Property developers complain to EU Commission about Porto Franco loan

Porto Franco.
Porto Franco. Source: Siim Lõvi /ERR

In summer, the Porto Franco development at the Port of Tallinn received a favorable €39.4 million loan from the state. Six real estate developers consider it an unfair competitive advantage and are waiting for the European Commission's evaluation of the state's action.

"We think that the loan doesn't meet the market conditions," manager of Arco Vara, Miko Niinemäe, told Delfi finance newspaper (link in Estonian).

Niinemäe said that banks would ask for a five to seven times higher interest rate for the kind of loan that Porto Franco received.

"The 2 percent expresses inequality, to put it bluntly, distorts the market," Niinemäe said.

He explained that Porto Franco needs to pay €5 million in interest over six years, but it would be around €19 million under market conditions..

"This €14 million gap gives a significant advantage to one developer," Niinemäe noted.

In addition to Arco Vara, Eften Capital, East Capital Real Estate, Kawe, Metro Capital and Hepsor are waiting for answers.

In September, the government agreed to give a loan of €39.4 million to Porto Franco. The loan is issued by KredEx and the interest rate of the loan is 12-month Euribor plus 2 percent every year.

The plan to grant a loan to Porto Franco has been criticized in the past, among others by the President of Eesti Pank, Madis Müller. Coalition politicians have justified the loan.


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Editor: Roberta Vaino

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