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''Ezera Māja'' hostel renovation | ~3.6% Equity Bonus | ROUND 03. | Round 3
100% Finanziert

100%
100%
Bedarf:0.00€
Min.:0.00€
Zinssatz:30%
Zeitraum:12 Monate
Ziel: 36 000€
Mindest. Ziel: 36 000€
Öffnet: 2021/08/12
Läuft ab: 2021/09/12
Art: Specialized
Lage: Latvia
Investitionen: 260

SUMMARY

CROWDESTOR is announcing a new investment opportunity: ''Ezera Maja'' Hostel Renovation | Round 03

The current opportunity offers CROWDESTOR investors to fund the final stage of the renovation of the ''Ezera Maja'' hostel. The loan term is 12 months, and the interest rate is 30% p.a. The financing target for this round is 36 000 EUR. The interest and the loan principal are repaid at the end of the Loan Term in a bullet payment.

The raised funds will be used to renovate 8 700 m2 hostel with up to 750 beds, located in Riga, Viskalu street 48. The renovation includes room repair, new furniture, kitchens, showers, toilets. The implementation of energy-efficient technology such as insulation, a new heating system, and a modern electrical network is already completed, which had reduced energy-related costs by 45%.

The Borrower plans to open the first two of five floors in the spring of 2022 as this part of the building is 70% ready for business operation.  

The project valuation, performed by the certified state specialist, gives 2 500 000 EUR as a debt-free figure, leaving around 900 000 EUR of net equity. The existing shareholders offer 24% (est. 216 000 EUR) as Equity Bonus Plan to CROWDESTOR investors at the funding volume of 235 000 EUR (~3.6% at the volume of 36 000 EUR). 

LOAN

Maximum target: 36 000 EUR
Minimum target: 36 000 EUR
Loan period: 12 months
Interest rate: 30% p.a.
Equity bonus:  24% at the funding volume of 235 000 EUR (~3.6% at the volume of 36 000 EUR)
Repayment: The interest and the loan principal are repaid at the end of the Loan Term in a bullet payment. 
Collateral: Private guarantee from SIA SPADE
Location: Latvia

BUSINESS OPPORTUNITY

The Borrower plans to capitalize on the macroeconomic trend of foreign and regional blue-collar worker influx to Riga. 

Latvia has been losing the blue-collar workforce since joining the EU in 2008, as other European countries offer better working conditions. This resulted in a lack of workers for numerous local retail, transport, construction, and food processing companies. The gap is filled by workers coming from Latvian regions and non-EU countries such as Belarus and Ukraine. 

The demand for construction workers, plumbers, drivers, and other blue-collar workers will continue to grow as business activity in Latvia will increase with the end of the COVID-19 crisis and record-high investments from the European Union in 2021-2027.

Latvia will receive over 10B EUR in 2021-2027: 

  • Cohesion Fund - 4.24B EUR
  • EU Agricultural Funds 3.4B EUR
  • Recovery and Resilience Facility – 2B EUR
  • over 300M EUR from smaller development programs.

Another pan-baltic infrastructure project is Rail Baltica. This new European standard railway will connect the Baltic capitals with the European railroad network. The European Commission is co-financing 85% of the total cost of the project.

The Latvian government is committed to injecting 220M EUR into the economy from its own reserves. These funds will be directed into infrastructure - roads and 10 pined ready-to-go projects like a new prison in Liepaja, Office of Criminal Expertise, hospitals, and schools. 

Record-high investments in large-scale infrastructure projects will create outstanding demand for blue-collar labor, which will be filled by immigration from the regions of Latvia and the neighboring CIS countries like Ukraine and Belarus.

“Ezera Maja” hostel will utilize the economies of scale to provide accommodation services at a lower price compared to smaller competitors. The Borrower plans to offer the lowest budget accommodation price on the market with additional advantages like almost unlimited parking space and convenient logistics as employers will be able to house all the workers at the same place. 

Usage of Funds

The renovation budget remains at 1.5M EUR, and over 1M EUR is already invested. The borrower had already brought the energy efficiency of the building to typical European levels by installing LED lighting, a modern electricity network, a heating system, and overall insulation of the building. These investments had resulted in a 45% decrease in electricity and heating bills during the winters of 2019/2020 and 2020/2021. 

The current stage of the renovation plan includes room refurnishing, installing new kitchens, showers, and toilets for the first floor. 

The rooms on the first three floors are 70% ready, with only painting and floor works left. After finishing the fitting works for showers, kitchens, and toilets, the Borrower can open the hostel for business operations.

Hostel room before the reconstruction Hostel room during the reconstruction Hostel room after the reconstruction

 

REPAYMENT PLAN

The total liabilities of the “Ezera Maja” project are 1 371 111 EUR, including the interest. 1 125 000 EUR are obligations towards Envestio, and 246 110,02 EUR are obligations towards CROWDESTOR. With the additional 296 100 EUR of CROWDESTOR principal and interest, the total liabilities will reach 1 667 211 EUR, including the interest. 

Obligations towards crowdfunding platforms will be replaced with a bank loan as soon as the project starts generating sufficient cash flow. The Borrower has been negotiating and received positive feedback from several Latvian banks. 

The loan of 1 667 211 EUR with 15 years maturity at 3% interest requires a monthly payment of 12 000 EUR. As soon as the renovation works are completed, the hostel can generate up to 55 000 EUR turnover with at least 30 000 EUR EBITDA monthly.

Equity Bonus Plan and Project Valuation

The project valuation, performed by the certified state specialist, gives 2 500 000 EUR as a debt-free figure, leaving around 900 000 EUR of equity. The existing shareholders offer 24% (est. 216 000 EUR) as Equity Bonus Plan to CROWDESTOR investors at the funding volume of 235 000 EUR (~3.6% at the volume of 36 000 EUR). 

Envestio SI OU bankruptcy proceedings

The restructuring agreement with Envestio SI OU was signed at the end of March 2021. It has extended the credit term up to the summer of 2022. The interest rate is fixed at 8% annually. The agreement states that Envestio SI OU has no dispute of any nature with stakeholders of the hostel. The Borrower convinced the creditors that investment was used lawfully and transparently. 

The project has a clear roadmap to achieve cash flow and refinance crowdfunding campaigns with the bank loan.

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