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Britská XV

Debt investment

Mezzanine loan for a construction phase of Prague's residential project

Net yield
1M PRIBOR + 1,1 - 1,5

% p. a.

Current interest rate: 8,2 - 8,6 % p. a.

47,856,524.16

CZK

Invested

58,750,000

CZK

 
Current project status as of 15.11.2022
The developer has managed to contract the pre-sale of additional units of the project which were non-bindingly pre-negotiated at the time of the loan agreement. The value of the newly contracted revenues amounts to 101 million EUR. CZK 101 excluding VAT. The developer has thus exceeded the estimated threshold of future revenues required to fully repay the Upvest loan.
The current contracted pre-sales therefore amount to CZK 703.7 million. CZK without VAT (80.6% of the minimum revenue). Under the future purchase contracts, the future purchaser must make a non-refundable down payment of at least 10% of the unit purchase price.
The status of pre-sales to date is as follows:
  • Residential units: 111 of 140
  • Stores: 15 of 17
  • Parking: 71 of 102
The repayment of the Upvest loan remains conditional on, among other things, the completion of construction, collection of additional purchase price payments under future
purchase contracts and repayment of the senior loan. However, with the proper continuation of the project, it should not be necessary to sell any
additional units of the project to repay the loan provided, including fixtures.
  • Remaining

    1

    day

  • Expected maturity

    17

    months

  • Number of investments

    639
  • Minimum investment

    5,000

    CZK

  • Payments

    Interest capitalised and repayable together with the principal, principal repaid in one lump sum or on an interim basis no later than the final maturity date from project proceeds
  • Project location

    Stodůlky, Praha

  • Developer

    FINEP HOLDING

    More about the developer

  • Purpose of the loan

    Refinancing of part of the borrower's own resources invested in the project

  • Type of credit

  • Securing


    Surety statement of FINEP HOLDING, SE
  • Current project phase

    Construction phase

  • Introductory summary
  • Product description
  • Project description
  • Timetable
  • Investment analysis
  • Commercial analysis
  • Risks
  • Check
  • Developer
  • Introductory summary
  • Product description
    • Investment product description
    • Participation parameters
  • Project description
  • Timetable
  • Investment analysis
  • Commercial analysis
  • Risks
  • Check
  • Developer
The text below was translated automatically. Therefore, we cannot guarantee the accuracy of the translations.

Introductory summary

We offer you participation in a mezzanine loan for the 15th stage of the Prague residential project Britská čtvrt'. The mezzanine loan is provided for the purpose of refinancing part of the developer's own resources already spent in the project. This stage consists of the residential building "N", which has two sections "N1" and "N2". A total of 140 residential units, 102 garage parking spaces and 17 chambers will be constructed in the project. The project is in the construction phase (approximately 25% of the project costs have already been spent) and has pre-sales of 69.0% of the minimum required yields where approximately 74% of the sales at the minimum required yields are sufficient to repay the Upvest loan including the anticipated amount of accrued interest at the anticipated repayment date. In order to reach the "break-even" point, i.e. the point at which the contracted proceeds equal the estimated maximum debt, it should be necessary to sell 8 more average apartments at the minimum sales prices (out of the remaining 45 vacant apartments). The project has a valid building permit and construction works have been underway since June 2022. The senior lender of the project is Komerční banka, a.s.

The loan is secured by a notarial deed of direct execution and acknowledgement of debt and a surety statement of the parent company FINEP HOLDING, SE. Interest is capitalized during the loan relationship and is payable together with the principal no later than the final maturity date. The principal may be repaid in one lump sum or continuously no later than the final maturity date. The loan has an expected maturity of approximately 17 months and can be repaid no later than 31 December 2025. Repayment of the loan takes place upon completion of the sales of the project units and upon repayment of the bank loan.

Under the loan agreement, the developer is obliged, among other things, to comply with the maximum debt-to-value ratio (). This maximum limit has been set for of 80 %. As the developer is implementing other phases of the project within the SPV loan, it is obliged to comply with the at the company level at the maximum value of 80%, however, the 15th stage, to which the Upvest loan is linked, is contractually and accounting separated from the other stages of the overall area.

Legal due diligence did not identify any facts that would jeopardise the granting of the loan. Emphasis was placed on checking the real estate registry, the loan registry, the validity of the public permits for the construction, the construction contract with the general contractor, the future purchase agreements entered into with the buyers of the future units, and other potential legal risks.

Technical screening also did not identify any facts that would jeopardise the granting of the loan. The primary focus of this review was to check for a final building permit, review the project budget and schedule, validate the project's sales floor, the construction contract with the general contractor, evaluate the construction cost per the construction contract, the current construction status of the project, and other potential technical risks.

Both the technical and legal due diligence highlighted the risk associated with the location of the building, i.e. directly over the B line subway route. This implies a higher risk of meeting the noise and vibration limits for the approval of the property as a residential building. According to the technical expert, the project documentation addresses this by using special materials to limit noise and vibration. At the same time, noise and vibration measurements will be taken periodically during construction to ensure that all the limits for the approval of the property as an apartment building are met. According to the loan agreement, the developer is also obliged to deliver the approval decision for the property as an apartment building by 30 November 2024 at the latest. In case of approval of the property for any other purpose, this obligation will not be fulfilled and will be a breach of the loan agreement.

From the conclusions sensitivity analysis shows that even if the sales prices fall by up to approx. 26 % below the minimum yields under the loan agreement (which are determined to be approx. 4 % below the estimated yields under the loan agreement) and without any change in the other assumptions, Upvest can be expected to repay the loan including the accessories. The conclusions of the sensitivity analysis further indicate that a potential increase in construction costs of more than 50% over the maximum construction costs still provides a sufficient profitability level for the project at the 1,12x. Sufficient profitability of the project at the level of 1,30x remains even if the overall schedule is extended by more than 24 months compared to the current assumption.

The main risks of this investment opportunity include the construction risk in relation to the general contractor who may not meet its obligations under the construction contract despite potential penalties, the potential extension of the project timeline and the related potential termination of the already executed PPAs, which may be terminated without penalty if the project is not approved within 90 days of the obligation to approve the apartment building, which is 30.However, we are trying to mitigate the aforementioned risks by, among others, the obligation to carry out the project approval no later than 30.11.2024 or the obligation to supplement the developer's own resources in case of an increase in the project's investment costs. In Upvest's opinion, the guarantor's declaration increases the validity of the agreed obligations. However, this is not an exhaustive list of project risks, of which there are many more. Reporting to investors will take place on a quarterly basis.

Britská XV
Britská XV
Britská XV

Product description

Participation in a mezzanine loan to finance the Britská XV (House N) development project in Prague - Stodůlky.

The developer of the project is FINEP, which has built more than 14,500 apartments in dozens of successfully completed projects in the Czech Republic and Slovakia. FINEP has been involved in residential and office development for more than 25 years. The borrowed company is a subsidiary of the FINEP and Ungelt groups, designed for the implementation of selected stages of the Britská čtvrt' development project, namely FINEP STODŮLKY bytová a.s.

The developer will use a mezzanine loan from Upvest for the purpose of refinancing part of its own resources, mainly acquisition costs incurred within the project. The loan is provided during the construction phase of the project.

The loan from Upvest will be secured by a guarantee declaration of the parent company of the borrower, FINEP HOLDING, SE, and a notarial deed of direct execution and acknowledgement of debt. Interest will be capitalized and repaid together with the principal during the term of the loan relationship. The principal will be repaid in one lump sum or gradually from the proceeds of the project, but no later than the final maturity date.

Investment product description

Product (participation in the gains and losses of a loan agreement)
Purpose of the loanRefinancing of part of the borrower's own resources invested in the project
Location of the financed projectBritská čtvrť, Praha 13 - Stodůlky
Parties to the loanLender upvest s.r.o.; Borrower FINEP STODŮLKY bytová a.s.
Investment objective58.750.000 CZK
Total investment costs of the project587.367.103 CZK without VAT
of which financed by senior loanCZK 469,893,683
acquisition tranche of the senior loan100.000.000 CZK
of which financed by client advances received58.723.420 CZK
of which financed by a loan from Upvest58.750.000 CZK
Minimum investment amount5.000 CZK
Type of interestRetrieved from
Interest periodMonthly
Expected repayment methodInterest capitalised and repayable together with the principal, principal repaid in one lump sum or on an interim basis no later than the final maturity date from project proceeds
Fundraising period26.10.2022 - 28.11.2022
Estimated start of interestAfter successful fundraising
Loan maturity from Upvest
Nearest due date12 months after the loan is drawn (approx. 30.11.2023)
Estimated maturity17 months (30.04.2024)
Final due date37 months (31.12.2025)
Securing a loan
Surety statement of FINEP HOLDING, SE
Project companyFINEP STODŮLKY bytová a.s.

Participation parameters

1M PRIBOR + 2,5

% p.a.

Total interest on the loan

1,4 - 1

% p.a.

Upvest fee

1M PRIBOR + 1,1 - 1,5

% p.a.

Net income

>= 5,000 CZK

1M PRIBOR + 1.1% p.a.

>= 100,000 CZK

1M PRIBOR + 1.3% p.a.

>= 1,000,000 CZK

1M PRIBOR + 1.5% p.a.

Together with principal repayment after repayment of the loan

In the event that the investment target of CZK 58,750,000 is not reached, the developer has the right to apply for a lower amount raised through public fundraising. In the event that the investment target is not reached, the developer also has the right to refuse to draw down the lower amount of the loan, in which case the participating investors will have their investments returned to their wallets.

The interest rate on the loan, and therefore the investor's net return, is affected by movements in the reference rate . The interest rate on the loan changes for each interest period, i.e. each month, according to the currently announced value of 1M on the Czech National Bank's website. The first interest rate will be determined on the day the loan is drawn down. Thereafter, the interest rate for subsequent interest periods will be set on the last day of the preceding interest period, i.e. on the last day of the calendar month. Model situation: - the loan is drawn down on 15 November 2022 - the interest rate for the first interest period will be set at 1M on 14.11.2022 + 2,5 % and will be valid from the date of drawdown until 30.11.2022 (inclusive)- for the following interest period from 1.12.2022 to 31.12.2022 the interest rate will be set at 1M on 30.11.2022 + 2.5% - for January 2023 the interest rate will be set at 1M on 31.12.2022 + 2,5 % etc. for the following interest periods The floating interest rate has been set after a commercial agreement with the developer. The interest rate is not capped at a maximum value, the minimum interest rate is 2.5% (at 1M less than or equal to zero). Pegging the interest rate to a reference rate is standard practice in the banking market and, in times of heightened uncertainty about the future development of the reference rate, is an appropriate way to maintain the correct pricing of the loan over time.

Development of the 1M PRIBOR reference rate over the last 12 months

Datum 11/202112/20211/2022 2/2022 3/2022 4/2022
1M 2,89 3,87 4,13 4,60 4,89 5,31
Datum 5/2022 6/2022 7/2022 8/2022 9/2022 10/2022
1M 5,907,117,157,127,117,14

The developer may repay the loan from Upvest no later than the final maturity date, in one lump sum or in instalments. The investor shares in the proceeds from the date of the successful fundraising until the loan is repaid in full. The actual interest on the principal portion of the loan begins on the date the loan is drawn down by the developer and ends on the date the lender receives repayment of that principal. Between the date of successful fundraising and the date of drawdown of the loan, the amount raised is subject to a reservation fee which must be paid by the borrower together with interest at the end of the project. The reservation fee will not be charged unless the investment target is achieved and the developer requests a drawdown of a lesser amount by November 30, 2022. The amount of the reservation fee will be equal to the reference rate of 1M + 2.5% on the day preceding the announcement of the achievement of the investment target or the day preceding the last fundraising day. Investors shall share in the proceeds of the reservation fee in the same way as they share in the interest income, i.e. in an amount equivalent to 1M + 1.51% p.a. The proceeds will be paid to the investors immediately upon receipt of the relevant instalment by the lender.

The developer may also repay the loan from Upvest before the next maturity date, in which situation the investors' yield is protected by the developer's fees, which are set at an amount to match the nominal yield the investor would have received if the loan had been repaid on the next maturity date and there had been no change in the reference interest rate of 1M .

The time lag between the expected maturity date and the final maturity date allows the borrower to repay the loan when sufficient sales are achieved after completion of construction to fully repay the Senior Loan and subsequently the Upvest Loan. It also provides additional provision for any delays in construction execution or other complications.

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Contact

  • info@upvest.cz

  • upvest s.r.o.
    Budova Churchill I – BASE
    Italská 2581/67
    120 00 Praha 2Vinohrady

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