The Czech-Moravian Guarantee and Development Bank (ČMZRB) will help to turn brownfields in the Ostrava region into modern business centres. Together with the Ministry of Industry and Trade (MIT), the bank has launched a new program, which will offer concessional mezzanine financing. The aim of the program is to finance approximately six projects focussing on the revitalization of brownfields into business centres. First call is expected to be started early in 2021.
This “Brownfield fund” will be managed by ČMZRB Investments, bank´s subsidiary company, which signed an agreement with MIT in March this year. Allocation of the fund will be CZK 497 million (app. EUR 19 million) from the Operational Programme Enterprise and Innovation for Competitiveness (OP EIC). This amount is earmarked for the realization of the Integrated Territorial Investments in the Ostrava region, in this case for transforming the abandoned and dilapidated industrial premises into modern business areas. “Ostrava is the centre of the Moravian-Silesian region. It has a long history of mining and metallurgy. However, the importance of mining and related industrial activities have significantly decreased since the early 1990s. Nevertheless, the city is still labelled as the steel heart of the country. Number of obsolete industrial premises spoils the face of the city. The aim of the fund is to revitalize 85,000 square metres of brownfields into modern infrastructure for SMEs. For the first time in this sector, public intervention will take the form of repayable mezzanine financing, which will support the market-oriented revitalization of old industrial buildings,” says Marian Piecha, Deputy Minister of Industry and Trade for EU funds.
ČMZRB is the leader in financial instruments for SMEs in the Czech Republic and has a long history of cooperation with MIT on its programs. This is the main reason why MIT has chosen ČMZRB to manage the fund and to select the financial intermediary. “For such complex projects it is suitable to offer mezzanine financing, mainly because the risk is so high from the bank´s point of view,” Jiří Jirásek, CEO of ČMZRB, explains and adds: “Junior debt from ČMZRB makes the project less risky and incentivises a commercial bank to offer senior debt, which will cover the remaining part of the project costs, beside own resources of the investors. Junior debt will be offered with a preferential interest rate, which will save investor´s costs. As a result, the investors will be motivated to invest into the revitalization of a brownfield instead to invest into a greenfield site.”
New program is the result of the cooperation between OP EIC and the City of Ostrava. Program will focus on the revitalization of larger brownfield areas. It will support investment projects aimed at transforming such areas into new business infrastructure, which will be sold or leased to SMEs. Although some industrial premises such as Nová Karolína have already been revitalized, there is still a number of those that are waiting for a renovation.
The ČMZRB Group will not finance these projects directly. In May 2020 we started a tender to select a fund manager, which was won by Urban Development Fund MS. This company was established in 2012 and has an experience with financing the revitalization of brownfields in the Moravia-Silesia region in cooperation with the European Investment Bank. Thus, the company can build on its previous expertise and team of qualified experts experienced in real estate development and financing.
Call for applications will be announced early in 2021 and first mezzanine loans will be approved in mid-2021.