Investmentanalysis as of 31.05.2021

Multitalent III AG – Solid and Excellent (E2021)

The now well-established investment concept is currently experiencing a maturity stage that offers investors stability and reliability. The history to date has been positive; the investment concept has proven itself so far, even against the current market environment. The corporate group is on a solid footing and the existing portfolio is convincing.

The offerer

Multitalent III AG, Liechtenstein, was founded at the beginning of 2021 as part of the Vivat Group, which was established in 2012. The sole shareholder is the director Waldemar Hartung, who is also the person with overall responsibility and shareholder of all companies of the Vivat Multitalent Group. The second director is Gerd Jelenik, lawyer and Managing Director of CSC AG, whose registered office also serves as the office address for Multitalent III AG. The physical gold is also stored via CSC AG.

By its own account, the Vivat Group has issued investment products and bonds since 2012. The issues have so far proceeded without any problems and according to plan. Around € 8.5 million in interest was paid out in 2020 (cumulative € and CHF; previous year: € 5.7 million).

With 883 new contracts (a total of 4,392), total revenues increased by around € 52 million to € 185.5 million. The capital inflow amounted to € 45.2 million, the outflows (interest and capital) increased as planned to a total of € 12.2 million.

On the basis of the present balance sheets, the corporate group can be described as very solid with strong growth.

Owing to the liquidity now available and the very strong international sales, the corporate group has established itself in the German project development market. According to the project list, the accounts of the Vivat Group showed a balance of € 43.5 million at the end of 2020. 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. The Vivat Group is currently the only offerer I know of on the market with a range of products sold in Germany, Switzerland, Austria, France, Belgium, Italy, Latvia, Estonia, Lithuania, Finland 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 a person of integrity and conscientious in every specific issue within the scope of the analysis and beyond. Third parties, some of whom have known Waldemar Hartung for decades, also attest to his impeccable reputation without exception. Hartung is the person in overall charge of this concept, thus an exclusively positive reputation 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.

Strenghths – The offerer is active throughout Europe and extremely sales-driven; the corporate group is on a sound financial footing. The existing portfolio testifies to the quality of the offerer’s work.

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 (around 5 %) is held in physical gold. Gold serves purely as a hedge. An increase in value is not forecast, which makes perfect sense. In addition, the current mood of political and economic crisis 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 is stored in Liechtenstein. The current value is around € 3 million with an upward trend.

The real estate projects consist of conventional new-build projects and refurbishment measures. The greatest profit potential lies in this first step of the value chain. The Vivat Group invests in two areas: Some projects are implemented completely independently. The range of each project volume has widened further: According to plans, it is between € 125,000 and € 6 million. This 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.

In other projects, the Vivat Group acts as a co-investor alongside other investors, some of which are institutional. Here, the ticket size can currently be up to € 10 million (planned). 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 € 187.8 million (previous year: 82.4 million) are forecast for the 38 (previous year: 24) projects shown in the “Activity Report 2020”. The invested equity capital amounted to € 82.4 million (previous year: € 44.15 million); some outside capital was also raised. 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. € 24.5 million in returns had been generated up to the time of analysis.

The (partial) returns on 9 completed or partially completed projects invested in between 2014 and 2017 are higher than the initial investment in 7 cases. 2 projects – a golf hotel on the island of Rügen and Hotel Schloß Breitenfeld, Leipzig – have not yet generated their investment. Schloss Breitenfeld is held in the company’s portfolio and is currently not up for sale, while construction is currently due to start on the golf hotel.

5 of the 6 investments from 2018 have generated pro rata returns (between 10.4 % and 126 %). The investment strategy is therefore largely progressing according to plan.

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 4 years. The project profit flows to the corporate group after sale of the property. 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 48 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 III AG’s investment strategy. The overall risk is improved thanks to diversification via investments (and investment shares) currently up to € 10 million (planned). At the same time, 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 III 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 III AG, has demonstrated over the last 7 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 increasingly bearing fruit in the form of bigger tickets for attractive large-scale investments. As always, concept quality proves its worth in the implementation (and in times of crisis). If the current figures are taken as a basis, the investment concept has proven to be successful to date. The extensive planned additional revenues from the individual projects provide for substantial reserves, which sufficiently secure the present issues.

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

Strenghths – 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. Lucrative existing portfolio.

The concept

The investor puts his money in Multitalent III 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. Since the Vivat Group has been active on the market since 2012, the corporate risk is offset to a significant extent. The initial systemic over-indebtedness of the offerer is also of a purely formal nature when set against the value of the existing real estate portfolio.

The total costs are high at 18 %; the sales commission payments are a significant cost factor at 13 %. 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 6 % and 8 % p. a. (quarterly pro rata payments). Partial withdrawal is not possible during the term.

It is highly probable that the calculation of the rate of return will be successful if the capital is invested in short-term real estate projects. Experience has shown that the high rate of return at the beginning of the value chain (usually well over 20 % p. a. with the appropriate project quality) allows the high interest rate and the initial costs to be generated. Correspondingly high-quality projects have already been secured, as can be seen from the available project documents. 2 project cycles are mathematically possible with the 5-year fixed term of the bond. The present issue starts with a volume of € 60 million, which should be easily realisable due to the very strong sales across Europe.

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

Strenghths – 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 possible during the term of the bond. Diversification over a large number of individual projects reduces the overall investment risk. Lucrative existing portfolio.

The target group

A diversified investment portfolio consisting of various holding sizes, property types, maturity levels and chances of profit should convince investors who are looking for a conventional property developer with a primary focus on German real estate. The overall investment risk of the concept has been significantly offset thanks to risk diversification via numerous individual investments with different terms in different regions of Germany. The investment concept has been tried and tested in the meantime and is holding its own against the current (selective) difficulties. The overall investment risk is good thanks to the high return volume and the revenue potential of the current investments. The pronounced key personnel risk has to be seen in relative terms against the investment portfolio of the corporate group.

All things considered

I think the “Solid (E2021)” and “Excellent (E2021)” offers of Multitalent III AG, Liechtenstein, are very good. The person who has sole responsibility has so far proven his integrity and reliability. The corporate group has reached its maturity phase, and the investment strategy is proving its worth even in highly segmented market environments. In my opinion, the offers merit a rating of “very good” (A-).