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MAGELLAN shipping containers
A solid delivery
for investors
The shipping industry is set for a resurgence thanks to
the use of containers, which are providing investors with
stable investment opportunities, Carsten Jans, CEO of
MAGELLAN Maritime Services, tells World Finance.
It is evident that the impact of the global financial
crisis extended much further than just the financial services sector. Trade throughout the world
took a severe hit, and as a consequence, the world’s
shipping industry experienced a sharp downturn.
However, there has been a concerted effort by
many of the industry’s leading firms to modernise
the way in which they do business, in particular
through the use of containers. One of the leading
proponents of such a strategy is MAGELLAN
Maritime Services, a global leaser and trader of
containers that was founded in Hamburg in 1995.
World Finance spoke to its CEO and founder
Carsten Jans about the company’s history, the
attractiveness of containerisation, and why containers are proving so popular for investors.
How long has MAGELLAN been offering
investments in containers?
MAGELLAN was founded as a container trading
and leasing company in 1995, so we’ll be celebrating our 20th anniversary in 2015. We’ve also been
offering investors outside the industry the opportunity to benefit from container investments since
2005.
Our investors purchase containers at a minimum investment of around €10,000 ($12,453),
and they are the sole owners of the containers,
each with their own individual purchase agreement with MAGELLAN – no investment fund
or similar enterprise involved. We also lease containers back for a five-year period in separate administration agreements that guarantee a fixed
leasing rate of around 12 percent per annum on
the purchase price. After the five-year period, we
purchase the container back from the investor at
a repurchase value of around two-thirds of the
purchase price. We have since paid up all of our
leasing payments and repurchase prices for the
56 container investments we have concluded since
2005, as predicted. Many investors have already
invested in our containers more than once due to
the good experience they have had with us.
What do investors find attractive
about shipping containers?
The low interest rate policy has reduced the number of investment opportunities with a decent return on investment and predictable investment
security for investors in Germany and Europe.
Containers as tangible assets have been satisfying
these criteria for increasing numbers of investors
that go on and tell their friends and associates.
Investors aren’t recommending fixed-interest
bank deposits at a maximum yield of two percent,
which are hardly inflation-proof. Containers ensure returns of around six percent per annum,
and the risk is manageable. Container values
remain stable even in times of crisis – a 20ft
container consists of around two tonnes of steel.
Tangibles with steady values have become more
important to investors since the financial crisis
– specifically, tangibles with values that can’t be
written off to zero. Containers are mobile and can
be used wherever they’re needed, so these tangibles will still make sense to investors in the future.
What sets MAGELLAN apart from
other investments?
MAGELLAN Maritime Services is not a typical fund company so familiar in the world of
investment funds, but an operationally active
container leasing company that takes care of
every part of the container’s value as a tangible
asset from manufacturing to sale at the end of the
investment period.
We represent traditional business virtues such
as reliability, clean management, punctuality and
economic sustainability – values our national and
international partners from industry appreciate,
values that we pass on to our investors. We pursue
a sustainable container business approach that
our investors automatically benefit from. This
completely eliminates the risk of an asset manager doing well while the investor loses out.
What are the success factors?
Obviously, it takes a sustainable approach alongside sound business activity. We don’t depend on
third parties in our business operations, but order
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Logistics
STANDARD
CONTAINERS HAVE
COME TO PLAY AN
ESSENTIAL ROLE IN
GLOBAL TRADING.
YOU COULD EVEN SAY
THEY’RE A SYMBOL OF
GLOBALISATION
our containers straight from the manufacturer
thanks to the years of contacts we have formed.
These manufacturers as well as the liner shipping
companies have full confidence in our company
as a sound partner with the MAGELLAN name
on more than 190,000 TEUs (20-foot equivalent
units). No other container investment company
can claim that.
We don’t buy container portfolios to refinance
them and sell them on for a better price as some
investment companies do – our earnings come
from the asset value of our containers in daily business. We have already gained a name as an international player in the container leasing business;
MAGELLAN is currently the largest container lessor in Germany, and 14th-largest worldwide.
Why are MAGELLAN investments a
more sound choice than other container
investments?
We lease our containers to the top 25 liner shipping
companies without intermediaries; you will often
find us at the liner shipping companies and container
manufacturers, and this gives us a financial edge over
other companies as we work directly with manufacturers and lessees without agents and intermediaries.
Investors have confidence in entrusting their
assets directly with an internationally experienced
market player. There are no investment companies
that also earn from financial management without
themselves operating actively on the market, and
no investment company would ever unnecessarily
reduce its yield.
What containers does MAGELLAN invest in?
We are involved in standard containers, with a few exceptions – 20ft, and 40ft high cube containers. These
containers have been crossing the oceans for decades,
so they’re not a fashion thing. Standard containers
have come to play an essential role in global trading,
and you could even say they’re a symbol of globalisation. These container types are obviously also subject
to market mechanisms that can impact both sales
prices and leasing rates, and the fluctuating price of
steel also has an effect.
Even so, you’ll find these standard containers in
any port, and they can be used virtually anywhere.
Major liner shipping companies order these containers as needed, and any excess capacity takes a few
months to absorb – you won’t find the unused capacity that you might find in ocean-going vessels or
real estate. Very few containers were built during the
financial crisis in 2008 and 2009, so 2010 even saw
a shortage of them.
We at MAGELLAN tend to avoid specialised containers such as refrigerated containers, known as reefers, and tank containers,
as markets and market participants are often too small
to predict long-term trends over five years with any certainty; investments in those niche markets are riskier.
How did MAGELLAN make the investment
offer so secure?
We apply all the necessary due diligence in our
investment offerings. That is, we keep an eye on
quality while purchasing containers, selecting
liner-shipping companies as lessees, and in how
we draw up container leasing agreements. We
only conclude long-term agreements that linershipping companies can’t terminate, eliminating
the need for container management by other container lessors or management companies, or any
other third parties.
This eliminates the risk of container returns
from liner shipping companies before term – so
far, all of our containers have gone through at
least five to seven-year leasing periods without a
hitch. We only do business with the top 25 liner
shipping companies with good credit ratings to
match as lessees.
We survived 2008/2009 without losses, so
we can keep our own buoyancy in rough seas.
Have the other forms of investment also proved
their mettle like this? Apart from that, we have
independent auditors look at our leasing agreements with liner shipping companies to confirm
the quality of our agreements for our investors.
Finally, the auditors have confirmed that we’ve always paid back our investors since our first offering as predicted. So far, every one of our investors
has seen every penny of their investment returned
as promised by MAGELLAN.
What of the future for the investor market
with respect to new financial regulations on
investment products and consultants?
Every investor has to give some thought to which
investment has delivered the goods over the last
10 years and hasn’t robbed the investor of a good
night’s sleep. What kind of investments were they
– bank securities? Investment company portfolios
with hot-shot asset managers? Or tangible assets
in the real economy?
Tangibles are and always have been the mainstay of economic development. But what tangible
asset can compete with a shipping container on
flexibility in shipping goods? Laws and politicians
won’t ever be able to change this in any lasting
way by creating new rules and taxes to get the financial markets back under control. We’ll simply
adapt to any new rules affecting the shipping industry. Remember that with MAGELLAN, you’re
investing in two tonnes of good hard steel – not in
securities or other financial products.
This is a difference we’re proud of, a difference
that our investors appreciate. The last financial
crisis has shown how the markets have been moving away from the real economy, sinking astronomical sums into paper securities rather than
tangibles. We think that we at MAGELLAN have
been playing a significant part in restoring investor confidence in the real economy over the last
decade. More than 10,000 investors have shared
our confidence so far. n
W14MJ_153_A09_78410.pdf
str ategy
Investor Relations
The Magellan team derives tremendous benefit from its expertise and the commitment of
Contact
Interested? If you have any questions,
please contact us in Hamburg or your
personal investment consultant.
Business
its staff, as well as the company’s personal coninvestments and
tacts and ability to build relationships of trust
Details
on our products
withservices
shippingare
lines, container manufacturers
participations
[are] and
and
a
host of companies in the industrial, finanavailable
on
the
Web.
in demand for their
Visitpotential
us on our
website: cial and business sectors. The figures speak for
in good
themselves: Magellan has leased 246,000 TEUs
times, But only a few to date, of which 120,000 TEUs comprise conwww.magellan-maritime.de
are viewed as safe
tainers that are an average of two years old and
www.magellan-maritime.com
assets in times that are currently under long-term lease. Magellan
only leases new containers for periods of five
are not so rosy
years or longer.
Shipping demand
Among other things, Magellan is involved in the
container financing sector, with the aim of enMAGELLAN Maritime
larging its container fleet and meeting shipping
Services GmbH
companies’ growing demand for leased containers. The surge in container ship construction beDomstrasse 17
tween 2003 and 2008 induced a major upswing
20095 Hamburg
MAGELLAN
Container
Germany
in the container leasing sector, until the onset of
Management Services GmbH
the financial crisis in 2008, which brought about a
Tel: +49-40-37 86 54 50
major decline in container leasing and a shakeout
Birsigstrasse 2
Fax: +49-40-37 86 54 60
in the leasing industry.
4054 Basle
E-mail: [email protected]
“Magellan’s position in terms of direct-inSwitzerland
vestment
activities is taking on ever growing
Tel: +41-61-2718673
importance,” says Magellan Sales Director Axel
Fax: +41-61-2718675
Roselius. “We’re seeing confirmation of this in the
E-mail: [email protected]
growing number of new investors that we’re attracting and the current 60 percent reinvestment
rate on the part of our steady customers; and this
is trending upwards.”
For the most part, Magellan steers clear of
bank financing; nor does the company have any
plans to avail itself of underwriters. In keeping
with its motto, ‘keep it simple’, Magellan is a
company with a robust one-two punch: it offers
investment opportunities in the container sector
a stack of magellan containers waiting to be transported
and, at the same time, acts as a container management and leasing company. The size of the
lacks sufficient contacts. Successful investments container fleet that Magellan leases to shipping
fixed long-term leasing agreements;MAGELLAN
the existence Maritime
inLtd.
functioning markets with standard contain- companies has grown steadily over the years,
of an actual long-term lease agreement
secures
Services
(USA)
this investment, but only where reputable lessees ers that have been in demand for years and se- and between January and December 2013 alone,
9624 South Cicero
with good credit ratings are involved. Whether lection of top market players as counterparties Magellan ploughed some $82m into containAvenue #231
through funds or direct investments, working have been possible for more than 30 years, and ers – all of which were quickly snapped up by
Oak Lawn, IL 60453
with competent and creditworthy counterparties returns of four to seven percent (IRR after tax) leasing customers.
USA
Magellan provides its customers solely with
plays a major role in container investment success. can be reached after a standard term of three to
Tel: +1-708-636 six
7304
years; however, only experienced market play- direct-investment opportunities, provided that
Fax: +1-708-636 ers
7341
will offer this kind of investment.
Knowing the right people
promising offerings of this type are available
[email protected]
Container investments only used toE-mail:
fail when
the
How does a company in the maritime indus- under the prevailing market conditions. No ininvestor did not take sufficient care in reviewing try manage to remain successful, even during a vestment portfolio will be offered during times of
the four aspects – market, object, concept, and crisis period? Magellan Maritime Services is con- market uncertainty or poor market performance.
counterparty. Again and again, investors inex- tinuously gaining new investors despite the tough One of the main drivers of the company’s success
MAGELLAN
Maritime
perienced in the market seek to invest in niche economic times, and according to the company’s has
been its investment
customers, and it does
Services (Shanghai)
Ltd.
markets in special equipment with dubious own information, ranks among the world’s top 20 everything
in its power to
keep them happy by
counterparties, and still expect their investment container leasing organisations.
offering
them
attractive
investment opportuniRoom 302,
Juyang
Building
to be successful. It only takes failure in one aspect
In a period when banks are giving the ship- ties.
company
only
offers its customers the
No.The
1200
Pudong
Avenue
for the whole investment to fail, however solid ping and transportation sectors as wide a berth opportunity
to make direct investments in sea
200135 Shanghai
the concept.
as possible, the sea container leasing special- containers
P.R.Chinathat are made in China and that are
Investment offers from initiators new to ist Magellan is continuing to forge its own leased from there for five years or more to the
Tel: +86-21-58522806
the market often have difficulties in establish- path – and this despite the fact that reports of world’s
top 25 shipping companies. n
Fax: +86-21-58522806
ing themselves permanently due to insufficient weaknesses in the ship chartering sector and a
E-mail:
[email protected]
MORE INFORMATION
experience and lack of good contacts, and if the dramatic decline in container shippers’ cargo FOR
investment fails, investors are often left standing with their containers as the counterparty
business on many shipping routes aren’t exactly
inspiring confidence.
www.magellan-maritime.com
email: [email protected]
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