BrickBro Operational Fund - Commercial
Regarding República Argentina 191 operation (that is integrated by 3 different registered entities), the buyer, that was initially interested in buying only one, is now interested in acquiring all 3 together. Hence, BrickBro is currently devoted to meeting the legal conditions for delivering the operation. Josep Tarradellas 44, on the other hand, is already being managed for its sale and, finally, Viladomat 191 operation has been cancelled due to a regulatory study and all invested capital has been recovered. By following this link you can find a detailed pdf of the update.
EvoEstate presents its Investors an exclusive opportunity to invest an operational fund of BRICKBRO GLOBAL INVESTMENTS S.L. This opportunity offers expected returns estimated by the deal originator of 16% in 12 months. The purpose of the investment is to invest at least in 3 assets and in a maximum of 5. These operations will be selected by the Company according to their free criteria, knowledge and market opportunities.
The total size of the fund is expected to be around 500,000 EUR. This project is not listed on Brickbro platform, because this investment is provided by its parent company exclusively to EvoEstate investors. If you would like to access this deal directly- minimum investment size would be 50,000 EUR.
BRICKBRO GLOBAL INVESTMENTS S.L. is a Company dedicated to the development and investments in real estate. The Company buys offices, premises, mezzanines to be refurbished and converted into lofts and offices. The Company operates in Catalonia and Madrid and commercializes these assets through purchase option agreements in order to transfer the right to a third party.
Commercial property vs residential
BRICKBRO GLOBAL INVESTMENTS S.L. have been doing multiple operations with residential properties, but they are currently changing their focus due to two reasons: to diversify their portfolio and high demand for large offices in Eixample and Financial districts.
Market analysis by Cushman & Wakefield (attached in the documents), suggest that the vacancy rate for offices in these districts inside Barcelona is below 3%, which proves that the demand is high. An important factor is that current offices for landlords yield on average 3.5% annualy, while BRICKBRO GLOBAL INVESTMENTS S.L. sales price objective is to sell renovated properties at such price, which would yield 6.5% net annually to the landlord and make the property liquid.
BRICKBRO GLOBAL INVESTMENTS S.L. will be acquiring properties between 300 - 2000 sq. m., targeting acquisition price at around 1000 EUR / sq. m.
The investments Company specialises on commercial properties on the grand floor in cities of Barcelona and Madrid. They place a deposit (“option compra”) for this commercial property then, they transform it into bright nenovated offices and sells it below the market value- which would yield 6.5% net to the landlord.
Option compra- is a method of property purchase, when the buyer places a deposit of the property purchase usually for 6 months and 10% of the total property purchase price. After this agreement is established they begin the renovation of the property and completes it within 1.5-2.5 months. During the next 3 months, they find the buyer and enters into a three-party agreement with the initial seller of the property.
When they intermediate the sales process, they keep the margin what they would have earned and this way they do not have to pay property acquisition, sales taxes and notary fees.
Business model risks
Because this is an equity investment, it involves a lot of risks, especially the one, that you can lose capital, because you participate not only in the upside but also potentially in the downside.
The 2 general risks with this business model are that the property market value can go down, this way reducing the returns for the Investors and that the investments Company could not sell within the period of the “option compra”, which would lead them to buy the property and also reduce the returns.
Their historical performance informs that this had happened 2 / 25 residential operations. However, if the sales term exceeds the term of the contract, they always try to get an extension for another deposit.
“Option compra” model yields 100% returns on expenses incurred during the process of one property.
In case the Company is unable to sell within the 6 months, the Company has to acquire the property, then it should yield 25-33% returns on expenses including the acquisition, sales taxes and notary fees.
Up to an IRR of 10%, 80% of the net profit of the operation will go to the Investors and the remaining 20% to the Company. Once the IRR of 10% is exceeded, 80% of the net profit of the operation will go to the Company and the remaining 20% to the Investors.
The investors’ historical returns investing in the Company’s operational funds range between 16-18%.
EvoEstate success fee
EvoEstate does not charge any investment fees to the investors if the returns are 16% or below. In case the investment yields returns above 16%, EvoEstate will charge 20% from the surplus, i.e. the investment yields 18%, EvoEstate will charge 0.4% from the invested amount, while returning 17.6% to the investors.
- This investment will become active on December 30th, 2019.
- Clients who would like to see detailed historical returns for residential properties in an excel spreadsheet, contact us at firstname.lastname@example.org . This document is not public due to its confidential nature.
- If there will be a higher demand for this project than 50.000 EUR another investment vehicle will be established.
- For this investment a separate SPV will be estblished, which will be separate from Brickbro Global Investments S.L. other investment funds' or other Company's activities.
- EvoEstate will not with-hold taxes, unless you are a private client and resident of Estonia.
Summary of Risks
The investment in this project involves the following risks: risk of not obtaining the expected monetary return, risk of falling prices, risk of not completing the financing, political risk, risk of rising rates, risk of lack of liquidity to recover the capital invested, risk of total or partial loss of the invested capital and risk of fraud.
Risk of falling prices: That the price of the property falls due to the increase in supply or decrease in demand in the area. There may also be a general fall in property prices due to many factors.
Liquidity risk: Unable to find a buyer when you want to sell the property.
Mitigation: The sales team knows the dynamics of the market and is structured with a team of partners in intermediation services to reduce this risk.
Risk of rising rates: Increase in the cost of financing in the purchase of real estate. What would push down the demand of the housing market.
Political risk: What happens if political instability grows during this year.
Risk of loss of total capital or of not obtaining the expected monetary return: It is important to keep in mind that there is no safe investment, and as in any investment, there is always the risk, not only of not obtaining the expected returns, but of losing all of the invested There may be a bankruptcy or bankruptcy by the developer or the estimates of your business plan for various reasons are not met.
Fraud risk: It should be noted that there may be a risk of fraud due to the improper use of the money obtained for the project. There may be fraudulent use of money from any real estate transaction.