Visit to EstateGuru
Last month I visited EstateGuru in Tallinn, Estonia. Here I talked to Bert Reila, the Affiliate Marketing Manager. The EstateGuru office is located within walking distance of the historical old town centre. This was convenient, as I stayed in a hotel in the middle of the old town, and the walk took less then 15 minutes. It also helped that it was 20 degrees and sunny, I guess the rain of the last few days finally depleted the clouds.
Can you give a brief introduction of EstateGuru?
EstateGuru was founded in 2013 in Tallinn, Estonia, and the platform was opened for investors in 2014. We offer short-term loans to businesses with real estate as collateral. At the moment the available loans are from Estonia, Latvia, Lithouania, Finland, Spain, and Portugal. All loans are originated by EstateGuru itself, we so not work with external loan originators.
Can you tell something about the start of the company?
In 2013, just after the crisis, our CEO Marek Pärtel saw that is was very difficult for businesses to get financing. The traditional banks are quite reluctant and conservative, and even if the loans are approved it can still take several months for the process to complete.
Together with Marko Arro and Kaspar Kaljuvee he saw a business opportunity and they decided to found EstateGuru. Today they still lead the company: Marek Pärtel as CEO, Marko Arro as CFO, and Kaspar Kaljuvee as CRO (Chief Risk Officer).
How big is EstateGuru?
Our main office is in Tallinn, and we also have offices in Latvia, Lithouania, Finland, the UK, and Armenia (for IT support). In total we have 36 employees, of which 10 are working on platform development. We currently have almost 30,000 investors, of which about half are active.
How many loans has EstateGuru financed so far, and what is the current monthly volume?
We have now financed over 955 loans in total since the platform started, with a total value of more than 142 million euro. The average return rate of our investors is currently 12.06%. The total of outstanding loans at the moment is 81 million euro.
We are publishing approximately 40 to 50 new projects each month, with a value of 6 to 8 million euro. Next year we are aiming at raising this to 10 million euro each month.
Which expertise is present at EstateGuru itself, what what has been outsourced?
Almost all expertise is present here. We outsource the valuations of properties and projects, plus some advertising.
Our CEO has over 15 years experience in real estate, both as an investor and project development. Combined, our employees have more than 26 years of experience with real estate valuations, 10 years banking experience in the field of credit risks, and 16 years in project development. Our debt collection manager has over 15 years experience and is personally involved in each project where there are signs of late payments or other problems.
How do you minimize the risks for investors?
Our loans are always backed by real estate collateral, 95% via a first rank mortgage. In the rare case a loan cannot be payed back we can sell the collateral and use that to pay back the investors. The maximum LTV (Loan To Value) is 75%, and the average is currently 56%. This means that the average loan is almost half of the actual value of the collateral, and the lower the LTV the higher the chance all investors can be payed back even if the value of the property is lower due to market circumstances.
We also have a very strict acceptance process. A loan manager does the first analysis, the background check, inspects the collateral, and has it valuated by an external company. If a loan consists of multiple stages, then the valuation of the collateral is done at the start of each stage. Then it is brought before an internal creditcommittee which consists of 5 persons from the risk management team. These 5 persons will vote and the result must be unanimous or the loan is not accepted.
Only 3% of our loans has experienced problems, and we have been able to get the funds of our investors back each time.
The funds and accounts of our investors are also protected. It is only possible to withdraw funds to the bank account from which the first deposit was made. This cannot easily be changed, it requires proper documents plus access to the registered e-mail address.
What plans do you have for the near future?
In the next 3 months we will launch the secondary market, and we will add a ‘diversification score’. Next year we will be focussing on growing our monthly volume to 10 million euros per month. A recent investment of 1.3 million euro in EstateGuru itself will be used to expand to the UK and to Germany.
My impressions after this visit
Solid and transparant, those were the things that came to my mind after my visit to EstateGuru. I received clear and extensive answers to all my questions, and the atmosphere was really friendly.
Another plus is the platform being profitable, which of course is a sound basis for the future. Dit can be read in the annual reports which are published on the website. This all, together with the fact that all loans are secured by real estate collateral, makes EstateGuru a valuable part of my portfolio where I can invest with my mind at ease.