transactions involve a very high risk of conflict of interest that can lead to a situation, where the fund does not acquire the land or property for a fair market value.

In our view, preconnected property transactions are hardly or not compatible with the principles of a fair fund management due to conflicts of interests connected therewith. For this reason, for ›MLC Properties East Africa‹, we have ensured that no such transactions take place. The management acquires rights in land only from independent sellers and is endeavoured to achieve best possible results.

Are there debt capital risks?

The Issuer, MLC Properties East Africa GmbH & Co. KG, and the property companies, MLC Properties Rwanda SPV GmbH & Co. KG and MLC Properties Tanzania SPV GmbH & Co. KG, only use equity capital. There are no debt capital risks.

Why do I participate indirectly via a fiduciary company?

The Issuer is a German limited partnership. Investors do not participate in the Issuer directly as limited partners, but indirectly as trustor via MLC Properties Treuhand GmbH, business adress: Gartenstr. 27, 61352 Bad Homburg v. d. Höhe, Germany. Due to the fiduciary agreement between the investor and the fiduciary company, the latter hold the the investor’s limited partnership interest in its own name and is registered as limited partner in the commercial register. However, the fiduciary company holds the limited partnership interest for the account and on behalf of the investor. Thereby, the investor becomes economically and also for tax reasons the beneficial owner of the limited partnership interest.

The interposition of the fiduciary company is customary for German closed-end funds. Reasons therefore are the reduction of administration costs due to fewer notifications to the commercial register and the protection of the investors’ personal data. Limited partners are to be registered in the publicly available commercial register.

The legal position of an indirectly participating investor is nearly identical to that of a direct limited partner. There are, in particular, corresponding rights against the Issuer to payout profits and co-determination rights via participating in partners’ meetings.

When and how do I receive my money back?

The issuer will make semi-anual distributions after closure of the subscription phase (until December 2021 the longest). Distributions will be made on each 15th of June and December. The issuer makes its distributions from its cashflow it receives from its business, i.e. from rental income out of Rwanda & Tanzania.

It is intended to sell properties step by step from 2026 onwards. The realised capital will be paid back to the investors, unless the investors decide in a shareholders’ resolution that these funds shall be reinvested fully or in part.

A full winding up of the investment and a corresponding payout of the capital to the investors shall take place until the end of 2030.

Is there a foreign exchange risk?

A foreign exchange risk occurs, as far as the exchange rate of a foreign currency affects the value of an asset. The foreign exchange risk realises, if the price of a foreign currency develops negatively in relation to the own local currency. In particular, the risk comes into effect, if money or receivables denominate in a foreign currency.

In Rwanda & Tanzania, real estate transactions are predominantly made and construction works and commercial rents are predominantly paid in US dollar (USD). Furthermore, payments are made in Rwanda franc (RWF) and Tanzania shilling (TZS). For the purpose of minimising risks, the issuer and the property companies keep their foreign currency holdings as low as possible. As far as payments are received in a foreign currency, the money exchanged in euros timely.

Insofar as the issuer holds liquid funds as liquidity reserve, this is made in the the form of euro bank deposits. For the purpose of the avoidance or reduction of negative interests, the issuer is also entitled to hold short-term public bonds that are denominated in euro.

However, the major part of the assets is held by the object companies in the form of real estate. In general, the value of real estate is determined by the prospected income thereof for a certain period. If the income of a property is earned in, e.g., Rwanda franc (RWF), the exchange rate for EUR/RWF is relevant. A deterioation of the exchange rate, however, does not automatically lead to a loss of the property’s value. In general, exchange rate effects are counterbalanced by inflation effects, as it is shown for Rwanda & Tanzania in the following charts. Typically, inflation leads to a corresponding nominal appreciation of real assets and corresponding higher rental income.

 

Source: Finanzen.net, 2020

 

Source: Finanzen.net, 2020

 

Average change of exchange rates against the euro (2010-2019)

EUR/RWF2.6 % p.a.
EUR/TZS3.3 % p.a.
EUR/USD-2.2 % p.a.
Average inflation (2010-2019)

Germany1,3 %
Rwanda3,8 %
Tanzania7,3 %
USA1,8 %

 

See also the information on the exchange rate risk in the prospectus.