EvoEstate comment

After 3 months break, we have the first skin in the game fixed-interest loan for self storage rooms in Madrid. This developer has already had an equity financing with 15% expected returns with Urbanitae. The previous project had sold 88% of the units and the developer is seeing more demand in Madrid.

This loan comes with 2 guarantees: first one on this property and second on the other commercial property that developer has. The Loan to Value ratio comes to 45%

Developer plans to make 16% return after all the costs (including and financing).

Detail Descripton

INFORMATION ABOUT THIS PROJECT

From Urbanitae, we present a new project that consists of the development of a promotion of 67 storage rooms in Madrid. 

The development is located in the Chamartín district, within the city of Madrid. Specifically, it is located on Calle Luis Cabrera 62, next to Plaza de Prosperidad and Calle López de Hoyos, with a high population density and almost 35,000 people registered in the neighborhood itself. Currently, a housing stock from the end of the 70s predominates and generally they do not have storage rooms in the same property, thus enhancing the profile of buyers in the environment.

PROJECT DESCRIPTION

The promoter of this opportunity is a company related to  Grupanxon. This company is a business holding company with more than 20 years of experience in different areas, highlighting real estate development and integrating its own construction company. This is the same promoter as the Magallanes operation, already financed on the platform.

In 2017, the company decided to create a new line of business specialized in promoting garage spaces and storage rooms, finding a clear market niche in the center of large cities due to the scarcity of this type of solution. In less than three years, they have promoted and built more than 600 units between Malaga, Seville and Madrid. 

The project has a fixed-rate loan strategy, which consists of financing the developer to develop the promotion of storage rooms. The developer has already signed a reservation contract for the acquisition of a premises of more than 450m2 that will be transformed into a space with independent storage rooms. Both the construction and the commercialization of the storage rooms will be borne by the developer.

The proposed development consists of  67 individual storage rooms, with direct access from the street and has a parking area and community loading and unloading area. Currently the premises are enabled as a garage and the developer will be in charge of intervening the space to adapt it to the required use. The commercialization of the operation has already started and there are signed pre-reserves. The final target client is residents of the neighborhood who are looking for an additional space to their home, for the custody of belongings. 

Due to the nature of the operation, the building permit is processed through a  responsible declaration  (in collaboration with an ECLU) ;  therefore, it is not necessary to file a file with the Municipal Administration. Subsequently, once the project is completed, supervision by the Administration of the works will be necessary. The work is scheduled to last 6-8 months and the project as a whole lasts 12 months, including the writing process of the final units. The developer has already carried out a technical study on the premises and consulted the community regulations for the development of the operation.

STRUCTURE

The operation will be articulated through a company created by the developer exclusively for the project:  JJM PROMOTORA 2020 SL  This operation will be structured via debt, where Urbanitae Investors will grant a loan to the company. The sale of all the storage units is not necessary for the repayment of the loan. The main characteristics of the debt are (more information in the Loan Report document) :

• Fixed rate loan of 15%.
• Term of the loan 12 months.
• Interest on the loan will be paid at maturity.

Regarding the guarantees of return of said loan, the debt contract establishes a first mortgage promise on two different assets:

• The property itself that is the object of the promotion, located at Calle Luis Cabrera 62, Madrid. 
• An additional storeroom located on Calle Rioja 126, (Leganés, Madrid), owned by a group company. It is free of charges and already enabled with 38 storage rooms. The execution works are recently finished and the developer is going to retain it as a patrimonial asset. They are two farms that are register-independent but physically linked. You can check the ownership and the state of the premises in the attached documentation.

WHY INVEST?

There are several reasons to invest in this project: 

• The building permit is processed as a  Responsible Declaration and therefore it is not necessary to wait for a favorable report with the administration to start the works.
• The project will be promoted by a company linked to  GRUPANXON, an entity with more than 600 storage rooms and garages promoted since 2017.
• The promoter of the work invests his own capital in it, which aligns the interests of all the agents involved in the investment.
• Structured operation via loan, where it will not be necessary to wait for the sale of all the units to receive the loan yields.  

MARKET

A market study has been carried out to determine if the sale prices set by the promoter are reasonable. Currently, there are no more than 5 units available for sale of this type. 

You can see more information within the documentation, Sales Witnesses, where you will find a list of storage rooms for sale in the area.

WHEN WILL I RECOVER THE MONEY INVESTED?

The term of the loan to be granted to the developer is  12 months. 

The deadlines set by the developer for the operation are:

• July-August 2020 purchase and sale of the premises. Obtaining a license.
• August-September 2020 start of works.
• April-May 2021, end of works.
• June-July 2021, deed of the storage rooms.

It is important to keep in mind that in any real estate promotion the terms can vary both upwards and downwards. 

RISKS

All investments carry risk. We detail the clearest risks we have identified for this project:

• Increase of the terms foreseen in the project, due to delays in the construction or validation of the project technician, therefore an increase in the term for the repayment of the loan.
• Delay in the sale of the storage rooms and therefore the developer will face difficulties in repaying the loan.
• Diversion of fixed costs associated with the investment, unforeseen in construction. 
• Risk of not reaching the expected sales rates and consequently the delay in terms.  
• Risk of not achieving the expected sale prices in the business plan, and therefore the developer could not face the repayment of the loan.