The borrower: Leading Estonian real estate developer Endover has over 20 years of experience building new-developments and redeveloping existing ones.
The development: The development consists of three independent buildings which will feature a total of 50 loft-type apartments once complete, with a total gross building area (GBA) of 4989 m2.
- €1 500 000 for the acquisition and development preparation of a site with planning for a 50-unit development in Tallinn city centre, at 65% Loan to Value (LTV).
- A construction loan of €4 900 000 over 18 months for the total construction costs to allow for the build and then sales period, if necessary.
- Very quick financing released in stages following the signed surveyor report of completed works and an updated valuation report to reflect the resultant increase in value.
Endover first approached a traditional lender who requested 50% pre-sales while the loan facility included a remarkable restriction which did not satisfy the borrower. The borrower had simultaneous development financing from the main financial partner, yet the lender refused to increase the exposure per client. Moreover, the demand for the apartments was increasing and it was essential to move forward with the project as soon as possible to take advantage of the prevailing market conditions.
The borrower, Endover, was a new EstateGuru customer, having completed the majority of its previous developments with funding from traditional banks and bond emissions. Endover admits to being previously sceptical about raising capital through a crowdlending platform, yet the popularity of the crowdlending marketplace has increased over years and they saw an opportunity to attract additional buyers for their premium type apartments through EstateGuru’s network of investors.
The borrower felt that it was important to build a relationship with a lender that they could work with over the long term and who understood their business. The main requirement was to establish a hassle-free financing line, where financing could be done quickly and with a level of flexibility in repayments.
The funding was agreed and provided for both stages of this project, which is currently in the final stages with the interior works being done and two buildings out of three set to be completed before summer 2020. At the start of the financing back in May 2019, the borrower had only 8-pre sale agreements, as of today they have sold 48% of the total units (24 apartments) and first owners will be able to move in by May-June 2020. The borrower has since received a funding line from EstateGuru investors for a similar development project as well as a capital release for the sales period of the last unsold apartments in a previously finished project. We have also quoted terms on a future project.
Endover feels very positive about the experience, reserving special praise for the speed and flexibility of our staff and the support of our investors. The first tranche of €1 500 000 was gathered in just eight days, and the following tranches, valued at between €50 – €300k, in a matter of a few hours to three days. The initial preparation including the client meeting and terms negotiation was a straightforward process and since then all the ongoing requests and approvals were conducted digitally and online. EstateGuru had new tranche financing up on the platform the same day following the surveyor report and fresh valuation report.
UPDATE 24 July 2020:
In total, EstateGuru financed a little over €5 million in 28 tranches for the construction on this project. Starting from April 2020, the first sales transactions were closed for first-time home-buyers and a total of 15 apartments were sold by July 22. Due to the positive reaction to the project and the success of the sales phase, it is set to be completed before the original projected due date, as neither sales nor construction were affected by the COVID-19 situation. Considering the readiness of the project, with 15 sold apartments and 7 reservations(out of total 50 built) the client received a refinancing proposal from a traditional bank. EstateGuru successfully received full repayment of the remaining € 3 378 322,49 (principal and accumulated interest) which makes it the largest single repayment in the history of EstateGuru to date. Previously, EG investors in this project received partial repayment with accumulated interests each time an apartment was sold and released from the mortgage.
Client Feedback from Endover’s Kaspar Allese
Endover is one of the biggest real estate developers in Estonia, what made you choose EstateGuru for funding this project over other options?
We believe that new types of funding such as crowdfunding will replace older and out of date traditional funding types. As one of the market leaders and pioneers in crowdfunding, Estateguru has proven that they have the ability to fund projects with a large scope.
Q: What stood out to you or what did you like in the process of funding your loan through EstateGuru?
A professional team who are experts in real estate loans and their proven track record for financing larger projects. There has been always good cooperation to find the best model for financing our projects.
What was your experience of working with Pavel?
Pavel is a true professional on whom you can count on any given time. Dialogue with him is always comprehensive and focused on finding the best solution for the client.
“Working with a calibre of client like Endover is challenging on the one hand yet also quite simple because they understand our model, they think in terms of attracting investors but at the same time are very demanding and strict about having things very clear and precise.” – Pavel Artamonov, Estateguru Loan Manager