Investment summary

The development project in Ibiza entails the acquisition of a plot of land for constructing 16 luxury apartments, 32 parking spaces, and 16 storage rooms. The asset is based in Ibiza, specifically in the north of the island, in Port de San Miquel. Its location is one of the project's strengths, considering the area's exclusivity. 

The construction of these apartments will be carried out based on an Opportunistic strategy. After the refurbishment, such a strategy will allow the generation of very attractive (and radically different from the existing ones) assets, generating profitability and lower risk for investors after selling the properties. 

It is a very attractive new business opportunity. It is the first project we are launching in the Balearic islands, in a highly demanded area due to the scarcity of new construction. 

The project will be developed and managed by Bizkaiurban, a specialist developer with a proven track record in this business model. 

As part of the business strategy, the investment will rely on two investment rounds. In this first round, the final payment for the land and the first payments associated with the project will be formalized. The second round is expected in the 13th month, once the licenses are obtained and the construction of the homes commences. 

In any case, ROUND 1 investors will receive a premium over ROUND 2 investors for entering the initial phases of the project. ROUND 2 investment will have an estimated issue premium that will depend on four variables: the month of entry into the round, the percentage of pre-sales at that moment, the granting of the building permit, and the bank loan. 

The business has always been modeled based on a Conservative Scenario. Possible deviations in costs, deadlines, or sales prices are more likely to be in favor. 

NOTE: due to the real estate nature of the project, once the company reaches 100% of the objective, the project will conclude (there is no possibility of "overfunding" up to 125%). 

Stock images. They do not refer to the final state of the project. 

ECONOMIC SCENARIOS   

According to the criteria of the CNMV (Spanish Securities and Exchange Commission), two additional scenarios must be included, in addition to the moderate scenario proposed by Fellow Funders for Equity projects, to show potential variations in the business plan.   

The unfavorable scenario contemplates a 15% increase in construction costs and a 15% decrease in the selling price.   

The moderate scenario reflects the costs and returns as proposed by the developer and analyzed by Fellow Funders.   

The favorable scenario considers a 5% increase in construction costs and a 5% increase in the selling price.   

Location

Market

The catchment area has a 51.61% for-sale rating, few available properties in the area, and low unemployment. According to the household income and university education level, the socioeconomic level of the area is high. The population is middle-aged and low-density. It is, therefore, an attractive area for investors. 

The average price of the area is €4,545/sqm. The selected area has high prices, low supply, and high liquidity. The rate of effort of the population is high, and the volumes of supply and demand seem to be well balanced. The properties with the highest absolute demand in the area are four-bedroom and two-bedroom, respectively. 

Due to the urbanistic situation of Ibiza Island, there is a severe shortage of urban land destined for development. The institutions tend to limit the development on the island through very restrictive urban planning regulations. The northern part of the island is particularly affected by this situation, as most of the land is protected. Over the last few years, the north of the island has become the most exclusive area of the island. The beauty of its coves and natural landscape, and the scarce exploitation compared to the south and other areas of the island, have led to the emergence of exclusivity sentiment.  

There is currently no offer in this area for the property type proposed in this development, the existing offer consists of villas from 1.500.000.000 € - 6.000.000.000 €. There are also some new developments starting in the area of Portinatx (the same municipality and market), of high level apartments. 

Traditionally, the north of the island only offered villas. The apartments for sale were old. In recent years, the product of new construction is already aimed at this market: central Europeans (Dutch, Belgians, Swiss, English) with high purchasing power and looking for these environments. 

Investment is another commercial outlet to consider, given the need for rental accommodation for the workers and managers of the hotels in the area. Since the pandemic, the demand for housing with gardens and outdoor spaces has increased everywhere. 

These factors increase the value of existing urban land available for licensing and in a situation of legal certainty, i.e., there is no risk of possible declassification in a subsequent revision of regulations as it is land in a fully consolidated urban area, as is the case of the land we are dealing with here. The only thing that can happen to land of this type in Ibiza is that it may be revalued with the passage of time. 

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Financial plan

The project requires a total investment of €13,663,999. Out of the total capital needed, investors will provide €1,000,000 in a first-round via Equity Crowdfunding. On the other hand, €4,508,458 will be provided through a loan. Developers are in advanced negotiations with a bank. Developers, in this first round, will provide €305,000. An initial reserve fund of €233,345 will be set aside for possible contingencies. 

Investors will become shareholders together with the contribution of the developers in the Special Purpose Vehicle (SPV). 

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The following forecasts are mere estimates that may vary depending on the economic, social, and other circumstances that may arise during the life of the project. 

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Real state scoring

Our Scoring relies on a transversal evaluation of the business, evaluating the different metrics that we obtain from our financial analysis, its structuring, the possible intrinsic and extrinsic risks, the analysis of the environment, and the developers' experience.

According to this analysis, the project obtains a A- rating. 

Project: The project will require a total investment of €13,663,999. Private investors, who will enter as shareholders in the Special Purpose Vehicle (SPV), will finance 3,799,000 € of this amount in two equity rounds.  

Capital Structure: The project will be structured with capital provided by the promoter, around 6% of the total equity; capital from Fellow Funders investors, around 94%; and finally with a bank loan of 33% of the total investment.

Developer: The developer team has extensive experience in the sector and specializes in this type of project. The team has worked nationwide in the Basque Country, Catalonia, Malaga, and the Balearic Islands. 

Market: The location of the asset is one of the project's strengths as it is situated in one of the most exclusive areas of Ibiza. Additionally, the selling price of the area has been analyzed and is aligned with the market demand. 

Financial Risk: The developer loan for this project is 33% LTC, which means that the leverage is limited. The project is expected to obtain 50% of the pre-sales at the start. The construction will not begin until the loan has been granted. 

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Project steps

The investment term will begin when the Capital Increase is formalized. 

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Operation coverage

Once the capital increase finishes with the new partners from the crowdfunding round, the investors will own the majority of the equity of the Special Purpose Vehicle created for the business, turning into the owner of the assets. 

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Risks

• Variation of Execution costs: the Execution costs are analyzed by the project developer. However, they can always suffer variations due to conditions not foreseen beforehand. 

• Technical or Execution Problems: in any work or project, technical or material execution problems may arise which, due to their nature, are not foreseen and may cause delays in the deadlines as well as cost increases. 

• Administrative procedures: projects always rely on their regulatory and administrative suitability. However, they can always be affected by circumstances beyond the control of the developers and the project that may imply delays in deadlines or increases in administrative fees. 

• Variation of sale or rental prices: the price of the assets for sale or rental may be subject to upward or downward variations depending on various market factors. The project's developers have experience in these markets. They will be who will act following the situations that may arise to maximize profits and minimize risks. 

• Liquidity: there may be market situations in which part of the investment takes more to liquidate. In this case, the company will take the appropriate measures to resolve them as quickly as possible. 

• Changes in financing conditions: bank financing conditions may vary depending on several factors. However, the European Central Bank forecasts point to a long period of low interest rates. 

• Political instability: regulation in Spain depends on many administrations. There may be political changes that could lead to changes in town planning, tax or administrative regulations. 

• Loss of capital or unexpected monetary return: the return on investments may be lower than expected since all future analyses bases on business expectations and may vary. Therefore, the risk of not obtaining this return and losing part or all of the invested amount always exists. 

NOTE: due to the real estate nature of the project, once the company reaches 100% of the objective, the project will conclude (there is no possibility of "overfunding" up to 125%). 

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