MirLand Development has agreed a $31m (£20.7m) loan with its main shareholders in order to continue the development of schemes in St Petersburg and Moscow, Russia.
The Russia-focussed, AIM listed developer is also to delay or suspend the development of other schemes.
The company agreed the loan with Israeli property and investment companies Jerusalem Economy, Industrial Buildings Corporation and Darban Investments. Between them, the three companies hold a 75% stake in MirLand.
The loan will be used to finance part of the first phase of MirLand’s Triumph Park residential scheme. It will also be used to finance permits for other MirLand schemes, including its Moscow Skyscraper scheme in Moscow.
Finance has become particularly difficult to arrange for Russian development as the global economic downturn and a negative investment sentiment towards Russia continues. This has forced many traditional sources of debt, such as from international banks, to dry up, making the little available debt more expensive.
The MirLand loan, which must be repaid by 31 March 2010 carries an interest rate of 12% a year
MirLand chairman, Nigel Wright said the company would focus on schemes where ‘the prospect of real gains remains strong despite current financial market illiquidity and which will bring the most immediate benefit to shareholders as markets recover.’
But he said:‘For the smaller regional projects, we may defer construction start and use the current period of uncertainty to progress requisite permits and consents so that we are positioned to activate these projects as conditions improve.’