Estateguru: ‘€125 million in defaulted loans’
After being founded in 2014, Estonian real estate investment platform Estateguru has financed 719.1 million euros worth of loans. However, it has also announced that it has 450 outstanding defaulted loans, worth 125 million euros.
The real estate investing platform’s current default rate (outstanding loans) if 42.7 percent. The default rate (total financed loans) is 17.4 percent. This is caused by a high default rate in Germany and the Baltics. “First of all, we are very unhappy with the high default rate and are working around the clock to remedy the situation. At the start of the year, we augmented our legal and debt teams, partnered with additional external law firms and implemented a more aggressive approach to recovering defaulted loans, so that we could find solutions and expedite the recovery process”, said the platform in an email to investors.
‘The high default rate in Germany has impacted the whole portfolio.’
“The situation has been aggravated by macroeconomic conditions (with the selling periods for real estate developments having been prolonged), and the high default rate in Germany has obviously impacted the whole portfolio. One of the bigger borrower groups in Lithuania and a couple of bigger loans in Finland have also defaulted”.
‘Bringing down default rate will take time’
The platform expects that it will take some time to bring down the default rate. Some loans are expected to be recovered this summer, but others will take longer. “We expect to see recoveries increasing once overall real estate sales in the markets begin to increase.” Estateguru has already halted introducing new German investment projects, to focus on recovering the outstanding defaulted loans.
‘We will change our model for Germany.’
“The current default level is unacceptable, but we have learned from the experience, and we will change our model for Germany accordingly. As mentioned previously, we have temporarily halted the introduction of new German projects on the site while we institute these changes and recover the defaulted loans. We have also bolstered our German team in terms of manpower, external support and resources.”
To prevent future defaults, the real estate platform has announced that it will integrate tools into the loan application process which will help in assessing the borrower. This will also allow for risk-based pricing, resulting in low-risk clients getting better rates.
“We also plan to review and add additional questions to the loan applications, in order to supply appropriate levels of data to institutional investors, and so that we can make more informed decisions based on more data points. We have already adopted a stricter approach to concentration risk, and rules regarding how much an individual borrower can borrow.”