OVERVIEW

Novira Capital OÜ (“Novira Capital”, “Novira”) is a financial and real estate company based in Tallinn, Estonia. The company’s main focus is financing and development of large-scale real estate projects. During the past 4 years, Novira has financed projects in the total amount of approximately 80 million EUR.

Merirahu Villad ("Merirahu") is an exclusive real estate development project developed by Novira in Tallinn between Rocca al Mare Open Air Museum and Merirahu residential area, offering a quiet and private seaside living environment. The development project consists of 8 three-storey houses with 6 apartments in each house.

The development company Merirahu Residence OÜ is raising an additional EUR 300,000. The investors can invest a total amount of EUR 300,000 for a term of 16 months. The loan will carry a 10% annual interest rate with interest payment and the principal being paid at the end of the loan term. The loan is secured with a pledge on the loan agreement which is secured with a 1st rank mortgage (it will become 2nd rank mortgage when a local bank provides project financing).

There are a number of factors that make an investment together with Novira mezzanine loan an attractive opportunity. The main highlights:

• Novira team has extensive and successful experience in the Baltic real estate market;

• Novira is the mezzanine loan provider and shareholder to the project, thus ensuring further monitoring and governance of the business;

• Merirahu development is in an exclusive location in Tallinn.

PROJECT

Merirahu project is in a quiet and private residential area surrounded by beautiful nature and greenery. Its 2.5 ha plot stretches from Vabaõhumuuseumi tee all the way to seashore. The development has spacious terraces (up to 45 square meters per apartment), private courtyards and closed underground parking.

There are several kindergartens and schools near Merirahu home and the area offers many different opportunities for sports and entertainment.

Construction progress: 4 concrete structures have been built, the interior works are ongoing and in the foreseeable future the roof works will be finished and windows installed.

Project marketing campaign will start at the end of July 2019. 2 apartments, 3 parking spaces and 2 storerooms have already been sold/pre-sold to the clients before the campaign. 

The first 4 houses of Merirahu development will be completed by spring 2020. The architect works of the project were carried out by the renowned architect Martin Aunin and Sven Luik. The construction works of the project are carried out by Mitt & Perlebach OÜ.

Visit Merirahu website for more information.

DEVELOPER

The land and project are owned by Merirahu Residence OÜ (registry code 14166448), which is a subsidiary of Novira Capital OÜ for the implementation of the project. Merirahu Residence OÜ has signed an agreement with Novira Capital OÜ for the development, financing, sales, and marketing. In addition to that, the Novira Capital shareholders also have a stake in the Merirahu Residence OÜ. The shareholders of the project have invested EUR 2,300,000 for the purchase of properties and an additional EUR 2,430,000 (as of 08.07.2019) in architecture and interior designs, construction, marketing and other costs.

• 4 apartment buildings in the prestigious Kalamaja district were built in 2015;
• Novira finished a new 8 storey office building on Tartu mnt 83 in 2016;
• a new 15 storey office and apartment building Novira Plaza in the modern business district on Tartu mnt 25;
• renovated a hotel and business centre Centennial on Endla 15.

The project requires up to EUR 14.5 million investment. Approximately half of the project will be financed by a local bank in Estonia (up to EUR 7.8 million) and Novira Finance OÜ has committed to provide up to EUR 4.1 million in mezzanine financing. Argeld investors have an opportunity to invest in a secured loan up to EUR 0.3 million in “Argeld loan Merirahu”.

Bank loan - up to EUR 7.8 million

Mezzanine loan (Novira Finance) - up to EUR 4.1 million

Shareholder's equity investment - EUR 2.3 million

Argeld loan Merirahu (current campaign) = EUR 0.3 million

Terms and conditions of “Argeld loan Merirahu”

The loan agreement has the following terms and conditions:

• Total amount EUR 300,000;

• Interest rate 10% per annum;

• The investment term is approximately 16 months (maturity date 31.12.2020);

• Interest payment at the end of the period;

• Principal repayment at the end of the period;

• Collateral for the loan is a mortgage on development property (currently 1st rank mortgage, but it will become 2nd rank when a local Estonian bank enters the financing structure) ;

• The borrower has the right to redeem the capital invested early (investors will receive at least a 3-day notice letter in such cases)

Loan repayment

Repayment of the loan is scheduled by 31.12.2020.

The loan will be repaid from sales of apartments, parking lots and storage units. If the actual sales pace will not match the expected pace, “Argeld loan Merirahu” might be repaid by refinancing using a bank or mezzanine loan. 

Collateral

The loan is secured with a 1st rank mortgage (the same level as Novira Finance OÜ). The collateral is provided by Merirahu Residence OÜ. Novira Finance OÜ together with “Argeld loan Merirahu” investors will be transferred to 2nd rank mortgage when a local Estonian bank provides a senior loan to the project.

RISKS

Cost overrun. Lately, a rising cost environment has been observed in the construction market. Considering the increase in construction prices, the cost overrun can be considered a risk of the project. This risk is mitigated by performance-based contracts with the general construction company Mitt & Perlebach OÜ. In addition to that, the developer receives one construction acts per month with specifications of construction works done during the period signed by the general contractor, developer and Telora OÜ provides supervisory control.

Delay in construction completion. There is a risk that changes and delays will happen in a construction schedule that may negatively affect Borrower’s ability to service “Argeld loan Merirahu”. The risk is mitigated by the fact that “Argeld loan Merirahu” may be repaid from client prepayments or an additional Novira’s mezzanine loan.

Real estate market size and prices. Tallinn is Estonia's most active and liquid real estate market segment. Demand and supply are balanced; most apartments are booked and sold during the course of construction. However, apartments in some projects have been for sale for 3-5 years and developers have been obliged to lower prices to attract buyers. Generally, the market will be able to absorb the planned development, especially considering the planned long sale period during the project. Adverse real estate market development may have a material adverse effect on Borrower’s business, financial condition, results of operations and future prospects and thereby, on Borrower’s ability to fulfil its obligations under the “Argeld loan Merirahu”, as well as the value of the “Argeld loan Merirahu”.

Competition. Competitor activities, such as innovations in pricing, improvements in promotional and marketing activities and business strategies, may reduce Borrower’s sales or profitability or increase costs, which may, in turn, have a material adverse effect on Borrower’s business, financial position, results of operations and future prospects and, thereby, on Borrower’s ability to fulfil its obligations under the “Argeld loan Merirahu”, as well as the value of the “Argeld loan Merirahu”.

Financing risk. The Borrower is exposed to financing risk pursuant to which the price of the financing needed to carry out Borrower’s business will increase and that it will be less readily available. There is a risk that Borrower could encounter difficulties in raising funds and, as a result, lack the access to liquidity that it needs and there can be no assurance that Borrower will be able to meet its financial covenants when required. Should any of the above factors materialise, this may have a material adverse effect on Borrower’s business, financial position, results of operations and future prospects and, thereby, on Borrower’s ability to fulfill its obligations under the “Argeld loan Merirahu”, as well as the value of the “Argeld loan Merirahu”.