Interest-free or extremely low-interest financing from development banks is just as much a prerequisite as tax relief in order to make the Frankfurt bridges an attractive investment for investors
Of the total cost of 33 billion euros for the entire Frankfurt bridge project, 23 billion are to come from private and institutional investors and 10 billion from public funds.
For private and institutional investors, extremely low-interest development loans from KfW, EIB and possibly the World Bank and other institutions with comparable loan programs are necessary to make investment in the Frankfurt bridges attractive. The 10 billion from the public sector should be designed as grants that can be financed from the innovation-driven economic growth that the Frankfurt bridges will bring about for decades to come.
Just as important as low-interest (or, in the case of grants, interest-free) financing for private and institutional investors is the tax-free receipt of the returns that the Frankfurt bridges will regularly generate.
This form of tax relief would have to be decided at EU level, as the Frankfurt Bridges are a project that has a special strategic, economic, technological and, if the concepts are transferred to other cities, infrastructural significance due to the involvement of all European countries in sourcing as well as in research and development. Such tax relief would then benefit all investors from the EU. As the concept for the construction of the Frankfurt Bridges envisages the involvement of all countries in the European cultural area (i.e. beyond the EU), these countries should also be invited to make the Frankfurt Bridges attractive to investors from their countries by offering appropriate tax relief.
A tax exemption on capital returns on socially relevant infrastructure projects is unusual in Europe (unlike in Singapore, for example) - but it would not be a novelty: A model for this could be the green bond "Green OLO 86", which Belgium issued in February 2018: with a term of 15 years and a volume of 4.5 billion euros, it was the first green government bond in Belgium. The funds were used primarily for "clean transport", which means that around 85% of the proceeds went to domestic passenger transport and railway projects. Investors could earn tax-free interest income (under certain conditions) . The withholding tax on interest income was completely waived, which meant a complete exemption.
The basic concept illustrates how the capital investment in the Frankfurt bridges, which is designed to last for 100 years, can be divided into manageable investment horizons of two to three decades
The financing of the Frankfurt bridges can be divided into two parts: firstly, the phase from the start of any planning to the completion of the bridges (around 20 years) and then the operating phase (around 85 years). The first phase can be divided into three risk-return parts: A. the concept planning phase with a small but very risky investment of 60 million euros over a period of 5 years; B. the planning phase according to HOAI with 5.85 billion euros and a duration of 5 years, which already has a significantly lower risk because it is based on approved development plans; the construction phase of 10 years, which is ambitious in terms of time, but is accordingly also led by private sector investors (not carried out!).
The subsequent operating phase of 85 years involves hardly any risks and therefore has a moderate interest rate; however, it can also be broken down into three periods of around 25 to 30 years, as public investment surges take place at these intervals, each of which represents a significant increase in the value of the real estate and transport portfolio on the bridges.
The financing volume of the Frankfurt bridges represents by far one of the largest infrastructure projects in Europe - but the investment is justified
The Frankfurt bridges significantly improve the lives of 30,000 bridge residents and at least 100,000 of the 760,000 Frankfurt citizens who regularly use the cultural, gastronomic and transport facilities there due to their proximity to the bridges.
A complete district like the one being built on the Frankfurt bridges is like a small town coming to life. The benefits for Frankfurt and the Rhine-Main area cannot be quantified. In this respect, the Frankfurt bridges cannot be compared to philharmonic halls, airports, tunnels or train stations in terms of their impact on people.
Interest-free or extremely low-interest financing from development banks is just as much a prerequisite as tax relief in order to make the Frankfurt bridges an attractive investment for investors
Of the total cost of 33 billion euros for the entire Frankfurt bridge project, 23 billion are to come from private and institutional investors and 10 billion from public funds.
For private and institutional investors, extremely low-interest development loans from KfW, EIB and possibly the World Bank and other institutions with comparable loan programs are necessary to make investment in the Frankfurt bridges attractive. The 10 billion from the public sector should be designed as grants that can be financed from the innovation-driven economic growth that the Frankfurt bridges will bring about for decades to come.
Just as important as low-interest (or, in the case of grants, interest-free) financing for private and institutional investors is the tax-free receipt of the returns that the Frankfurt bridges will regularly generate.
This form of tax relief would have to be decided at EU level, as the Frankfurt Bridges are a project that has a special strategic, economic, technological and, if the concepts are transferred to other cities, infrastructural significance due to the involvement of all European countries in sourcing as well as in research and development. Such tax relief would then benefit all investors from the EU. As the concept for the construction of the Frankfurt Bridges envisages the involvement of all countries in the European cultural area (i.e. beyond the EU), these countries should also be invited to make the Frankfurt Bridges attractive to investors from their countries by offering appropriate tax relief.
A tax exemption on capital returns on socially relevant infrastructure projects is unusual in Europe (unlike in Singapore, for example) - but it would not be a novelty: A model for this could be the green bond "Green OLO 86", which Belgium issued in February 2018: with a term of 15 years and a volume of 4.5 billion euros, it was the first green government bond in Belgium. The funds were used primarily for "clean transport", which means that around 85% of the proceeds went to domestic passenger transport and railway projects. Investors could earn tax-free interest income (under certain conditions) . The withholding tax on interest income was completely waived, which meant a complete exemption.
The financing concept for the Frankfurt bridges is not a fully developed concept, but merely a framework that can be used to roughly outline the structure and mechanisms of a 100-year financing plan
First and foremost, it is important to estimate whether it is possible to finance the Frankfurt bridges with a two-thirds share from private and institutional investors - in such a way that they represent an attractive investment despite the 100-year time horizon. However, the reasons for the long financing period and the seemingly final main interest rate are well founded:
- The transfer of ownership to the owners 100 years after the start of the planning phase according to HOAI has been set so late because one of the most important levers for the building permit for the Frankfurt bridges is their non-profit purpose or their relevance for society: only in this way can setback areas be undercut at critical points and in individual cases (with significant compensation payments) the right of objection of building owners be overridden - provided that they still raise an objection at all in view of the enormous payments to them while at the same time causing minor impairment.
- Acceptance for the Frankfurt bridges will increase significantly if the point in time at which people will have to leave affordable housing (because it is rented and sold at market conditions) is more than a human lifetime away when the development plans are voted on.
Even if the 100 years seem counterproductive at first glance with regard to the attractiveness of the investment, a closer look reveals that the speed with which the construction project can be carried out in a participation-oriented society such as Germany increases significantly with the postponement of the transfer of ownership and the associated "payday" for the "rich" investors.
There are certainly infrastructure investments that are designed to last for 100 years, such as ports. And just like these, the usability of Frankfurt's bridges must be guaranteed by high-quality building materials. In addition, as with ports, the will to use them must still be there in 100 years, which is the case with the bridges due to their artistic value and the high quality of life they offer (all guaranteed by the long-term thinking of the non-profit actors when planning and building). In fact, Frankfurt's bridges must become something like Venice: a district that will still inspire admiration and desire hundreds of years from now.
The concept planning phase costs comparatively little, but is an important lever for the success and profitability of the entire bridge project - it does the preparatory work for acceptance of the project and is characterized by high risk - high return
The concept phase is financed by the bridge fund, which is very small at this early stage with around 60 million and has rather risk-averse investors - if successful, they can sell their shares tax-free and profitably to less risk-averse investors after 5 years
The concept planning phase costs around 60 million euros. It shows whether and which of the eight development plans it is preparing will be approved.
As soon as the development plans have been approved after around five years and the public has accepted the socially oriented planning of the Konzeptplanungsgesellschaft gGmbH, the bridge fund can open up to the entry of large investors. The previously "cheap" fund shares increase in value with every development plan approved by the public (i.e. with every approved construction phase of the Frankfurt bridges).
The greatest risk lies in the concept phase, when the construction plans for the bridges have not yet been publicly approved: This is also where the highest return is achieved - the planning and construction phases, on the other hand, are less risky and have a lower interest rate
The profitability in the subsequent phases can be secured with comparatively little risk (this is naturally an extremely simplified representation of the actual financial flows): While at the beginning of the construction phase there is still the usual construction risk that time and costs could get out of hand, once the bridges have been completed and put into operation the investment risk is comparatively low.
However, the construction risk is also significantly reduced by the intensive planning phase, which was carried out in a non-profit spirit, as there is no resistance from the population that could slow down the construction project. Obstruction, delay and cost explosion due to political influence are also ruled out, as this is basically a project by private investors that is not subject to the management, awarding or influence of day-to-day politics or changing coalitions.
The preservation and increase in value of Frankfurt's bridges over the decades must be ensured through maintenance cycles
When designing the financing for the construction of the Frankfurt bridges, it is important that certain payment flows are defined as the project progresses: For example, the city of Frankfurt buys the bridge body including the pipes from the bridge fund (depending on the project's progress), which ensures interest during the planning and construction phases: The bridge body, which functions like a decentralized power plant or like an irrigation and drainage system, represents an environmentally friendly and profitable extension of the city of Frankfurt's supply infrastructure. In addition, if the city were to create a new quarter for 30,000 people, it would have to ensure the supply of this part of the city anyway (for comparison: 9,000 people live in the Europaviertel - as of 2024 - and 17,000 people in Riedberg).
It makes sense for the bridge body to be transferred to the city for another reason: the city must ensure the connection or interface to the existing supply infrastructure of the municipal utility companies anyway.
Furthermore, the bridge body is best kept in the hands of the city of Frankfurt, as 40% of it is on Frankfurt soil, 40% on federal soil and 20% on the land of the state of Hesse. The city must agree on the terms of use with the latter, which is easier for it than for the bridge fund.
Furthermore, maintenance cycles must be defined which take place every few decades and for which the City of Frankfurt and the State of Hesse (and only to a lesser extent the Federal Government) can plan to set aside provisions of a manageable size (in the low double-digit million range).
The eligibility of the “Frankfurt Bridges” construction project is not only given by the concept itself, but is also guaranteed by non-profit actors in the implementation of this “ESG project”
If you put together the components "investors from the private sector for whom the Frankfurt bridges are an attractive investment" and "management actors who are to act in a non-profit manner", the most suitable form of company is a CoKG with conventional limited partners and a general partner who is a subsidiary of a non-profit foundation. The general partner is a GmbH with only 2 people, as it only has one function: awarding contracts for the planning, construction and operation of the Frankfurt bridges to its non-profit gGmbH sister companies.
In this way, acceptance by the population and politicians is ensured, which means a quick and cost-efficient implementation for investors and also makes the investment attractive for future owners, as it avoids "short-term profitability thinking at the expense of quality and decades of durability". At the same time, this form of company or this approach enables interest-free or low-interest ESG financing models - and even in the operational phase, the subsidy eligibility is maintained.
Even though it is a very long-term investment with a total term of 100 years, it can still be designed to be attractive and fungible if it is designed accordingly
