Due to local legal requirements, resolving the defaults in Germany is proving a long and frustrating process, but we are unwavering in our commitment to getting the job done, and we are starting to see results. We have compiled some of the questions we have received recently about the situation in Germany, and provided our responses below.
Estateguru has previously said that you expect to recover 30% of defaults by the end of the year. What is the current expectation?
Our initial projection of recovering 30% of defaults by the end of the year remains a valid target. It’s important to note that our dedicated workout group is diligently finalising comprehensive workout strategies, and these strategies will be ready for implementation in September. This will provide us with a clearer understanding of how much progress we can expect to make in resolving defaults within specific timeframes.
On average, we have managed to resolve default cases within 12 months. Considering Germany’s more bureaucratic environment and the lack of sufficient data for statistical accuracy, providing an exact timeline for the recovery of defaults in that market is difficult. We can only estimate that the process might take longer than in the Baltics and Finland. Nonetheless, recoveries are achievable, as demonstrated by the loans already repaid to investors in Germany. Additionally we need to take into consideration the size of the loans and the overall macroeconomic situation which also have an impact on recovery time.
But progress is being made. In recent months we have recovered approximately 4M from defaulted loans, including 0.5M in Germany.
What is the ongoing process?
Our ongoing recovery process is a collaborative effort involving multiple external partners who specialise in legal disputes, workout strategies, and the sale of claims. Our legal team and Chief Risk Officer are fully engaged, working around the clock, particularly on the German recoveries. This collective approach ensures that we employ the most effective methods to secure recoveries and resolve defaults.
Have we achieved any concrete targets in the process already?
Absolutely, we’ve made significant strides in our recovery efforts. Notably, we successfully recovered one project without resorting to auction or insolvency proceedings. This achievement demonstrates our commitment to exploring innovative and custom recovery strategies. Additionally, we’re preparing for upcoming milestones in October, with pristinely organised data tapes and data rooms. By digitising our documentation, we’re streamlining the enforcement process and enhancing the attractiveness of our portfolio for potential claim buyers. And as mentioned above, in recent months we have recovered approximately 4M from defaulted loans, including 0.5M in Germany.
The total historical outstanding loan portfolio for Germany is currently €82,808,302, down from €103,807,532, which means that approximately €20 M has been repaid to investors thus far.
Do we see any losses currently?
As of now, we haven’t incurred any losses. However, it’s worth mentioning that the real estate market in Germany has experienced subdued activity over the past year. This has resulted in reduced transaction volumes, accompanied by notably lower sales prices. While we have not experienced losses at this point, the future trajectory of the market remains a factor. Should the market activity fail to pick up in the upcoming months, there is a possibility that losses could be incurred.
We remain steadfast in our commitment to addressing defaults, optimising recoveries, and bolstering the resilience of our portfolio. The evolving real estate landscape underscores the importance of our diligent efforts and proactive approach to mitigating potential losses. Rest assured, our focus on prudent strategies and dynamic collaborations positions us well for both near-term challenges and long-term success.
Click the links for more information about how we approach risk at Estateguru, how we maximise value creation for our investors, and what you need to know when it comes to late loans on the Estateguru platform. Or watch our recent Q&A session with our Chief Risk Officer Andres Luts and Head of Retail Investors, Daniil Aal.
