Mortgage-secured financing for a profitable regional real estate developer (V)

Summary

The Company was founded in 2016 and it is engaged in the real estate development business in Liepāja city. The Company acquires unfinished or poorly managed apartment buildings, renovates them, and sells refurbished apartments. After the sale of apartments, the Company also provides building management services that generate an additional revenue stream. The Company has a construction team; however, the major part of construction works are outsourced from specialized companies in the region. Since its establishment, the Company already has completed more than 10 development projects in the city.

In June 2022 Capitalia granted a loan of EUR 153,303 to the Company to finance the development of a 12-apartment building in Liepāja city. Currently, the apartment house is completed, 11 out of 12 apartments are booked already and settlements with buyers will take place in June 2023. The active loan’s repayment was based on sales of new-built apartments. However, the Company already has the next development project in the pipeline where additional capital is needed. Therefore, the Company prefers to invest the sales revenue in the next development project instead of making a loan repayment.

To refinance the active Capitalia loan and accelerate the development of another apartment building, the Company is seeking EUR 156,363 financing for 12 months. The loan repayment is based on the completion and sale of new-built apartments. The loan will carry a 12.48% annual interest rate (1.04% monthly) and it will be amortized at the end of the term. The project’s risk rating is B (85).

The loan will be secured with a mortgage on two apartments in Liepāja, Kungu iela 28 with a total market value of EUR 222,000 (LTV value of 70%).  A personal guarantee from the owner will be provided.

Key investment highlights

There are a number of factors that make lending to the Company an attractive opportunity and the main highlights are as follows:

  • The loan is secured with a mortgage to two apartments worth EUR 222,000 (LTV 70%).
  • The Company has been profitable since its establishment.
  • A personal guarantee of the owner is provided.
  • The Company is an existing client of Capitalia servicing active loans with an excellent payment discipline.
  • The Company’s equity-to-assets ratio stands for a strong 36%.
  • The Company has just finished a sizeable development project and expects sales revenue of more than EUR 1.2M in the following months.
ID 16135-8-LV
Industry Real estate
development
Location Latvia
Loan type Business loan
Term 12 months
Expected return 12.48%
Interest rate Monthly
Amortisation At the end of the term
Risk grade B (85 out of 100)
Personal warranty From owner
Collateral Mortgage to two
apartments worth EUR
222,000
Capitalia's cofinancing 4363
Target amount 156363
Successfully funded
This loan is already funded.
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