We are thrilled to announce that Address has recently been honored with an opportunity to share our story through an interview article published by Eiendomswatch. We are delighted to share our vision, history, and upcoming plans with the readers. Keep reading to discover the unique aspects of our journey, presented through the eyes of Eiendomswatch.
- It is a property fund that is directed towards residential property, and in that way, we help to institutionalize residential property as an asset class, says managing director Nedim Mavric in Address.
"We buy your dream home for you, which you can rent from us", reads the pitch on the website of the housing fund Address.
The company is in the startup phase but reports that they already have "customer applications equivalent to over 1.2 billion in capital needs", with expectations of this "increasing to 5-6 billion in a very short time".
- This solution is needed in society, says founder and managing director Nedim Mavric in Address.
- I have personally experienced difficulties in getting into the housing market and therefore understand our customers very well, he says.
- Can you give a brief explanation of what Address does?
- It is a rent-to-own solution, where the customer – the end user – applies. If the application is approved, the consumer receives a specific budget, and the fund will then invest in a property that they move into and rent from us. The customer gets a right to buy - but not an obligation - to purchase the property at a future agreed price, explains Mavric.
- The customer pays market rent to rent the home, and on the day they choose to exercise the purchase option, they pay the cost price adjusted by the monthly price change in Oslo. There will, therefore, be no discussion about price as it is contractually established. And it's a great customer experience because the customer skips the bidding round, he says.
- You say the fund will invest in the properties. How is this financed, and where does the money come from?
- We are working on securing institutional capital. It takes time, but we have received a lot of positive feedback so far, says Mavric, who has a background in banking and finance, including experience at Nordea.
- We, or the fund, earn money from rental income and indexed price developments on the properties. In addition, there is an establishment fee of one percent of the purchase price that the customer pays when the agreement is concluded. Those are the three revenue streams, he says.
Mavric says that he and the others at Address earn a management fee paid by the investors.
- The fund is a separate entity owned by institutional investors. We manage it and invest in housing. Additionally, we charge a management fee paid by the fund. In other words, a classic management setup, he says, and adds:
- The fund is registered with the Norwegian Financial Supervisory Authority, and we are a registered manager.
- It is a property fund aimed at residential property, and in that way, we help institutionalize residential property as an asset class. There are not very many housing funds in Norway today, he says.
In contrast to existing rent-to-own/ share-let solutions offered by companies like Obos, there is no minimum requirement for how much of the property customers of Address must purchase from the start. This share can be zero. In that case, the customer pays normal monthly rent. However, the establishment fee of one percent is unavoidable.
- To buy 50 percent of a home, you must still have 7.5 percent of the home's total value in equity, and many people do not even have that. That is why we want to set the entry barrier as low as possible. But you also get the opportunity to buy a share of the property during the rental period, a minimum of five percent at a time, says Mavric.
It can be difficult to save up money to buy a larger share when you are paying rent and perhaps a loan at the same time?
- Yes, there is no magic pill here, but it is at least an opportunity. And if they are on the ownership side, and the market rises, they earn the appreciation on their ownership share the day they choose to take out a loan on the entire property. In addition, they do not pay rent for their share of the property," he concludes.
- You say you have been in contact with several property developers. As mentioned, companies such as Obos and Fredensborg Bolig have their rent-to-own schemes. Are there any advantages for property developers to work with you instead?
- Absolutely. To solve the capital tie-up problem. After all, their business model is to build and sell homes. In today's market, the private buyers aren't there, so they don't get to sell enough. Many do not get to sell at least 60 percent, which they have to pre-sell to be able to start house building at all.
- That is why they want an external financial partner on that journey, says Mavric, and adds that even in good times, it is beneficial to have external funding.
Address is in an early phase, he acknowledges. The housing fund, which has taken great inspiration from international players such as Divvy Homes and Home Partners of America, is not yet up and running.
Mavric cannot say anything concrete about when the first customer will be able to move into a home (partly) owned by Address, but he deems it "realistic that it will happen towards the end of the next quarter".
Before that time, the company will attempt to convert "soft commitments" into binding obligations, thereby landing the necessary financing.
Source: Eiendomswatch
