Loan portfolio overview (March 2020)

At EstateGuru we have always placed great value on transparency, which is why you are receiving this update. We hope that it gives you a great overview of where we are during this time of unprecedented crisis, the state of our loan portfolio, and why we are convinced that we are not only able to weather the storm, but emerge from it stronger than ever before.

In March 2020 investors financed more than €8,3M worth of loans on EstateGuru’s platform. During the same time period, borrowers paid back 31 loans to the amount of €3,9M (please see the graphs below). The historical return rate of repaid loans in March of 2020 was 10,8%. All in all EstateGuru investors have been paid interests in the amount of €13,6M since 2014.

Graph 1 – Loan repayment amount
Graph 2 – Count and average return of repaid loans

As of 02.04.2020, investors have financed 1392 loans exceeding the amount of €200,1M since 2014 through EstateGuru, of which 621 loans exceeding the amount of €96,3M have been repaid.

There are 17 unique projects and 40 defaulted loans (in different loan stages) to the value of €6,0M in EstateGuru’s portfolio. The Estonian portfolio has the greatest number of defaulted loans, followed by Latvia and this hasn’t changed over the years as these are our two biggest markets.

Still, no capital loss has occurred to our investors and we are putting more effort into recouping defaulted and late loans during the current turbulent times. Our historical LTV is below 60% and we have enough of a buffer to protect investors against a real estate market decline and an increased number of defaults. We are constantly improving our procedures related to debt collection and monitoring of borrowers. Besides in-house knowledge, we have partnerships with debt collection agencies and law firms in every country where we operate.

Graph 3 – Outstanding portfolio

Many of our investors have asked us about how the current crisis has affected our credit policy. Our answer is that we have remained conservative and we are putting even more effort on due diligence of borrowers and collaterals. We are monitoring the macroeconomic situation and analyzing the potential negative effects that the crisis has on the real estate sector on a daily basis. Our newer markets like Germany will undergo more intensive and explicit review, while our approach to taking on new projects will be extremely conservative for the time being.

Graph 4 – Overall statistics

However, in the coming months, we expect to see many recoveries happening and we are currently finalizing the sales of the collateral assets. During the past few months, our default rate has decreased to the level of 5,8%, but in the near future, it will most likely increase due to the crisis. We expect the default rate to remain below 10% and our team is constantly working towards this target.

Every loan in our portfolio is backed by real estate of which the overwhelming majority is residential. As governments are supporting households intensively during the current crisis, we should see fewer problems in residential real estate than in other sectors. However, investors should expect more loans to be prolonged over the coming months as, in some countries, notaries are closed. Also, banks and buyers are delaying transactions due to the quarantine. To react to these trends and adapt to the changing macroeconomic situation, we have increased interest rates for new projects to the level of 12%+.

Aside from this statistical overview of our loan portfolio, EstateGuru wishes to emphasize the need to keep in mind certain very important points when building your investment portfolio. As P2P has become a widespread asset class for your investments, there are a high number of companies offering this service. While we have a strong belief and proof of concept of our business model, investors do need to keep in mind how the platform operator has set up its structure and product, with the focus of how the investors’ assets are actually represented. EstateGuru would like to highlight:

  1. All EstateGuru’s investment opportunities are backed by real estate
  2. EstateGuru has 6 years of experience in the market, with 50+ years of combined experience from our management members
  3. EstateGuru keeps all investors’ assets fully segregated from the company’s own assets
  4. EstateGuru has established all loan contracts directly between the borrower and the investor, ensuring that, should anything happen to EstateGuru, all contracts are valid and ongoing
  5. EstateGuru has established a security agent structure, according to which the security agent will represent all investors in the transactions. The security agent is an independent SPV controlled by a law firm. If anything were to happen to EstateGuru, the security agent would find a new platform operator to manage the investments until their maturity.
  6. All investors’ assets on the platform are available – meaning that this is your own virtual wallet, your funds have not been engaged elsewhere and you can freely access your available funds at all times. We confirm withdrawals once per each working day and deposits 4-5 times per working day (automatic for all properly filled fields).
  7. For the third year in a row, EstateGuru will be publishing an audited financial report to all of its investors, illustrating the strong financial status of the firm. Our auditing partner is Ernst & Young. In addition to that, a monthly public overview of our loan portfolio is available. Moreover, investors can access the full loan book on the platform at any time.

We will keep you informed about the credit portfolio quality on a monthly basis.