Investmentanalysis as of 20.08.2020

Multitalent II AG – VIVAT Solid and VIVAT Excellent

The Vivat Group continues to establish itself as a pan-European issuer of successful (indirect) real-estate investments. Its history to date has been positive, with the investment concept continually demonstrating its efficiency and profitability. The corporate group is now in excellent shape, and sufficient potential attractive target investments are available.

The offerer

Multitalent II AG, Liechtenstein, was founded at the beginning of 2020 as part of the Vivat Group, which was established in 2012. The sole shareholder is the chairman Waldemar Hartung, who is also the person with overall responsibility and shareholder of all companies of the Vivat Multitalent Group. The lawyer Gerd Jelenik is the vice-chairman. His company CSC AG serves as an office address for Multitalent II AG; it is also understood that the physical gold will be stored via CSC AG.

By its own account, the Vivat Group has issued investment products and bonds since 2012. The issues have proceeded without any problems so far, at least no complaints can be found in the relevant portals. Around € 5.7 million in interest were paid out in 2019.

2019 was the year with the highest sales in the company’s history. With 833 new clients (a total of 2,918) and 1,008 new contracts (a total of 3,510), total revenues increased by around € 50 million to € 134.7 million. Thanks to instalment savers, the capital inflow also almost doubled to around € 87.5 million. A steep growth curve becomes apparent if the balance sheets of recent years are taken as a basis. The Vivat Group has steered trough the usual initial period of weakness extremely well. Owing to the liquidity now available and the very strong sales force, the corporate group is increasingly becoming a very serious player in the German project development market. According to the project list, the accounts of the Vivat Group showed a balance of € 38.1 million at the end of 2019. The growing market weight of the corporate group can also be seen in the increasing ticket sizes of the respective individual investments.

Vivat Financial Services GmbH, Kempten, is responsible for sales across Europe. Karsten-Dairek Keune, who worked as a bank director for decades, is the general manager. He has an extensive and well-grounded network of contacts, which can also have a positive effect on the success of the present issue. The Vivat group is currently the only supplier I know of in the market with a range of products sold in Germany, Switzerland, Austria, France, Belgium, Italy, Latvia, Estonia, Lithuania, Finland, Hungary and Liechtenstein. The group is structured professionally; the integrated external partners are also top-notch, as can be seen from the project quality. I have personally known Waldemar Hartung since the end of 2016. To date, he has proven to be reliable and conscientious in every specific issue within the scope of the analysis and beyond. Third parties, some of whom have known Hartung for decades, also attest exclusively to an unblemished reputation. Since Hartung is the person in overall charge of this concept, exclusively positive experience of this kind is essential, even if it cannot be a guarantee for the future.

The offerer quickly responded in exemplary fashion to questions arising in connection with the analysis and supplied all the requisite supporting documents.

Weaknesses – Key personnel risk owing to sole decision-maker.

Strengths – The offerer is extremely sales-driven; the corporate group is now on a sound financial footing. The initial returns from individual investments testify to the work quality of the offerer.

The investment segments

It is understood that the net capital from the issue will primarily be invested in German real estate projects. A small part will be held in physical gold. In this respect, gold is used purely as a hedge; an increase in value is not forecast, which makes perfect sense. The partial investment in physical gold means that Multitalent II AG finds itself in the best of company together with a large number of prominent international asset managers. The usual level of investment in physical gold is up to 30 % here. In addition, the current mood of political and economic crises continues to make gold attractive as an investment which extends beyond the mere preservation of value. By its own account, the Vivat Group currently holds 60.6 kg of physical gold, which are stored in Liechtenstein. The current value is over € 3 million with an upward trend.

The real estate projects consist of conventional new-build projects and refurbishment measures. The greatest profit potential is provided in the first step of the value chain – if the developer knows his business. The Vivat Group invests in two areas: Some projects are implemented completely independently. The range of project volumes has widened further: It lies been between € 275,000 and € 7 million since 2019. This range is unusual because the intensity of project support is generally the same, irrespective of the volume. According to the offerer, there should be no shortage of potential investment projects; these would normally be implemented at the beginning or end of the respective year. The break due to the coronavirus caused an investment backlog, which would now be cleared.

In other projects, the Vivat Group acts as a co-investor alongside other investors, some of which are institutional. For example, an individual ticket of € 2.7 million was invested in a project in Magdeburg with a total volume of € 49 million. In my experience, such a co-investor strategy is unusual in this set-up, and for me it is a testimony to the excellent, well-established networks of the Vivat Group.

Total proceeds of € 82.4 million are forecast for the 24 projects shown in the “Activity Report 2019”. The invested equity capital amounted to € 44.15 million; outside capital was also raised to some extent. The outside capital ratio across all projects should be around 40 %. Some of the investments have been running since 2014 without a negative result so far.

The (partial) returns on 6 completely or partially completed projects (as of mid-2020) are higher than the initial investment in every case. The final accounting for the project is not submitted until the dissolution of the respective project company, which begins after completion of the respective property and can take up to 2 years. The project earnings accrue to the group after the property has been sold. The residual profit is disbursed after the project company has been dissolved.

Bank financing can be provided at project level. This is usual in real estate projects; thanks to the generally short project duration of a maximum of 36 months to completion, interim bank financing is a manageable risk for high-quality projects. According to the offerer, outside capital will mainly be used in the letting phase; the project financing provided by equity capital will be replaced by bank loans.

The resulting portfolio is a positive aspect of Multitalent II AG’s investment strategy. The overall risk is improved thanks to diversification via investments (and investment shares) up to € 7 million currently. At the same time, the comparatively small investments of around € 500,000 ensure a broadly diversified overall portfolio. The Vivat Group is flexible enough to include even small investments in the portfolio, which can be to the investor’s advantage if the project yield is attractive. A possible failure cannot infect the overall portfolio as long as the individual investments are made via legally independent project companies.

Since the loan subscribers have no rights of co-determination whatsoever, they must have complete trust in the expertise of the responsible people at Multitalent II AG during the term. Finding lucrative properties is an art, even in the current extremely positive investment environment. Waldemar Hartung, who has sole responsibility for Multitalent II AG, has demonstrated over the last 6 years that he can find such projects. A learning curve is also clearly visible in the increasing quality of the company’s own projects. The partnerships which have evolved over many years are also increasingly bearing fruit in the form of bigger tickets for attractive large-scale investments.

Weaknesses – Target investments are not evaluated for investors on a yearly basis by external experts.

Strengths – Offerer has extensive in-house expertise in the target real estate segment at its disposal. Target segment enables attractive returns with appropriate access and expertise for selection and implementation. Established partner structures enable access to highly attractive co-investments.

The concept

The subsriber invests his money in Multitalent II AG, Liechtenstein via a fixed-interest partial debenture (also referred to as a “bond”). The latter invests the capital directly in real estate projects or companies (and a small part in physical gold as a hedge). Since the loan is valued as outside capital, it would be treated on an equal footing with other outside capital in the event of enforcement. The issuer itself does not raise any further outside capital, so that the loan subscriber ranks first, alongside other investors. The capital seeker was only founded in 2020, which means that the corporate risk is high. Since the Vivat Group has been active on the market since 2012, the corporate risk is offset to a significant extent. Analysing the business environment and the market position of the offerer, one sees that the initial systemic over-indebtedness of the offerer is also of a purely formal nature

The total costs are high at 18 %; the sales commission payments are a significant cost factor at 15 %. However, the sales costs are spread over 5 years. This puts the costs into perspective, since they are covered by current income, and a higher net investment capital is available to begin with. The interest on the bond is between 6 % and 8 % p. a. (quarterly pro rata payments). Partial withdrawal is not possible during the term.

It is highly probable that the profitability calculation will be successful if the capital is invested in short-term real estate projects. Experience has shown that the returns at the beginning of the value chain are so high (normally well over 20 % p. a. with the respective project quality) that the high interest rate and the initial costs can be achieved. Vivat Group has existing access to attractive projects, as can be seen from the available project documentation. 2 project cycles are mathematically possible with the 5-year fixed term of the bond. This issue starts with a volume of € / CHF 60 million (the previous issue was launched with € / CHF 40 million). Since the Vivat Multitalent Group’s in-house highly professional sales force was able to raise more than € / CHF 60 million for the previous issue by mid-2020, I consider the placement and capitalisation risk to be comparatively low.

Weaknesses – Key personnel risk owing to sole decision-maker.

Strengths – Experienced offerer with a very strong sales force. Trustworthy decision-maker with integrity. Previous issues are proceeding without any problems. High interest yield which is in line with the opportunity / risk profile. Two project cycles are possible during the term of the bond. Diversification over a large number of individual projects reduces the overall investment risk. Excellent partner network enables de facto access to lucrative target investments, also in the € million range.

The target group

The overall investment risk of the concept has been significantly offset thanks to risk diversification via numerous individual investments with varying terms in different regions of Germany. The offerer is increasingly able to demonstrate sufficient expertise in the selection and management of adequate target investments. The concept with a high minimum investment with above-average interest rates and a pronounced key personnel risk makes the offers particularly attractive for experienced investors.

To sum up

All things considered, I think the “VIVAT Solid“ and “VIVAT Excellent” offers of Multitalent II AG, Liechtenstein, are very good. As far as I know, the person in charge has integrity and is reliable. The group is on a very stable financial footing today, and the investment strategy is proving to be very lucrative. In my opinion, the offers merit a rating of “very good” (1-).