In the real estate world, there is an alternative way to buy properties before they go to auction. What is it all about? We Wealth asked Luca Bonacina, co-founder of Cherry Srl, a fintech startup that provides technology solutions to the lending world. Today, when one thinks of NPL-related real estate, the connection immediately goes to judicial auctions. But these are lengthy and often more crowded procedures than one might expect.
Buying a Loan From a Bank
What advice can we give family offices and those who manage large assets to “succeed in a deal”?
“Let’s take a step back,” Bonacina explains, “If there is an auction, it is because there is a procedure that generated it, but the procedure has been there since before the auction: the creditors therefore know who the debtor is and what his real estate assets are. That is where action needs to be taken.
In general, it is possible to purchase the debt from banks, financiers, or other creditors, substituting for them in the procedure itself, or to arrange what is known as a real estate write-off, which consists of extinguishing the debt on behalf of the debtor and subsequently obtaining the property.”
Debtors Undergoing Procedures
How do you intuit which debtors are currently undergoing a procedure such that it is likely that the properties will later go to auction?
“It is important to generate awareness of these situations. With Cherry Brick, we have developed a new feature that automatically identifies which legal entities are in these situations by also assessing their real estate assets and then presenting the information to interested parties through a dedicated service. In addition, through an advisory service and a network of partners, we support and accompany the interested parties in the process of acquiring the assets themselves,” says Bonacina.
The Numbers of the Industry
Are there any numbers?
“We have calculated that from the beginning of 2022 to August 2023, more than 6,700 legal entities have been suppressed at the opening of new bankruptcy proceedings, with which more than 30,000 properties are associated,” answers the co-founder of Cherry Srl. H2 – Who is this alternative mode of real estate acquisition specifically aimed at? “First and foremost, industry investors or those who manage large Hnwi assets, people who are perhaps already used to buying a few loans every now and then and investing in funds that invest in NPLs. But that does not mean that there is not a broader audience: even the individual, as a natural person, could sporadically carry out a credit purchase transaction,” Bonacina continues.
The Next Step: Wait for the Auction
Otherwise, there is always the further possibility of acquiring properties at auction, at a later date.
According to the latest Cherry Brick Observatory, it was found that in the first half of 2023 there were about 91,300 lots subject to auction attempts (down 19 percent from 2022), with a total value of the minimum starting bid of about 14.5 billion euros (from 18.8 billion in the first half of 2022).
Lombardy is the first region in terms of the number of new auctions published (11,552, -28 percent), while Rome ranks first among both cities (2,259, -13 percent) and courts (2,886, -16 percent).
Beware, however: “Those not in the business have an interest in investing almost exclusively in properties that are already nice and ready (or almost), free of tenants, objects, etc. This is an absurd claim in the world of Italian auctions,” comments Bonacina, who then concludes by saying, “We need to identify properties that are in need of rennovation and perhaps still occupied but without enforceable titles.”
