Mortgage-secured financing for an experienced real estate developer

Summary

The Company was established in 2016 as a part of a larger company group engaged in the real estate development business. Both co-founders are experienced real estate business professionals working in the industry for more than 10 years. The Company specializes in the development of residential houses; however, the group companies have completed apartment houses and industrial buildings development projects as well.

Recently, the Company acquired a land plot in Mārupe parish for further development in a total area of 8,111m2. Mārupe is a popular suburb of Riga approx.12km from the center of the capital city. The purchase price of the property was EUR 267,000 which is equal to the market value set by a certified real estate appraisal. The acquisition of the land plot was partly financed by the Company as well as by a short-term loan from Crowdestate for the amount of EUR 170,000 which repayment term is due soon.

To refinance the loan from Crowdestate, the Company is seeking EUR 179,670 for 12 months. The loan will carry an annual interest rate of 13.44% (1.12% monthly). The loan will have monthly interest payments and the principal will be repaid at the end of the loan term.

The loan repayment is based on an execution of another ongoing development project in Mārupe for the construction of 9 residential houses out of which 7 houses are reserved by buyers already. This project is being executed by a related company and houses under construction are only a few hundred meters from the acquired land plot. The entrepreneurs expect to complete the construction and all related paperwork by the end of this year. The total revenue planned from this ongoing project is approx. EUR 2.56 million while the costs are estimated at approx. EUR 1.6 million. Therefore, the expected yield is sufficient to cover the loan when completed houses will be sold.

The loan will be secured with a mortgage to the property the Company recently acquired with a market value of EUR 267,000, approximately EUR 33.9 per m2, (LTV 67%) (appraised by Vindeks, 2022-02-16), and two personal guarantees from both founders.

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 a land plot with a total area of 8,111 m2 and a market value of EUR 267,000 (LTV 67%).
  • Two personal guarantees from both shareholders are provided.
  • The Company and its founders have an existing track record in the real estate development sector.
  • The loan repayment is based on an ongoing real estate development project with a significant expected yield of more than EUR 960,000.
ID 16338-1-LV
Industry Real estate
Location Latvia
Loan type Business loan
Term 12 months
Expected return 13.44%
Interest rate Monthly
Amortisation At the end of the term
Risk grade B (81 out of 100)
Personal warranty From two owners
Collateral A mortgage on
property with market
value of EUR 267,000
(LTV of 67%)
Capitalia's cofinancing 9670
Target amount 179670
Repaid
This loan is already funded.
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