Visit to Kuetzal
Last month I had the chance to visit the Kuetzal office in Riga. The appointment was at 9 o’clock in the morning, and Romans Antonovs (the project manager) was so kind to pick me up at my apartment. After a cup of coffee I talked to Alberts Cevers (CEO and co-founder of Kuetzal) and Romans Antonovs.
How big is Kuetzal?
We currently have a little over 2,000 investors. Kuetzal has 3 fulltime employees, and the 4th employee was just hired this week. We are trying to keep the team as small and flexible as possible. We can focus on the important issues, because we have outsourced almost a lot of things: marketing, design, legal affairs, even IT and the platform development.
We answer all emails and questions of our investors ourselves, even in the weekends. We take important decisions together, and so far we haven’t had any big difference of opinion. Alberts takes the lead when it comes to financial side of things, and Romans when it is about real estate.
Kuetzal is officially registeed in Tallinn (Estonia), but the office is in Riga?
Estonia has a more progressive government, more modern when it comes to legislation. We had several ideas in May 2018, including a cryptofund. In Latvia we had to explain our business ideas to a 70 year old lady. In Estonia the business clime is a lot friendlier, and you also need to have less money to start a business. It took us 2 to 4 months to found the company, and in December 2018 we had our first investor on the platform.
How can you ensure such a small team has all the knowledge that is required?
We have good connections to several people in all areas. We also talk frequently to the other platforms and companies in Riga: there is a really friendly atmosphere.
Besides that, we have two advisors that closely involved. One is a influential Latvian banker, who is not an investor in Kuetzal itself but he has a real interest. The other advisor is a well-known architect from Riga, who’s work includes an airport and several large shopping malls. This gives us a lot of insight in real estate and building constructions. Not so long ago we turned down a project just because of this.
What do you do to get quality projects on the platform?
We are very strict and thorough when it comes to allowing projects to the platform. We always visit the projects ourselves, and we meet the project owners in person. Most projects are also audited by an external company. This all takes a lot of time, so we want to hire agents in several countries. At the moment we are in the middle of this process for Spain, Italy, and the UK.
When the project is a real estate project, that real estate will be the collateral for the loan. This makes it possible to add the buyback guarantee to most of these projects. At the moment around 70% of the projects has buyback guarantee.
How do Kuetzal Care and the buyback guarantee work, and how are these financed?
Kuetzal Care guarantees that all projects will be fully financed, even if the combined investments of all investors do not reach the required minimum. For this Kuetzal has an agreement with several banks, investors, and large invesment funds who will finance the remainder.
Buyback guarantee means Kuetzal will return all invested sums to the investors within 2 months in case a borrower is unable to repay the loan. This also includes the accrued interest. The project owners are personally liable for the debt, plus there is the real estate object itself as the collateral. It is also possible to get your investment back before the projects ends, but then there is a 10% penalty. We can offer the buyback thanks to several large investors in our platform. We do not yet offer it on all our projects, because sometimes other parties offer better conditions so we want to keep this possibility open.
For investors the buyback guarantee is more impartant than Kuetzal Care
Kuetzal Care was important when we started, because there were not a lot of investors on the platform yet. Projects are funded a lot faster now that we have more than 2,000 investors and we see that the added value of Kuetzal Care is getting smaller. We also see the value of buyback guarantee for the investors and we want to add this to all our projects in the future.
One of the projects had both a ‘fixed interest’ and an ‘expected interest’?
That project will be closed soon, because the building was sold before the end of the project enddate for a really good price. The investors will share in the extra profit.
Is Kuetzal heavily regulated by the government?
No, there are no harsh regulations. Of course we do comply with all legal demands, as well as all European legislation such as the anti-laundering laws and the privacy protection laws. We are als required to report our monthly and yearly financial statements to the government.
When can the investors get these financial reports from Kuetzal?
Because we started in 2018, we do not have to publish annual financial statements yet. We will add this to the website later this year, and we are also thinking about publishing financial statements twice a year. This year the profit for Kuetzal is approx. zero and we expect to make a small profit next year. We mostly invest in growth and we expect the interest rates to be a bit lower, which also effects our profit.
Which developments and improvements can we expect in the near future?
We are currently working on some basic tools, such as a list of historical transactions and and option to download these. We also want to add a document to each investment with the official agreement. You say it is important for inbestors to have an overview of the transactions and account values for a certain period and on a certain date. We will look into that too. We expect to add the basic tools to the website in a month or so. Other developments we are considering are two-factor authentication and adding geo-locations to our projects, as well as live camerastreams so the projects can be followed in realtime.
You do not have a auto-invest yest?
We have already thought about it, it is not difficult to add. We are waiting until we have more volume. We do have enough projects lined up, we hve around 10 projects waiting to be added to the website.
The company behind an earlier project in Marupe just bought a plot of land where 38 houses can be built. The total value will be around 10 million euros, this will be split into multiple projects. We will add a new project as soon as one of the projects on the website is fully funded. We are thinking about an option for investors to pre-book these projects.
The minimum investment is 100 euro, this is a big threshold for smaller investors to re-invest the received interest. Can this be lowered to 10, 25, or 50 euro?
The minimum investment of 100 euro was chosen in the beginning to keep the number of transactions low. This was to minimize the load on the servers. Maybe we can lower the minimum now, we will have a look at that.
Both Alberts and Romans were very open and gave a lot of information. My visit to Kuetzal has left me with the impression that this is a platform that I can keep using with confidence. It is quite a new platform, so just like the others we need to keep a close eye on it.