I’d like to begin by expressing my immense gratitude to our investors, partners, and our team for the trust you’ve shown in our platform, in the course of what proved to be a challenging year. It is your continued support which has allowed us to weather the storm, and consolidate our status as a market leader in property backed lending in Finland, and the Baltics.
The challenging macroeconomic climate has tested our industry’s resilience and adaptability, and only those companies that have proven both resilient and flexible have endured. In light of these difficult conditions, we’ve reviewed and enhanced our policies to strengthen our platform and our portfolio, and altered our focus to better suit the tasks at hand. So it is with great optimism and confidence that we look forward to a new year brimming with crowdfunding opportunities.
I’ll outline the main challenges we faced in 2023 and the exciting prospects for 2024 below, as we continue our mission to make property financing and investing accessible to anyone, anywhere in the world.
- We funded just under €100M in new loans, with €21M already repaid and €78M currently performing as expected.
- €124M was repaid to our investors, with €14.6M of that amount recovered from defaults.
- Investors earned €16.5M, with an average return per investor of 8.98%
- We welcomed 8974 new users onto the platform, bringing the total to over 160 000.
- Automated investments grew by 20%.
For more details, check out our 2023 Recap.
Successes in 2023
Estateguru was an early recipient of a pan-European Crowdfunding licence, which allows us to operate in all EU member states in accordance with the framework laid out in the recently introduced European Crowdfunding Service Providers for Business Regulations (ECSPR). This has bolstered our reach and reputation, which is reflected in a global investor community that now exceeds 160,000. In 2023, We saw 8974 new investors joining the platform.
We shifted our strategy from a focus on growth to an emphasis on sustainable profitability, leading to increased revenues (€8.4M in 2023) despite lower transaction volumes. Although we faced a slight deficit due to major investments (over €1M) in loan recoveries, our revised approach led to a profitable second half of the year and a high level of reinvestment by our users. Measures aimed at strengthening the platform and the portfolio, such as our enhanced credit policy, and the implementation of Moody’s Analytics, have been implemented to excellent effect.
Despite record recoveries (€14.6M in 2023), challenges remain in reducing the default level, particularly in Germany. Our focus on improving user experience and security, coupled with our team’s dedication and expertise, continues to drive our success.
2023 in summary:
- We were one of the first recipients of a pan-European Crowdfunding licence, expanding our reach to over 160,000+ global investors, and onboarding 8974 in 2023.
- Our strategic shift towards sustainable, profitable growth has led to increased revenue (€8.4M in 2023) despite lower transaction volumes.
- We ended the year with a slight deficit due to investments in loan recovery, but we’re confident that these efforts will help us to achieve future profitability.
- Investor confidence remains strong with a high reinvestment rate and new and continuing institutional partnerships.
- We’ve enhanced our credit policy, and integrated Moody’s Analytics, to improve portfolio quality, with a significant portion of the €100M funded last year currently performing well.
- We face ongoing challenges in reducing defaults, particularly in Germany, but are committed to finding solutions, and have dedicated additional time and resources to expediting this process.
- Continuous efforts are being made to enhance user experience and security on our platform.
Addressing Default Reduction Challenges
Despite a record €14,6M recovered in 2023, reducing our default level below €100 million remains a challenge. The number of defaults in Germany is especially high, due to lengthy sales processes and legal proceedings (recoveries can take up to 5 years depending on market conditions), and consequently, resolving this problematic subsection of the portfolio will have a major impact on the overall default level. To further expedite the recoveries, we’ve changed management, partnered with legal experts, and strengthened our internal legal team.
Estonia ended the year with the highest loan origination volumes in the Baltics (€16.7M in 2023) and the lowest default levels (10.3%). A recent Estonian project, the Endover project, secured nearly €1M in funding in a single day. We are confident that our highly competitive terms, especially in the current high-interest environment, will continue to attract quality projects and investments. We also saw Estonian real estate developer, Everaus Kinnisvara, on the platform in 2023, representing another major win for the Estonian team.
Despite a rise in defaults in Lithuania, from 19% in the beginning of 2023 to 37% in January 2024 – primarily due to a major group project defaulting – substantial recoveries last year indicate a strong likelihood of reducing defaults to below 25% this year. The expected loss remains close to zero.
Lower loan volumes and increased defaults were observed in Latvia in 2023. However, our established processes and understanding of market trends led to a steady series of recoveries throughout the year. Our focus is now on increasing market share and attracting more high-grade borrowers.
In Finland, despite some challenges with larger loans from 2020 and 2021, and a sluggish market, a recent repayment of a €5M loan is one indicator suggesting a steady improvement in the portfolio.
Plans for 2024
- We’re well positioned to navigate the ongoing macroeconomic challenges in the real estate and investment sectors. Our strategy is to strengthen our position in existing markets, and maximise opportunities through the deployment and development of existing and new products, for both investors and borrowers.
- A key focus is on reducing defaults, especially in the German market, while keeping investors informed and engaged through regular updates.
- Our aim is to boost our monthly loan volume from €10 million to €20 million, whilst maintaining consistently high standards in line with our enhanced credit policy, and the integration of Moody’s Analytics onto the platform.
- Instead of expanding into new countries, our strategy will concentrate on deepening our market penetration in existing regions. We believe there is significant potential to increase market share given our innovative product offering.
- We’re dedicated to maintaining institutional grade quality standards, ensuring fewer defaults and the timely completion of projects.
- Launching a new Investor Dashboard for a better user experience and preparing to release a mobile app in Q3 2024 for convenient, real-time access to investments.
Having once more demonstrated our capacity to adapt to challenging conditions, and find opportunity in adversity, we have emerged from 2023 in a stronger position than ever before. By focusing on our core markets, streamlining operations and refining our policies and processes, we have consolidated our position as pioneers and market leaders in our industry.
Continuing to bring down the default level remains a crucial task for 2024, and our focus in this regard is unwavering, but I am pleased with the progress made and confident that it will continue. I must, once again, pay homage to our investors, our partners and our team for their ongoing faith in the platform, and conclude by wishing you all a very happy 2024.