A new generation of tech-savvy entrepreneurs is hoping to revamp the billion-dollar ship finance market in Germany.
Among them is Hamburg-based New Shore Invest, which is seeking to revitalise the KG (limited partnership) model by trading shipping shares digitally.
“There is a market among investors as well as an appetite from shipowners for fresh equity,” said Hanno Tamminga, one of three founding partners at New Shore.
New Shore has teamed up with Norwegian finance house NorthCape Capital, which is a minority partner.
Seed capital
The Oslo-based outfit will provide seed capital and concentrate on the loan side of the business, providing equity to small and medium-size shipping companies.
New Shore will focus on offering retail investors equity in single-ship companies.
To do so, New Shore is tapping into technology that makes it possible to divide ships into fractions, which can be bought and sold individually.
This process, known as tokenisation, involves splitting the equity portion of single-ship companies into tradable shares.
“It is the KG model, basically,” New Shore founding partner Richard Heuser said.
“Rather than trading over the stock exchange with expensive intermediaries and custodian banks, we’re facilitating on the blockchain, which makes it as secure but a lot more efficient.
“Because shipping is a risky investment, we had to break down the investment tickets to €1,000 ($1,109) in order for people to be able to diversify their portfolio and open up the market.”
Second time around
It is the second attempt by New Shore to develop the retail market.
The company, which was launched in 2018, had hoped to provide mezzanine finance for a series of small multipurpose (MPP) vessels under construction for German shipowner Reederei M Lauterjung.
However, Tamminga said the project never materialised because the shipyards were unable to fulfil the newbuilding project.
New Shore is now concentrating on a project for small MPP coastal vessels, with the goal of focusing on green newbuildings or LNG propulsion.
“A green and innovative story is what we need in order to attract retail investors to shipping again, said Hannes Hollaender, the third founding partner at New Shore.
The partners believe their projects will offer retail investors an alternative to real estate or stock markets and fill “a painful gap for equity to shipowners”.
“What the shipowner wants is equity — as do the financing banks,” said Tamminga.
“And that is what the German investor wants. If he takes the full downside risk, he also wants to have the full upside potential in case vessel prices appreciate.”
In addition, Tamminga said investing in equity benefits from the German tonnage tax, which effectively makes investments in shipping tax-free, while projects will be regulated by the German Federal Financial Supervisory Authority.
Different market
But what about the investors who lost money in shipping over the past decade? Will they really return to the market?
“We’re aiming at a totally different market than before,” he said. "We’re cutting out the middle man and not selling through financial advisors that took 10% upfront — we’re directly selling to the consumer through online marketing.
“Many people have tried to address the loan problem with banks exiting, but no one has addressed the [lack of] equity problem.
“The highest leverage these days is 65%, which still requires an owner to come up with 35%. That kills most of the newbuild projects at the moment because they simply don’t have equity.”
