The UK government has taken an equity stake in fast-growing real estate investment platform Shojin through the conversion of a pandemic-era loan facilitated by the Future Fund scheme.
The government-backed Future Fund was launched by the British Business Bank in 2020 to support emerging businesses during the Covid-19 pandemic. It matched new private investors on a pound-for-pound basis – up to £5 million – and, according to the Fund agreement, if a business raised more than the initial funding through subsequent financing, the debt and interest automatically converted to equity.
In December 2020, the British Business Bank via the Future Fund invested £860,000 into Shojin which was matched by individual investors as part of a £1.7m funding round. In return Shojin issued a convertible loan note to investors, including the Future Fund, with interest accruing at 8% per annum.
As Shojin has secured additional capital, the Future Fund converted its initial investment into equity, allowing investors to convert to shares at a 20% discount to the lowest subsequent sales price. The Fund also converted interest due from its investment at a 10% discount to the prevailing share price at the time of conversion, resulting in the government taking a 5.16% equity stake in Shojin this past month.
“Shojin has grown significantly in the past few years with the share price increasing from £500 to £1,029 per share,” said Noil Porter, chief financial officer at Shojin.
“We forecast a 5x to 8x growth in the next few years, so this has been, and will continue to be, a very good investment for the Future Fund. Their investment will grow along with other shareholders.
“The funding has helped significantly because it came as debt and allowed us to navigate through the challenges of the pandemic. The government has benefited from a 57% increase in its share value over 36 months.
“This is a real success story for Shojin, our investors and the UK government. We are delighted to be adding significant growth in value to all our investors including the UK government.”