When Adolfo Zavala worked for GE Capital Real Estate, he realized the opportunity that exists in Mexico to be able to finance real estate projects without so much friction and with greater flexibility, an idea that began to take hold when the firm he worked for was acquired by two global investment funds.
Zavala knew that since 2012 the companies of collective funding (crowdfunding) real estateTherefore, now jobless, he began to study the model and talk with his colleagues and even entered a business incubator, which led to the creation of Expansive, a firm that has been operating since 2016 and that a few days ago obtained the final endorsement to operate under the Law to Regulate Financial Technology Institutions, known as fintech law.
Expansive became the 51st firm (out of 55) to obtain authorization to operate under the fintech law and in the sixth of collective real estate funding to be authorized. Now, with the endorsement of the National Banking and Securities Commission (CNBV), it will seek to expand its business model, which is based on connecting investors with real estate developers, specifically vertical housing.
“We are dedicated to lending to real estate developers who are specifically in the residential niche, especially vertical residential, with the idea or the potential to expand into industrial buildings and commercial real estate, but until now everything has been residential,” Zavala explained.
He collective funding It is based on connecting investors with credit applicants, through the modality of debt, capital, co-ownership or royalties. According to Zavala, from 2016 to date, Expansive has focused on the model of debt crowdfundingespecially in projects in Mexico City, but also in other locations in the country.
From 2016 to date, the firm has financed around 280 million pesos; However, according to Zavala, a greater dynamism has been seen since 2022, where 50 million pesos have been granted and in the first quarter of 2023, 40 million pesos have been allocated.
“So, the loans we grant are relatively small, from 3 million to 5 million pesos, and when an applicant asks us for a stronger loan (20 million or 25 million pesos), what we do is split it into different ministries” Zavala stressed.
According to the Expansive executive, currently of the 20 projects that request credit, the firm approves one, after due diligence, which is based on five aspects:
- Developer track record.
- Project viability.
- Market.
- Financial Projection.
- Terrain characteristics.
- Warranty.
Why crowdfunding?
Zavala highlighted the advantages of this type of model, compared to the bank bridge loan, since in the crowdfunding both investors and applicants (developers) have several benefits.
“Before, for an investor to be able to invest in real estate, they had to raise significant amounts, get to know the developer, but what a platform like Expansive does is make available to the investor knowledge of who the developer is and the market in which it is intended to build said property,” Zavala said.
The Expansive executive pointed out that an investor can participate in the platform from 1,000 pesos, with returns that can go from 13% to 16 percent.
Likewise, Zavala highlighted that for a developer, the model of crowdfunding It gives you agility to access financing, yes, at the cost of a more onerous rate than that offered by banks.
“We are not the cheapest option, indeed if you take out a bridge loan, you may have a lower rate, in return, we have much more agility to give you an answer, within 72 hours, and if necessary, we ask for other things. What we do is be flexible and we can finance things that conventional banks normally do not finance”, he explained.
Although Expansive began operations in 2016, it was thanks to the fact that its creation was before the enactment of the fintech lawwhich was in March 2018, that it was able to operate under a temporary condition until the authority resolved its request, which if it had been negative it would have had to stop operating, which was not the case.
Now, Expansive joins the universe of platformers collective real estate funding definitively authorized such as 100Ladrillos, M2Crowd, Arces.mx, Topkapital and Monific, while Briq.mx and PM2.mx are waiting to obtain their final endorsement.
Zavala pointed out that once the authorization is obtained, Expansive will explore capital financing models and even seek to invest in projects outside of Mexico, such as in the United States and Canada.
