Loan Portfolio Overview (February 2022)

Photo by Andrew Neel on Unsplash

During the shortest month of the year, €17,3M worth of loans were funded on Estateguru’s platform. The strongest market was Estonia, which accounted for over 40% of the total volume, followed by Germany (24%). We are expecting a similar total funding amount for March.

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Loan repayments stabilized following January’s low point and amounted to €10,8M (45 loans, 10,2% return). Repayments could become more volatile in the upcoming months as our borrowers may be affected by the uncertain macroeconomic situation due to the war in Ukraine.   

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In February, our credit team, along with our risk lawyers, finalized a settlement agreement with a borrower and one of our defaulted projects (€1,8M) in Sweden has now been partially repaid. Full recovery of the project is expected at the latest by mid-May this year. In Finland, one defaulted loan project was fully repaid at the beginning of March (€0,3M). No new defaults occurred during the last month and the default rate has declined to 5,8%.

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As we mentioned, the Ukraine war may lead to an increase in macroeconomic uncertainty. Inflation is rising due to higher energy prices and supply shortage of commodities and construction materials from Ukraine, Russia and Belarus. Our borrowers, who are mostly real estate developers and construction companies, are already feeling the effects of this new reality – prices of steel and wood products have increased and there are longer waiting times as new supply chains are being established. As we finance mainly residential developments, we predict that, despite the expected hike in sales prices, the demand will remain strong (low unemployment rate, low interest rates) in all of our markets, and the short-term price increase will be absorbed without major problems.

Our conservative credit policy has resulted in financing projects where borrowers’ own equity is always a must and budgets are established with a cost overrun buffer. Even a real estate market decline of nearly 45% wouldn’t, on average, jeopardize our investors’ principal capital. Real estate is, and will remain, one of the safest asset classes. It should be mentioned that none of our borrowers is subject to any of the sanctions imposed on Russia and Belarus and all our investors’ collaterals are in EU and/or NATO countries. We have also signed a cooperation agreement with the European Investment Fund which supports the sustainable growth of our business model even further.

We are monitoring the markets and adjusting our credit policy if the situation should change. We will keep you informed about the credit portfolio quality monthly.