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Access to institutional real estate investment has changed, but the golden rule remains the same: capital protection begins long before the investment is made. At wecity, we receive hundreds of funding requests from developers, but only a very small percentage are actually published on our platform.
Our goal is not to accumulate a large volume of projects, but rather to offer opportunities with a robust legal and financial structure. If you’re thinking about diversifying your portfolio, here’s an explanation of how our risk analysis model works and the criteria each developer must meet.
The Initial Screening: Developer Feasibility and Solvency
Our team’s first step focuses not solely on the blueprints or the property’s location, but on who is behind the project. We thoroughly analyze the developer’s track record, their experience with similar construction projects, their current financial capacity, and their level of debt.
We require the developer to demonstrate a genuine commitment to the project, typically by contributing a significant portion of the capital from its own funds. This alignment of interests is essential to ensure that the developer shares the risk with our investors.
Technical and Commercial Analysis of the Project
If the developer passes the creditworthiness analysis, we break down the numbers for the real estate development. In this phase, we verify:
Timelines and Permits: We review the status of zoning permits and projected construction timelines to identify potential administrative bottlenecks that could cause delays.
Construction Costs: In cases where we finance construction projects, we verify that the construction budget (PEM) is realistic in light of current market prices and potential cost overruns.
Sales Pace: We require a minimum level of presales or pre-marketing to ensure that there is real demand and that the project’s exit strategy (repayment of the debt) is feasible.
The safety net: LTV and collateral
No project moves forward toward issuance without solid collateral backing the debt. We strictly evaluate the Loan-to-Value (LTV) of the transaction, ensuring that there is a prudent margin (safety cushion) between the amount borrowed and the value of the asset as appraised by an independent firm.
In addition, we structure our projects by prioritizing tangible collateral, such as a first-lien mortgage, to ensure that our investors have the highest priority for repayment should it become necessary to foreclose on the collateral securing the asset.
Independent Risk Committee and Transparency
Once all legal, zoning, and financial information has been compiled, the file is submitted to our Investment Committee. This multidisciplinary body makes a collective decision, either approving or rejecting the transaction. Only if the structuring meets our standards is the project made available on the platform.
It is vital to remember that, despite applying all these professional filters, every investment carries risks. Our evaluation process minimizes the likelihood of default and establishes robust recovery mechanisms, but it does not completely eliminate the possibility of partial or total capital losses, nor potential delays in delivery times. Therefore, the best strategy will always be to diversify your capital across multiple investments.
Would you like to explore the current investment opportunities that have passed our risk committee’s review?
Discover upcoming projects on wecity.
Review risks: https://www.wecity.com/riesgos/
