Estateguru warns of losses on German RE portfolio
Estateguru has warned investors that some losses may be incurred due to underperforming property loans based in Germany.
In an update to investors, the European peer-to-peer lending platform said that it had been using its own capital to offset defaults, but ongoing difficulties in the German real estate market mean that losses are likely.
In January 2023, Estateguru paused all new lending in Germany while the platform addressed the underperformance of the German segment of its portfolio.
This was caused by slowing transactions in the German housing market, as well as regulatory uncertainty and cost pressures within the property development sector.
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While the market picked up again in 2024, Estateguru noted that this was “only very slowly and not in all regions.”
“For property owners in shrinking regions, falling demand and declining rental income could pose a serious financial risk,” the company added. “As a result, we anticipate an increase in properties being sold below historical market prices and as a result of oversupply.”
Estateguru said that while significant progress has been made on the recovery of the German loan portfolio over the past year, many financed properties have not progressed in construction due to a lack of funding and the exhaustion of borrowers’ equity. As a result of this, the condition of some properties has deteriorated, making it likely that forced sales will result in some losses.
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“At Estateguru, we remain committed to ensuring the best possible outcomes for our investors by actively funding recovery efforts,” said a company spokesperson.
“Each month, we allocate approximately €100,000 (£83,312.5) of our own capital toward default recoveries, bringing our total contribution to over €1.1m in 2024.”
The firm said that it anticipates that some more recoveries will take place in 2025. However, the exact proportion of the portfolio affected will depend on the resolution of ongoing enforcement and insolvency proceedings.
“We expect to resolve some exposures in 2025, leading to property sales and partial repayments,” the spokesperson added.
“However, additional repayments beyond the sale price are unlikely in most cases, as many borrowers operate single-purpose companies with no significant assets.”
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