Fleur de Selent

There is a risk that the project owner does not attract enough solvent and willing members by the maturity date of the notes to pay the cooperative member contributions of EUR 1,125,000 required for repayment.

There is also a risk that the planned start of construction cannot be implemented according to plan, for example due to delays in the building permit, construction cost increases, rising financing interest rates for members, loss of development funding or regulatory changes. This could result in potential members not paying their contributions, or not paying them on time, which in turn could negatively affect or prevent the repayment of the notes or interest payments by the project owner to investors. If the project fails completely, only the undeveloped land can be realised as collateral; after deduction of costs, the realisation proceeds may be significantly below the nominal amount of the notes, meaning investors may suffer a partial or total loss.

The project owner belongs to the construction sector (according to the classification of Regulation (EC) No. 1893/2006, Section F).

Specific risks in this sector include negative macroeconomic changes, such as rising construction costs, interest rate increases and declining demand for cooperative housing, as well as political and regulatory changes (planning law, energy standards, cuts to development funding) that could adversely affect the market environment. These factors could impair the success of the project and, in particular, member acquisition.

A market-wide deterioration in financing conditions at lending banks may mean that potential members are unable to finance their cooperative contributions and that the funds required for repayment of the notes are not raised, or are only partially raised. Misjudgements in target-group communication or insufficient regional demand in the rural municipality of Selent may make member acquisition more difficult. A deterioration in local conditions (transport connections, infrastructure, demographic development) may adversely affect the attractiveness of the housing project and the willingness of potential members to pay. Negative economic effects may also arise if calculated future member contributions, net of costs, do not materialise at the planned level.

With this investment, investors are exposed to the insolvency risk of the project owner. The bondholders of the notes fully bear the risk of the project owner’s insolvency, i.e. the risk that the project owner is temporarily or permanently unable to meet its payment obligations to bondholders and/or third parties on time. In particular, bondholders could suffer a total loss in insolvency proceedings. The following specific events could contribute to this:

• serious changes in the macroeconomic environment,
• mismanagement,
• lack of experience,
• fraud,
• financing not aligned with the business purpose,
• unsuccessful launch of the project owner’s offering,
• insufficient cash flow.

Investors bear the risk that the collateral provided may not be realisable. In the event of insolvency of the collateral providers, this may lead to delayed payments, interest defaults or loss of the invested capital. Details of the agreed collateral and collateral providers can be found in Part D, point f) of this document.

There is a risk that the return may be lower than expected, delayed or absent entirely. Interest and repayment depend on the economic development and solvency of the project owner and may fail in whole or in part. Investors may therefore lose all or part of their invested capital. Inflation, exchange-rate fluctuations, costs and individual tax circumstances may additionally reduce the return.

There is a risk that the crowdfunding platform may be temporarily or permanently unavailable or may cease operations. In this case, communication as well as interest and repayment processes may be delayed. Investors’ contractual claims against the project owner remain unaffected; however, enforcing these claims may become more difficult. Since the crowdfunding service provider does not at any time take possession or ownership of investor funds and payment processing is handled through a payment service provider, a loss of invested capital solely due to a platform failure is unlikely.

The notes have a fixed term and are not subject to ordinary termination by investors during this term. A sale is only possible to a limited extent, as the transfer is technically limited to registered digital vaults. The register-keeping entity of the electronic securities register is Smart Registry GmbH, registered in the commercial register of the Local Court of Charlottenburg (Berlin) under registration number HRB 234468 B. The digital vaults are IT applications that enable the safekeeping and transfer of electronic securities. There is currently no stock-exchange trading or liquid secondary market for the notes. Even if the notes are included in trading at a later stage, it is uncertain whether a functioning market will develop. Investors may therefore be forced to hold the notes until the end of the term and bear the risk of not finding a buyer or only being able to sell the investment at a financial loss. The notes may prove to be completely illiquid.

There are also the following securities-related risks:

• No influence or participation rights: The notes themselves only establish contractual claims against the project owner and do not grant participation, co-determination or voting rights in or at the project owner’s shareholders’ meeting. Shareholder resolutions may be adopted at the project owner’s shareholders’ meeting that could adversely affect individual bondholders. Bondholders have no ability to influence the project owner’s business activities. This also applies to the use of the capital raised through the issuance of the notes. In particular, bondholders cannot stop loss-making business activities of the project owner before the contributed capital has been used up. For bondholders, this may lead to a total loss of the invested capital.
• Deterioration of terms by majority resolution: Under the issue terms, these may also be amended during the term of the notes if the required approvals are obtained through corresponding majority resolutions of the bondholders. Each individual bondholder therefore bears the risk that, against their will, amendments to the issue terms may arise as a result of a majority resolution of the bondholders, potentially to their disadvantage (e.g. lower interest, extended term or waivers).
• Technology and database risks: The technology and all related technological components and regulated services (e.g. digital custody, electronic securities register management) are still at an early stage of technical development. Bondholders face the risk that this technology may experience technical difficulties or that its functionality may be impaired by external influences. A partial or complete collapse of the electronic decentralised database relevant to the electronic securities (the “E-database”) could temporarily or permanently prevent bondholders from accessing their electronic securities. There is a risk of attacks against the network or the database used. Different types of attacks are conceivable. Such attacks could render the network or database unusable, meaning bondholders would be unable to transfer the electronic securities. If the network or database becomes entirely unusable, bondholders may no longer have any access to their digital vaults. In the worst case, this could result in the irreversible loss of the electronic securities. The project owner provides bondholders with a technical solution via an authorised custodian of electronic securities that is used to hold, store and dispose of electronic securities. There is a risk that this solution may be faulty and/or particularly vulnerable to potential hacking attacks. As a result, bondholders may temporarily or permanently lose access to their electronic securities, which in the worst case could lead to the irreversible loss of the electronic securities. Neither the custodian of electronic securities nor the project owner assumes administration in the sense of ongoing exercise of the rights and obligations arising from the electronic securities.

The risks listed above are not the only risk factors that may affect the project owner’s business activities. Other risks and uncertainties that the project owner currently does not foresee or currently considers immaterial may also have a material impact on the project owner’s business activities, business development and financial performance.