Why this is not skin in the game project:
This is not skin in the game project due to following reasons: The risk reward ratio for equity project is very little which is around 14% expected anually. The developer puts only 48k € of its own money and takes 74.776 € from the project as management fee plus the capital gains from 48k, so developer takes no risk.
The possitive thing about this developent is that construction cost is rather inflated at 1800€ per square meter, which we believe could be lower = could make the return better for investor.
We present a new project that consists of 7 new properties being constructed in Alcobendas (Madrid). Alcobendas is a municipality within the metropolitan area of the capital, with a stable population.
Located less than 15 minutes from the Paseo de la Castellana, Alcobendas has an average per capita income of € 50,000, which makes it the fifth richest municipality in the Community of Madrid and the ninth nationwide. It is also the third city in Spain with most multinational companies and the second in turnover and employment of these companies.
The promoter of this opportunity, ATOMIUN , is a Spanish family-owned real estate developer dedicated to the promotion and management of assets. His team has more than 30 years of experience in residential and business real estate and has extensive experience in promotions in the capital and surrounding areas that are running simultaneously. It provides a solid knowledge of the sector and the operational management of a promotion. It also has a proven track record in Joint Ventures and alliances with top-level investors and corporate clients to whom it brings real estate experience and knowledge.
The project has a capital gains strategy, which consists of the purchase of a corner building of houses in the urban area of Alcobendas. This building will be demolished to later build a new residential building.
The plot is located on Calle de los Naranjos 10, a road that connects Paseo de la Chopera with Calle de la Libertad. It is a consolidated residential area, with morphology of residential buildings of 3 and 4 stories and shops on the ground floors. In the immediate surroundings there are the Park Garden of the Vega, the commercial street of the Freedom and the commercial center La Vega.
The proposed development consists of 7 homes, which includes the typology of studios and homes with 1 and 2 bedrooms and 4 parking spaces . Each apartment is approximately 65 m². Each apartment is separated to 2 houses with 1 and 2 bedrooms on the first and second floors, and 3 studios on the third floor. On the ground floor, 4 parking spaces can be reached with direct access through Calle de los Naranjos.
The operation will be structured through a company already constituted exclusively for this project by ATOMIUN . This company will be the one that buys the building and hires the workers. A local agent will be in charge of the commercialization of the houses, who specializes in commercailizing new construction. Investors will be shareholders in proportion to their contribution to the project, the company will be entered via capital increase. The developer has already signed a pre-contract with the owner of property. At the same time, the developer, together with the architects of the development, is already working on the execution project to present it at the town hall.
ATOMIUN will not only be dedicated to the full management of the development, but will also contribute 10% of the capital necessary for its development, so that they would also become investment partners.
The remaining 90% will be invested through Urbanitae. The project has preconceived a promotional credit for the financing of the work, once the works license and a percentage of the sales are obtained (still to be determined with the financing entity, but it will range between 3 and 4 sales).
The Alcobendas project constitutes a profitable investment with controlled risks:
- Investment opportunity in a new construction promotion project.
- The estimated net profitability of the project by the promoter of the opportunity is 33.22%, in 26 months.
- The project will be promoted by ATOMIUN , with great work experience in the area.
- Promotion in a consolidated residential area in the northern part of the capital, where the demand for flats at low prices for young people is very high, as well as retail investors looking for homes to buy and rent.
- The promoter of the work invests its own capital in it, which aligns the interests of all the agents involved in the investment.
The developer estimates that the sale of homes and garages will generate a total income of 1,495,526 euros , which will mean a net gain for the investor (after expenses and income) of 33.22% of the amount invested.
After the purchase of the building, obtaining the licenses, and presale of 3/4 units, there is the possibility that the bank authorizes the company to return 50% of the purchase value (in this case € 165,000). If successful, the developer would return said amount to the company's shareholders, thereby improving the return on investment.
A market study has been carried out to determine if the sales prices raised by the promoter are reasonable.
As it has been found, there is currently no offer of new construction of small homes in Alcobendas, except for a small promotion that has sold 60% in 2 months.
The market for promotions in the municipality is not homogeneous, since most promotions are for larger homes, with common areas and with much higher prices.
You can see more information in the documentation, Sales Witnesses, where you will find a list of homes for sale in the area.
WHEN WILL I RECOVER THE INVESTED MONEY?
The estimated term of this project is 26 months.
The planned deadlines for the promotion are as follows:
- May 2019 private contract with the seller.
- September 2019 public deed.
- December 2019, obtaining the works license.
- January 2020, construction start
- March 2021, end of construction
- April 2021, obtaining the first occupation license.
- May - June 2021, housing deed.
- July 2021, liquidation of the company.
Within the rhythm of sales in the area, it is expected that 4/5 homes will be sold on the plan before obtaining the building license. The rest of the homes will be sold during the course of the work.
It is important to keep in mind that in any real estate development, the terms may vary both upwards and downwards.
All investments carry a risk. The clearest risks we have identified for this project are:
- Increase of the deadlines foreseen in the project, due to delays in the construction or in obtaining the license.
- Deviation of fixed costs associated with investment, unforeseen in construction.
- Risk of not reaching the expected sales rates and consequently the delay in terms.
- Risk of not getting the expected sales prices in the promoter's business plan.