The government has become a shareholder investor in PRS financing platform Shojin through the conversion of a pandemic-era loan facilitated by the Future Fund scheme.

This government-backed fund was launched by the British Business Bank - a state-owned economic development bank set up by the government to supply credit to SMEs - in 2020 to support emerging businesses during the Covid pandemic.

It matched new private investors on a pound-for-pound basis 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 bank invested £860,000 into Shojin via the Future Fund. Shojin is an investment company that provides access to opportunities in the UK real estate sector for investors.

The investment was matched by individual investors as part of a £1.72 million funding round. In return, Shojin issued a convertible loan note to investors, including the Future Fund, with interest accruing at 8% per annum.

Equity stake

As Shojin has secured additional capital, the fund converted its initial investment into equity, allowing investors to convert to shares, resulting in the UK government taking a 5.16% equity stake in Shojin.

Noil Porter (pictured), its chief financial officer, says: “Shojin has grown significantly in the past few years with the share price increasing from £500 to £1,029 per share. 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.

“The government has benefitted from a 57% increase in their share value over 36 months. This is a real success story for Shojin, our investors and the UK government.”