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Hagibor—Bulding Gamma

Mezzanine loan for Prague's residential project

Net yield
6.50

% p. a.

109,600,000

CZK

Invested

109,600,000

CZK

 

Níže uvedená data jsou platná k začátku fundraisingu, tedy k 10/10/2021.

Pravidelné reporty k průběhu projektu najdou investoři na přehledu svých investic.

  • Invested

    109,600,000

    CZK

  • Expected maturity

    33

    months

  • Number of investments

    1204
  • Minimum investment

    5,000

    CZK

  • Payments

    Interest paid on maturity

  • Project location

    Hagibor, Praha 10

  • Developer

    CRESTYL real estate, s.r.o.

    More about the developer

  • Purpose of the loan

    Financing of part of the purchase price of the project land, related transaction costs and loan fees, or refinancing of the developer's own resources expended for the above purpose

  • Type of credit

  • Securing

    Lien on project land pending obtaining a building permit, signing a construction contract with the general contractor and signing a loan agreement with the senior lender

  • Current project phase

    Permitting

  • Úvodní shrnutí
  • Popis produktu
  • Popis projektu
  • Časový plán
  • Investiční analýza
  • Rizika
  • Kontrola
  • Developer
The text below was translated automatically. Therefore, we cannot guarantee the accuracy of the translations.

Introductory summary

We offer participation in a loan provided for the purpose of financing the implementation of the residential part of the Prague project Hagibor - Gamma building of the CRESTYL development group.

The loan is provided primarily for the purpose of financing part of the purchase price of the project land, which now has a zoning permit. The loan will be secured in the first phase by a first ranking lien on the project land at the entry 51,7 %. After obtaining the building permit, signing the construction contract with the general contractor and closing the the lien will be extinguished and the loan will be subordinated solely to the Senior Lender's loan. If the above conditions are not met even by October 31, 2022, then the developer would be obligated to repay the loan no later than December 31, 2022, and Upvest would have a lien on the project land until the loan is repaid. The loan agreement imposes specific conditions on the parameters of the building permit, the construction contract, and the bank loan, which are discussed in more detail in this analysis. Thus, the loan relationship is set up so that only when the main project costs are firmly contracted and future project revenues are confirmed will the loan be subordinated to the bank financing. Subsequently, the construction of the project will commence and upon completion, the bank loan will be repaid first and then the mezzanine loan from the sales of the project units.

In addition to the mezzanine loan, Upvest also provides a junior loan to the developer, which is fully subordinated to the mezzanine loan and the bank loan on terms specified below and is provided for a similar purpose. This junior loan will not be subject to public fundraising or this analysis.

This is the second phase of the large-scale Hagibor project. This phase will include 120 residential units and 18 studios. The minimum permitted revenue for the project is CZK 1 159,1 million and the maximum allowed costs of CZK 958.8 million. CZK. The previous phases implemented by the developer within the site have already been booked or contracted to a significant extent; the financed Gamma project also has pre-sales of approx. 27% of the minimum sales. We assess the profitability of the project as higher than standard, assuming that the agreed parameters are met.

The project proceeds will be used to repay the senior lender first, followed by Upvest's mezzanine loan and finally Upvest's junior loan. 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 on an ongoing basis. is approximately 32 months and the loan can be repaid no later than 31 January 2026.

Under the loan agreement, the developer is obliged, inter alia, to comply with the project's financial plan, which includes both the revenue and cost side of the project. The loan agreement sets minimum average selling prices (determined as unit prices per m2 of sales area or per unit) and the maximum allowable costs by major items. Similarly, the loan agreement places restrictions on the parameters of the works contract (maximum fixed price, time of completion of the works, etc.), the loan agreement with the bank (minimum loan amount and maximum financing costs) and the form of the building permit (minimum sales areas).

Legal clearance did not identify any facts that would significantly jeopardise the granting of the loan. Emphasis was placed on assessing the legal status of the project land, the contractual relationships of the project company (including the planned acquisition) and the documentation entered into with the project's end clients.

Technical due diligence also did not identify any facts that would fundamentally jeopardise the granting of the loan. Certain risks of a technical nature may be permitting risk (timing of obtaining a building permit), decontamination of soil during site preparation, or the amount of direct construction costs. These risks are controlled in the loan agreement by the developer's obligations, the extent of the loan security and the amount of the loan provided in relation to the value of the project (LTV), the value of the project having been determined by an independent estimate by Savills' technical and commercial advisor.

From the conclusions sensitivity analysis shows that even if sales prices fall by more than 21% below the minimum permitted sales prices and without changing other assumptions, Upvest can be expected to repay the loan including the facilities. Also, an increase in direct construction costs of up to 25 % or an extension of the project implementation period by 12 months should not jeopardise the repayment of the loan without changing the other conditions. However, the sensitivity analysis shows a change in only one parameter, and a significant change in one parameter can be expected to lead to a change in the other parameters, and the result of the analysis may be misleading.

Among main risks of this investment opportunity are the permitting risk, the risk of increased investment costs (especially construction costs) and the risk of future price developments in the area. However, this is not an exhaustive list of project risks, of which there are many more.

Reporting to investors will be on a quarterly basis.

Visualization of the Gamma Residence projectVisualization of the Gamma Residence projectVisualization of the Gamma Residence projectVisualization of the Gamma Residence project

Product description

The product is participation in provided for the purpose of financing a part of the purchase price, related transaction costs and loan fees, or refinancing the developer's own resources spent for these purposes in the acquisition of land for the purpose of the Hagibor - Rezidence Gamma development project. Upvest also provides financing in the project under a separate loan agreement with a junior loan subordinated to both the senior loan and the mezzanine loan; however, participation in the mezzanine loan is not subject to participation in the junior loan, which is provided under a separate loan agreement.

The developer of the project is the Czech development group CRESTYL, a group with long experience in building mixed-use projects - residential, commercial and office. In residential development, the developer focuses mainly on the location of Prague and its surroundings.

This is the second stage of the residential part of the Hagibor project in Prague's Strašnice, 500 metres from the Želivského metro station, which is being developed by a project company from the CRESTYL real estate group ("developer"), namely Rezidence Gama s.r.o. Within this stage, 120 residential units and 18 studios and related accessories (garages, cellars, terraces) ("project units") will be constructed with a future sales internal floor area of the project units of 9,980 m2 (the "Project"). By the end of 2021, the developer will pay the purchase price for the land which now has a final planning permission for the Project. The issuance of the final building permit is also expected within a few months. Thereafter, a construction contract will be signed with the general contractor, bank financing will be established and construction of the Project will commence. Pending the signing of the construction contract, obtaining the building permit and the establishment of senior financing, a first ranking lien on the project land is established for the mezzanine loan. Once the conditions for the release of the pledge are met, the financing bank becomes the sole pledgee.

Therefore, the following must occur before the bank loan can be drawn down:

  • Obtaining a valid building permit
  • a fixed price not exceeding a specified limit

If the above events do not occur by 31.10.2022, the obligation to repay the mezzanine and junior loan by 31.12.2022 at the latest shall apply and a lien on the project land shall still be established until such repayment.

Collateral during the loan before the building permit

The move to a subordinate position to the bank financing occurs in the event of a fixed price works contract, i.e. the contracting of the main project budget item. At the same time, the senior lender can be expected to require a certain amount of pre-sales to be contracted, over and above Upvest's requirement to have pre-sales under future purchase contracts of at least EUR 112 million prior to drawing down the mezzanine loan. CZK 112 million. Thus, the validity of the revenues and costs should be somewhat confirmed at this point and the volatility of these inputs should not be significant under standard market conditions since the bank's entry.

Collateral during the loan after the building permit

After the project is approved and the purchase price is paid up, the bank loan is repaid first, followed by the Upvest mezzanine loan and then the Upvest junior loan once the Upvest mezzanine loan is repaid. The repayment of the mezzanine loan, assuming repayment on the final maturity date (31 January 2026), is expected to occur after sales reach 78.7% of total revenue. If repayment occurs on the expected maturity date (31.07.2024), then 77.4% of total revenues will also be sufficient for repayment. The above projection assumes the same duration of the bank loan, i.e. the extension of the project would occur in the permitting phase (until the building permit is obtained) before the bank loan is drawn down and thus would not have an impact on the bank's financing costs. If the extension of the project occurs when the full bank loan is drawn down, then the percentage of sales required to repay the mezzanine loan would be higher due to the fact that there would be an increase in the finance cost of the senior loan.

Once the project is completed and the purchase price is paid up, the bank loan is repaid first, then the mezzanine loan is repaid after the bank loan is repaid and then the junior loan from Upvest is repaid after the Upvest mezzanine loan is repaid. The loan agreement allows for a possible one-off repayment of up to EUR 17 million of the junior loan. CZK 17 million in the form of a refinancing with a bank loan. In the event that, during the construction of the project, the bank provides additional funds for the purpose of refinancing the subordinated loans (mezzanine loan and junior loan) or the developer makes a refinancing from its own resources with the prior consent of the bank, such refinancing will take place in proportion to the outstanding principal of the mezzanine and junior loans. In the case of repayment of subordinated loans from the sale of units of the project, the mezzanine loan shall be repaid first and then the junior loan. In the event of a controlled realisation of the loaned assets, the repayment of the mezzanine loan takes precedence over the repayment of the junior loan.

The security for the junior loan to Upvest is governed by a pledge of the Corporation's interest and voting rights agreement relating to the project company. This security is expected to assist in the efficient management of the project in the event of a material breach of the terms of the loan. The mezzanine loan is subordinate to the senior loan at the project company level but senior to the junior loan. The junior loan should provide an additional cushion to the mezzanine loan to absorb any decreases in the projected unit selling prices of the project or if project costs increase to the point where the principal value of the loan could begin to amortize.

The final maturity date of the loan has been set at January 31, 2026. However, in the event that the loan agreement with the senior lender has an earlier date than November 30, 2025 or a later date than January 30, 2026, the final maturity date will be amended to occur 1 month after the senior lender's final maturity date. If the investment target of $109.6 million is not collected during the fundraising period, the investment target of $109.6 million will be met. The developer has the option to withdraw from the loan agreement. However, it has the option to draw down the loan in a lower amount, provided that it transfers its own resources, i.e. funds subordinated to the mezzanine loan, in an amount that makes up the uncollected portion of the mezzanine loan. The purpose of this obligation is to ensure that the project has the financing to be completed.

The developer must, among other things, comply with the financial plan during the term of the loan (see more under Schedule a Check) and must not sell units at average prices below the minimum set without Upvest's approval.

Investment product description

Product

(participation in and losses from )

Financing of part of the purchase price of the project land, related transaction costs and loan fees, or refinancing of the developer's own resources expended for the above purpose

Location of the financed projectPrague 10, locality Hagibor
Lender upvest s.r.o.; borrower Rezidence Gama s.r.o.
Investment objective109 600 000 CZK
Total 958 800 000 CZK without VAT
of which financed up to CZK 763 840 000
of which financed from Upvestup to CZK 109 600 000
of which financed by a junior loan from Upvestup to CZK 75 400 000 and CZK 58 400 000 respectively
of which financed by own resourcesCZK 26 960 000
Minimum investment amount5 000 CZK
Type of interest

In one lump sum or in stages on the expected due date; no later than the final due date

1.10.2021 - 30.11. 2021
Estimated start of interestFrom 1.12.2021
Loan maturity from upvest
12 months (01.12.2022)
32 months (31.07.2024)
50 months (31.1.2026)
Securing a loan


Lien on the project land pending obtaining a building permit, signing a construction contract with the general contractor and signing a loan agreement with the senior lender

DeveloperCRESTYL real estate s.r.o.
Project companyRezidence Gama s.r.o.

Participation parameters

The Developer may repay the mezzanine 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 successful fundraising (with the reservation fee starting from 1 December 2021) until the loan is repaid in full. The actual interest on the drawn down portion of the principal begins on the day after the loan is drawn down by the developer and ends on the day before the developer receives the repayment of the principal in question. The proceeds are paid to the investors after a given loan repayment from Upvest by the developer. In view of the fact that the developer is acquiring land, the exact area of which will be determined by a geometric plan, the developer may not draw down the entire loan facility. In the event that the entire loan facility is not drawn down during the drawdown period, a pro rata portion of the undrawn loan facility will be refunded to the investors, however, such undrawn loan facility shall not be subject to an early repayment charge.

The time lag between the earliest maturity date and the final maturity date of the loan allows the borrower to repay the loan when sufficient proceeds from the sale of the units are received to repay both the senior lender and Upvest and also provides sufficient time for the borrower to sell the units in the event of a market windfall.

The developer can repay the loan from Upvest before the next maturity date. In such a situation, the investor's return is protected by the developer's fees, which are set at a level to match the nominal return that the investor would have received if the loan had been repaid on the next maturity date. As mentioned above, such a fee does not apply to any undrawn portion of the loan.

1,0

% p. a.

Fee for the provision of payment services

6,5

% p. a.

Net income

At the earliest on the date of repayment of the loan by the developer and at the latest on the settlement date

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Contact

  • info@upvest.cz

    novyprojekt@upvest.cz

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

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