Crowdlending Europe AB ("the Company" or "Crowdster", Org-Nr: 559521-5350) markets through an online platform ("the Platform") a range of investments ("Investments") in shares ("Shares") or syndicated loans ("Loans"). The Investments have in common that they are based on completed properties or real estate projects as the underlying asset. The Investments presented on the Platform are often different types of top financings for private real estate companies or property developers ("Project Owner" or "the Company") with no or limited security.
All investment is associated with risk, and investors risk losing their investment entirely or partially. Investment in Shares and Loans marketed via the Platform can generally be described as high-risk, as no financial advisor or other actor directly or indirectly recommends the Investments. Crowdster provides no guarantees for investors' Investments or loans and encourages investors to invest carefully.
Crowdster also encourages investors to seek personal advice from professional advisors, including investment advisors, accountants, lawyers, etc., and to conduct independent analyses and investigations before acting on the information Crowdster publishes. Crowdster cannot assure investors that the stated information is correct or complete. Crowdster in no way guarantees the success of any action an investor takes based on information published on the Platform. The Investments are therefore solely aimed at the following types of investors:
A loan can be combined with securities in the form of mortgage on shares or real estate, guarantees, company guarantees, or other securities. Note that securities in this type of investment are often subordinated and/or have limited economic value. An investment in Shares cannot be combined with any specific security. As a shareholder, there is typically no opportunity to claim invested capital to be repaid, unless there are sufficient funds in the company to meet all its obligations to its creditors and the company's board and general meeting decide on distribution.
Both Investments in Shares and Loans are typically dependent on the underlying real estate project developing as expected to generate the budgeted return. Project Owners may, for example, lack the financial prerequisites to handle significant project deviations such as budget variations, delays, etc. Any securities are no guarantee that the investor will get their invested capital back or achieve a return. Investors should be aware that the entire Investment may be lost.
Investments in both Shares and Loans are not covered by deposit guarantee or investor protection rules, which means that the investor cannot receive any compensation under these rules if the Project Owner or the Company goes bankrupt or otherwise has payment difficulties.
Investor protection is a state promise to compensate investors' losses of financial instruments and funds from, for example, banks and other financial institutions in the event that the institution goes bankrupt. The deposit guarantee covers funds in certain accounts and means that the depositor receives compensation if certain financial institutions, such as banks, go bankrupt or if the Financial Supervisory Authority decides to activate the deposit guarantee.
Beyond the risks associated with the investment instruments themselves, i.e., Shares or Loans and the security, the most significant risks are connected to the Project Owner, their financial resources, the project, suppliers and contractors, alternative financing sources, external factors and economic conditions, authority approvals, etc.
Below, we have described the most common risk factors that are considered potentially impacting these types of investments. The mentioned risk factors are not ranked, and the list does not claim to be exhaustive. Additional risks and uncertainties may occur with each Investment.
It is important to analyze potential risks in the current Investment and weigh these against the expected return. Only when you have done this and considered your personal financial situation in relation to the expected return can a well-founded investment decision be made.
When investing in Shares, returns are often paid through dividends. However, there are several types of risks that can negatively impact the Project Owner's business, and it cannot be guaranteed that the Company can produce a result that enables distribution. As a shareholder, there is typically no opportunity to claim invested capital to be repaid, unless there are sufficient funds in the Company to satisfy all creditors, both short-term and long-term, and the Company's board and general meeting decide on distribution.
There is a risk that a majority shareholder may decide, or refrain from deciding certain actions contrary to the interests of other shareholders, such as not choosing to decide on an expected distribution or managing the Company in an non-purposeful manner.
The General Assembly can decide to issue new shares, whereby the existing shareholders' proportional ownership and voting shares can be diluted.
The Company's shares are usually unlisted shares not traded on any marketplace. Shareholders who want to sell their shares (assuming it is possible according to the Company's articles of association) risk that the market value of their Shares does not correspond to the acquisition value or an assessed valuation at a given time. Additionally, there is a risk that no buyer can be found.
When investing in Loans, returns are paid through loan repayment and interest payments, possibly combined with prior amortization. However, several risks can negatively impact the Project Owner's business, and it cannot be guaranteed that the Project Owner can produce a result that enables repayment. The investments rely on there being sufficient funds with the Project Owner to meet its obligations and that the Project Owner's management or board actually carries out the repayment.
The securities provided in connection with Loans can in practice have an extremely limited economic value and in no way guarantee the investor's capital. The value of share pledges and company guarantees, for example, presupposes that the company has underlying realizable assets, while a subordinated property mortgage depends on the property being realizable at a price that can honor all obligations to the primary mortgage holder and that there is additional surplus capital. As an investor, one must carefully assess potential securities, and regardless of how good the securities are, one must expect it will take time to recover one's capital in the event of a pledge realization. There is a risk that the pledge proves to have no or only limited value.
It is customary for a parent company to guarantee a Loan as security for lenders (investors). However, the guarantor's financial position does not need to be strong and/or may deteriorate after entering into the guarantee obligation, which can impair investors' opportunities to receive payment from the guarantor.
If additional capital is needed, it can be difficult for the Project Owner to secure further financing if there are multiple pledges. Potential financing sources may be deterred from lending money if there are a large number of securities. Moreover, the Project Owner often struggles to obtain additional financing if a project does not proceed as planned. This can lead to the project not being completed and/or the Project Owner becoming insolvent.
For some Loans, there may be an option for the Project Owner to redeem the Loan early, which can result in lower total returns for the investor compared to if the Loan and interest had been repaid at the budgeted repayment time.
Loans are based on simple promissory notes that cannot be transferred or pledged. This means there is no opportunity for the investor to sell their Loan, which implies that the invested capital is tied up for the Loan's duration.
If market interest rates change, fixed-rate placements may become less attractive as investment objects if alternative investment opportunities offer higher returns. Market interest rate levels are also very difficult to predict in the long term.
Credit risk is more difficult to assess for Loans with a long duration compared to loans with a short duration. Most risk factors are amplified with the duration of Loans with a long remaining term compared to Loans with a short remaining term.
Income from a real estate project is primarily generated through positive operating results, value appreciation, or by selling the object on the market. However, there is a risk that the Project Owner acquires or invests in less attractive projects, resulting in high vacancy rates, low or non-existent value appreciation, or an inability to find buyers. Factors affecting commercial success include location, condition, financing, market, interest rates, season, supply, development, competencies and experience, subcontractors, authority approvals (e.g., local plan and building permit), etc.
Many project owners have no or limited history, which makes risk assessment difficult as it becomes harder to draw conclusions about the Project Owner's audited annual reports, financial strength, payment ability, willingness to pay, tax payments, general maintenance, etc.
As Project Owners operate in a competitive market with many strong actors, there is a risk that the Project Owner lacks sufficient resources and competencies to access attractive property purchases and projects with good return opportunities. Insufficient competencies and limited resources can negatively impact the project's commercial opportunities.
The Project Owner is often dependent on external parties regarding final financing and refinancing, as well as accessing construction credit. The Project Owner is thus dependent on banks and/or mortgage institutions' assessment of the market, project, Project Owner, etc., to obtain the necessary financing to complete their projects.
Since certain Investments involve long-term property ownership to generate income, there is a risk that operating results can be negatively affected by changes in property operating costs such as heating, cleaning, water, electricity, property taxes, fees, insurance, administration, and other maintenance. Increased costs can negatively impact operating results due to reduced income, for example, because of increased property vacancies, or if income cannot increase at the same rate as costs. A worse operating result than expected can negatively impact the project's return opportunities.
The Project Owner and their contractors may encounter construction problems that can lead to increased costs for the Project Owner. Construction risks can arise in connection with orders, contract negotiations, construction technical conditions, cost budgeting, weather conditions, geotechnical assessments, geography, as well as planning and logistics.
There are also risks associated with obtaining the necessary authority approvals if the Project Owner does not obtain the required approvals (e.g., local plan and building permit), or if these are challenged.
Market price fluctuations can lead to increased costs for a construction project, for example, regarding building materials, personnel, and hiring contractors. This can affect a construction project's ability to be completed according to schedule and budget.
Project Owners may acquire properties in different geographic markets or focus on specific geographic markets. How a specific market has developed historically is no guarantee that this development will continue, which means that supply and demand can develop differently in different markets or within the same geographic market. A negative development in a market or poorer development compared to comparable markets can have a negative impact on the Project Owner's profitability and financial position.
Often, a Project Owner is dependent on a third party for production and construction. The Project Owner thus runs a risk that counterparties do not fulfill their obligations, which can again affect the project's prerequisites. Possible risks can include faulty production, delays, and insolvency. Any advance payments to a contractor who subsequently goes bankrupt pose a risk that the Project Owner themselves may become insolvent.
Some Project Owners own a property or project together with multiple other actors. There is thus a risk of disagreements or conflicts between parties, parties not fulfilling their obligations towards each other, or the project becoming dependent solely on one party's financial position. Disagreement and non-fulfillment of obligations can have a negative impact on the Project Owner's opportunities to, for example, complete a construction, dispose of the property, or run the business appropriately.
Smaller Project Owners are often dependent on one or a few key persons whose competencies and knowledge of the business are essential for the Project Owner's continued development and management. These persons can be both employed key personnel and owners with significant influence, whose interests do not necessarily always align with investors' interests. Additionally, the operations of the Project Owner or its subsidiaries can be negatively affected if one or more key persons for any reason cannot or do not wish to be associated with the Project Owner.
The Project Owner always assumes an environmental risk when acquiring properties. If toxic substances or similar are found, which give rise to cleanup requirements, this can lead to significant costs. The Project Owner also risks being held responsible for environmental damages that occur on the property.
Legal disagreements and disputes can occur in which a Project Owner is a party. The risk is that such disputes are resolved in favor of the counterparty, resulting in significant costs for the Project Owner.
If a Project Owner for any reason becomes subject to negative press coverage or similar, it can affect their opportunities to do business. This can lead to difficulties in completing construction projects or leasing vacant premises in completed properties and negatively impact the Project Owner's ability to pay investors.
If the Project Owner's customers experience financial problems or for other reasons do not pay on time, this can affect the Project Owner's ability to meet their obligations to investors.
For smaller Project Owners, the business is usually concentrated on one or a few projects, which entails an increased risk due to the limited portfolio diversification. If a negative event occurs that adversely affects one or more projects in the portfolio, it can impact the Project Owner's and/or group's results to a greater extent than if a similar event were to occur in a larger company with a more diversified portfolio.
The value of one or more properties or projects in the Project Owner's portfolio may be impaired due to, for example, changes in market conditions or value deterioration related to the property's condition. If the value is reduced, it may be difficult for the Project Owner to sell the property at a profit or obtain new financing if the property cannot be used as security, which could potentially worsen both the Project Owner's financial position and investors' security.
Any ownership entails liability. For a Project Owner, properties can be damaged by, for example, fire, water damage, or other causes. Project Owners can, through negligence, cause damage to persons or others' property and cause environmental damage for which the Project Owner can be held liable. Lack of insurance coverage can additionally lead to unforeseen costs. Compensation liability or other liability for such incurred damages can also occur for personal injuries and damages to others' property or liability for environmental cleanup. Each of these risks can have a significant negative impact on the Project Owner's business, results, and financial position.
Developments in financial markets can affect market interest rates, which can result in increased interest costs that can negatively impact the Project Owner's return opportunities and financial situation.
A Project Owner can be exposed to currency exchange rate fluctuations, for example, if the Project Owner operates in other countries or if some of the counterparties the Project Owner works with operate in other countries. Fluctuations in exchange rates can therefore affect the Project Owner's results and financial position.
Since certain projects depend on achieving sufficient value appreciation to reach budgeted return targets, there is a risk that economic cycle fluctuations will reduce general demand, which can cause property price levels to fall or the number of potential buyers to decrease. Additionally, regardless of economic conditions, there is a risk that the Project Owner cannot find buyers due to misjudgments, infrastructure changes, political decisions, etc.
A Project Owner's payment obligations in connection with investments, as well as amortizations and interest costs, require good liquidity. If a Project Owner does not have sufficient liquidity to meet its payment obligations, it can negatively impact the project's ongoing operations, financial position, and results. Regardless of the property's and project's quality, such a liquidity shortage can lead to insolvency and bankruptcy.
A Project Owner can, by acquiring a plot of land or a project, take over a company or a property that can entail obligations and contain assets with a negative impact on the Project Owner's financial position.
Changes in laws and regulations, including tax, property, corporate, or other regulations, can affect the Project Owner's opportunities to continue operating under the same conditions as before, which can significantly impact the Project Owner's financial position and ability to complete projects and repayments.
Many projects are at an early stage, which increases the risk level as there are more uncertainty factors with greater potential impact. Examples of such uncertainty factors include:i) Lack of credit decision from bank or other financing sourceii) Financing on short, medium, and long-termiii) Lack of building permit, local plan, or other authority approvalsiv) Lack of contract with contractorv) Lack of contractual basis, for example purchase agreements, lease contracts that are legally binding and/or have actual economic valuevi) Lack of overview of how the market will look or develop when the project is to be sold, completed, refinanced, etc.