EstateGuru said it expects recoveries to take at least two years for part of its German portfolio, as it deals with borrowers that are avoiding contact or raising groundless objections.
The real estate lending platform has been grappling with high default rates in its loan book, reporting issues with its investments in Germany. In January this year it paused new investments in the country and launched an investigation into possible violations of its internal regulations by some members of its German team in 2020 and 2021.
In a post, EstateGuru said “navigating the complexities of local legal requirements in Germany has made resolving the defaults both a time consuming and frustrating process”. But the platform expects to start seeing results in the second quarter of 2024, after partnering with German real estate debt servicing firm Steinberg at the start of the year.
In its update, the group said it has not been possible to sell the entire German portfolio of non-performing loans in one transaction.
“The market is showing signs of low liquidity and the expected discounts are high because the recovery is strongly connected to the underlying property value, which is under pressure following a significant downturn of the real estate market in Germany,” it noted.
Currently only five per cent of the German portfolio is performing, with €79m (£68.2m) in recovery and €21m repaid.
Although around half of the defaulted borrowers are in contact with Steinberg, about 35 per cent are avoiding contact.
There are currently seven insolvency proceedings ongoing or being started, but no forced auctions have taken place yet.
“We assure you that we are working on a case by case basis to develop and apply workout plans which maximise the returns of our investors.” EstateGuru said. “The German real estate market situation is showing signs of improvement, which should make recovering the loans somewhat less difficult.”