The Rendity Rating measures the relative risk-adjusted return of the individual projects. B-rated projects will have a higher inherent risk than A-rated projects. Thus, B-rated projects will generally have a higher return than A-rated projects due its relatively higher risk. The rating does not imply that investing in one project is fundamentally better, worse, or better suited for an individual investor.
Calculation of the risk
A project’s Rendity Rating matches its quantitative project assessment. The project assessment is a numerical method evaluating eight major criteria of real estate investments. Every criterion is separately evaluated, resulting in a total score ranging from 6 to 20. A score between 6 and 8, will result in A rating, between 9 and 11 in a B rating and so on.
a6 | 7 | 8
b9 | 10 | 11
c12 | 13 | 14
d15 | 16 | 17
e18 | 19 | 20
Evaluation of the location
Several factors are taken into account in the internal examination of the location. On the one hand, the immediate surroundings of the property are examined, and on the other hand, the large-scale economic area (city, municipality and region) is included. Both have an influence on the location attractiveness of the respective property. For each project, additional information on the micro and macro location of the property can be found in the description.
|Primary||Central location in Top 12 European Cities (A-City)||1|
|Secondary||Suburban location or central location in B-Cities||2|
|Tertiary||Rural location or emerging market||3|
Bei Entwicklungsprojekten (Growth) ist der Abschluss des Projekts der erfolgreiche Verkauf der Immobilie. Sollten vorab mehr als zehn Prozent des Objekts verkauft worden sein, fällt das Risiko geringer aus. Ist der Verkaufsstart noch nicht erfolgt, wird dies mit einem höheren Risiko bewertet. Bei Bestandsimmobilien (Income) findet kein Verkauf statt – hier wird vielmehr in vermietete Immobilien investiert. Sollten diese nahezu vollständig vermietet sein, ergibt sich ein kleineres Risiko, als wenn das Objekt bislang unbewohnt ist.
|>10 percent sold / Almost fully let||1|
|0-9.9 percent sold / Partially rented out||2|
|Sales not started / Unrented||3|
Rendity offers two different investment categories with Growth (development projects) and Income (existing properties). In the case of a development project, there are a number of factors to be taken into account due to the construction process, which can influence the course of the project. If the construction is far advanced, the risk is therefore lower. If the development project is only in the submission phase, the risk is higher. In the case of existing projects, on the other hand, the property has already been built. The construction process, which is associated with a certain risk, is therefore eliminated. If minor renovation work is planned with a view to increasing the value, this is taken into account in the assessment. If only the maintenance of the existing property is planned, the risk is lower.
|Maturity phase||In the case of development projects, construction activities are well on track, while in the case of existing properties, refurbishment activities or optimization of leasing are well advanced.||1|
|Implementation phase||The planning activities have been completed. In the case of necessary construction measures, the start of construction has already been made and construction activities are in full swing.||2|
|Early phase||The project has been purchased and design activities are underway.||3|
Track record of the real estate partner
This involves measuring the track record of the real estate partner. The total volume of comparable real estate projects that the issuer has carried out for its own account is included in the calculation. Partners who have previously been able to implement several large-volume projects are accordingly classified as having a lower risk than those who do not yet have as much experience.
|>100 Mio. €||1|
|50-100 Mio. €||2|
|< 50 Mio. €||3|
Residential real estate - as the immediate past has once again made clear - is crisis-proof. For example, it is much easier to find a new occupant than it is to find a new business for a commercial property. Commercial real estate also involves a higher risk because it is generally larger and more complex.
|Residential||Property is used mainly for residential purposes||0|
|Commercial||Property is mainly used for commercial purposes||1|
Financing structure (ratio between equity and mezzanine capital)
Real estate projects are usually financed by a bank loan (debt capital) and equity capital. This equity can be raised by the developer itself and/or via mezzanine capital. If a major part of the equity is raised by means of mezzanine capital, the risk is higher than if the developer himself or herself contributes a major part from his or her own funds.
|<60%||Less than 60 percent of equity is mezzanine capital||1|
|60-80%||60-80 percent of equity is raised through mezzanine capital||2|
|>80%||More than 80 percent of equity is raised through mezzanine capital||3|
In this category, different measures are included to reduce the risk, which is brought in by the real estate partner. For each individual project, the collateral(s) is addressed individually. The most common measures include a (hard) letter of comfort, personal guarantee and mortgage.
|Yes||The issuer is liable by means of one or more securities||0|
|No||The issuer does not contribute any collateral to the project||1|
Existing Bank Financing
A real estate project usually involves a bank, which provides a significant part of the financing by means of loan capital. Before the money is made available, the bank conducts an extensive review. In interaction, a suitable financing concept is then worked out, with the focus on minimizing risk or maximizing return.
|Existing Bank Financing||Notes||Points|
|Yes||An audit of the bank has already been made||0|
|No||Bank financing is not yet available||1|
The Rendity Rating is not a measure of the quality or suitability of the investment and is NOT meant to serve as a replacement for individual due diligence. Importantly, the Fundrise Rating system is NOT similar or comparable to ratings from agencies such as Standard and Poor’s or Moody’s.
Das Rendity Rating are for informational purposes only. Each rating is impersonal and not individualized for any specific investor's financial situation and is not investment advice. These ratings are not intended to be, nor should you interpret them to be, a prediction of how a particular investment will actually perform. Each investor should always carefully consider investments in any security and be comfortable with his/her understanding of the investment.
Risk notice: An investor may also consider consulting investment professionals due to the potential risk.