<p>All investments are subject to risks. The risk usually refers to the probability of occurrence of adverse events, which may result in not achieving the planned investment goals.</p><p>Each investor should pay attention to various types of risks and the probability of their occurrence as they might affect investment returns. Any investment may result in profits and losses, including the risk of losing the full principal of the investment, and returns on investment are not guaranteed. The investment’s value may vary significantly over time. Past performance of any investment or asset class does not guarantee similar results in the future.</p><p>Crowdfunded investments are not covered by the deposit guarantee schemes established in accordance with Directive 2014/49/EU of the European Parliament and of the Council. Nor are crowdfunded investments covered by the investor compensation schemes established in accordance with Directive 97/9/EC of the European Parliament and of the Council.</p><p>The investor bears risks associated with investment activities and arising losses. Therefore, each investor should analyse whether the specific risk profile of a specific investment is acceptable to him/her. Each investor should independently analyse and evaluate the investment risks and consider their impact and consequences.</p><p>We have compiled a list of the main investment risks as well as their descriptions. This list is not exhaustive, and some risks may accumulate and converge.</p><h2>Investment Risks</h2><h3>Market risk</h3><p>Market risk is the chance that the value of an investment may change due to unfavourable market events, such as macroeconomic reasons, political or social instability, due to investors' behaviour, etc. Such events may lead to changes in real estate prices and volatility. Diversifying the investment portfolio into various asset classes, industries and regions of the economy, can reduce the market risk.</p><h3>Cyclicity</h3><p>Cyclicity means that the real estate market is cyclical like the other business sectors. Predicting the length of the current stage and the start of the next stage in the cycle is extremely complicated.</p><h3>Demographic risk</h3><p>Demographic risk arises from the change in the number and composition of the overall population.</p><h3>Consumer behaviour risk</h3><p>Consumer behaviour risk is a risk of changes in consumer behaviour that might adversely affect the demand for a specific type of real estate.</p><h3>Liquidity risk</h3><p>Liquidity risk means the real estate assets are illiquid and not easily sellable. Selling real estate property might take a long time, and one could end up selling the property below market or even at a loss if the property needs to be sold quickly. Liquidity risk may also lead to an extended exit period.</p><p>Risk of illiquidity of the investment also means that the investments made via Crowdestate are generally illiquid and should be made with the intention to hold them until the end of the investment period. While investments can be traded on Crowdestate's secondary market, there are no guarantees that there will be a buyer for the specific investment at the price level defined by the investor.</p><h3>Interest rate risk</h3><p>Interest rate risk is the risk of an increase in interest rates, resulting in an increase in loan servicing costs and a decrease in property values. High-interest rates generally have an adverse effects on real estate prices, and vice versa.</p><h3>Currency risk</h3><p>When investing in another country or in another currency, there is a risk that investors may suffer losses due to unfavourable changes in currency exchange rates. Currency risk can be hedged using various risk management methods and instruments.</p><h3>Inflation risk</h3><p>Inflation risk is a situation where the inflation rate reduces the real rate of return or real value of the investment.</p><h3>Legal risk</h3><p>Legal or regulatory risk arises from the fact that the legislative acts regulating the asset, investment activities or taxation of earned income may change during the investment period. For example, the government may change the tax laws governing the taxation of the investor's income.</p><h3>Political risk</h3><p>The political risk or country risk is the chance of investment value changing due to political changes or instability in the country. Radical changes in the economic or legal environment (such as nationalisation), internal political affairs or social crisis situations (such as civil unrest) are all examples of political risk.</p><h3>Default risk</h3><p>Default risk is the risk of the project owner becoming insolvent or bankrupt and, thus, becoming unable to meet material repayment obligations. The project owner's default might be caused by a variety of factors, including changes in the macroeconomic environment, mismanagement, lack of experience, unsuitable financing or capital structure, product mismatch, lagging sales, cost overruns etc.</p><h3>Risk of lower, delayed or no returns</h3><p>The risk of lower, delayed, or no returns mean there is a chance for the return from the investment to be lower than expected or that the project owner is late with scheduled repayments or defaults on investment principal or interest payments.</p><h3>Accuracy or completeness of financial information</h3><p>Risk of accuracy or completeness of financial information means that the financial statements provided by the project owner may not be subject to financial audit and, thus, might be less reliable. Project's financial projections are future-looking estimates compiled by the project owner, and should be treated as such. There are no guarantees that the project's actual financial outcome shall correspond to the original estimates.</p><h3>Accuracy or completeness of information in the Key Investment Information Sheet</h3><p>Crowdestate has established adequate processes to verify the completeness, correctness and clarity of the information contained in the Key Investment Information Sheet. Still, omissions, mistakes or inaccuracies in the information provided in the Key Investment Information Sheet may have a material impact on the expected return on the investment.</p><h3>Unavailability or quality of future reports</h3><p>The risk of unavailability or quality of future reports means that although the project owner has a contractual obligation to provide their investors with regular project updates, this does not guarantee the submission of such reports or the quality of the contents of such reports.</p><h3>Concentration risk</h3><p>Concentration risk can occur in a situation where an investor's investment portfolio is focused on just one asset class (e.g. shares) or economic region (e.g. Italy). The concentration risk can be avoided by reasonable diversification.</p><h2>Operational risks</h2><p>Operational risks realise in a situation where Crowdestate is not able to continue its business, and the company would be liquidated. Liquidation reasons may be financial (lack of liquidity, bankruptcy), legal (changes in the legal environment), management (inability to run the business as planned), operational (loss of key personnel) etc.</p><p>We have introduced measures to reduce operating risks and ensure Crowdestate’s long-term operations. Crowdestate’s team has decades of business management, corporate restructuring and growth experience.</p><p>Should Crowdestate's operations be closed down, this would lead to the activation of a predefined process, where Crowdestate’s members’ investments are sold, transferred over to another similar operator or ultimately transferred directly over to investors.</p><p>Crowdestate's members’ assets are kept strictly separated from Crowdestate’s own assets and investments. Therefore the potential ceasing of Crowdestate’s operations does not have any effect on investors’ investments.</p><h2>Risk management activities</h2><p>All investment opportunities pass Crowdestate’s thorough due diligence process to ensure that the information on investment opportunity’s legal, technical, marketing, legal aspects, etc., is accurate and sufficient for making a prudent investment decision.</p><h2>Disclaimer</h2><p>The current list of risks and their descriptions might not be exhaustive.</p>