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.

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“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.”

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