Auction Product - Badia del Vallès
Update 15.01.2020 6:33PM (CET): We have closed the financing part on our platform, the remaining amount will be financed by Inveslar. The investments have already placed successfully.
Update 18.12.2019 9:21PM (CET): Business plan was updated, because it did not reflect additional 18,000 EUR which was requested by EvoEstate. Also there were changes in fee structure implemented from Invernova side- which gave more favourable terms to EvoEstate investors and in pessimistic scenario structure expected yield due to changes in fees structure has increased from 11.05% to 11.22%.
EvoEstate presents its Investors another opportunity to invest in a deal originated by Inveslar. This opportunity offers expected returns estimated by the deal originator of at least 11.22% annualy for a duration of 14 months. However, this is in the worst scenario projected by Inveslar. Attached in the documentation you can find out 3 scenarios with different sales prices, which in some cases even projects up to 16.97% returns.
The purpose of this investment is to buy an apartment in Barcelona area which was acquired in an auction well below the market price. The funds will be used to also cover the acquisition expenses and renovation costs.
The total amount of the required capital for acquisition and renovation is 75,945.59 EUR, the total area of the apartment is 82 sq. m - the price of development per sq. m. is €926.
Current offerings in the given area for such characteristics start at €104,200 - €1240 per sq. m. (difference +34%), however, the price goes upwards to €136,000 - €1563 per sq. m. (difference +69%) with medium or lower class interior, and up to €146,000 - €1697 per sq. m. (difference +83%) for newly renovated apartments.
Nonetheless, it’s important to understand that even though this is undervalued property, Barcelona area- Badia del Vallès real estate market isn’t as liquid as central Barcelona’s.
Margin of safety
There are 2 components providing the margin of safety to the investors. The duration of the project: it’s noted that the developer expects to sell the property within 14 months, however, this duration could be much shorter because the expected renovation duration shall be shorter than 1 month.
Another component of the margin of safety is the property acquisition price which even after the acquisition taxes & costs and a renovation outcompetes other properties in the area.
Up to an IRR of 10%, 100% of the net profit of the operation will go to the Investors. 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.
EvoEstate success fee
EvoEstate does not charge any investment fees to the investors if the returns are 14% or below. In case the investment yields returns above 14%, EvoEstate will charge 20% from the surplus, i.e. the investment yields 16%, EvoEstate will charge 0.4% from the invested amount, while returning 15.6% to the investors.
- This investment will become active once the fundraising for the whole amount of is completed or the deadline on January 25th is reached.
- There is no need for any development licences for this renovation.
- Attached in the documentation you can find the business plan and supporting documents in Spanish.
- 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.