After two years of haggling, Merirahu, suburban Tallinn's most expensive and most controversial housing project, has been sold to a group of local plot owners in a 61.2 million kroon (4 million euros) deal financed by Hansabank.
The contract, finalized late last month, covers 93 plots in the elite seaside area of 36 hectares.
"For us, it's more of a salvage deal, enabling to carry on with the plans for our own homes," said Priit Koit, board member of the new project owner, Merirahu Arendus, and one of its six shareholders. "However, we do not expect to make a loss either."
The Merirahu project propelled to the public spotlight in late 2000 when the now bankrupt developer AS Hestlinger was offering space for up to 2,900 kroons per square meter, an extravagant price unrivaled by any other area of suburban Tallinn. The developer had been hoping to lure business executives, foreign embassies and others with top-shelf conveniences and even a private harbor for the local inhabitants. Heavy security measures, including an outer perimeter fence, manned patrols and 48 surveillance cameras were also planned.
However, after investing tens of millions in roads and communications, Hestlinger's plans stumbled in cash shortages and eventually insolvency.
In all, the area consists of 88 housing plots, 18 of which had been sold before the financial troubles and 70 just acquired by Merirahu Arendus.
As of today, 35 of all the 88 are either sold or booked, and interest is brisk in the 1,000 - 2,000-square- meter vacancies. Although prices have been slashed considerably, some remaining plots are still going for as high as 3.2 million kroons.
The new owners claim such prices, about twice the average, are well justified for what should materialize as Tallinn's finest residential area, boasting excellent location and communications, the nearby presence of large commercial centers, with a full specter of full services (from cleaning to gardening) and not least of all, the splendid views.
"All the plots are basically open to the sea - some closer to the shore, some rather shaded by trees. A unique character for each one," said Koit.
Meanwhile, only two residences have been completed so far. The project's new owners expect to wind up plot sales in about three years, and contracts contain clauses that should secure that the whole site will be fully housed in another 2-3 years.
To accomplish this, the new developer is seeking to engage all major Estonian real estate agencies and banks. "No major developments are expected this year," noted Koit. "During the bankruptcy proceedings, of course, all work was frozen, but we now expect active construction to start as early as next spring."
In the meantime, plot owners are rushing to procure designs and obtain necessary building permits.
According to Koit, Merirahu's new owners are happy with design regulations, which were established by the project's previous owners. The rules will prevent the appearance of gaudy, tasteless "mansions" of the newly rich that tend to contaminate many other residential projects of the past decade.
"We just happened to have a potential buyer who had envisaged something like a log cabin. Well, we had to turn him down," said Koit.
The project has not been without environmental concerns. The media revealed in 2001 that while digging the developer had destroyed some of the local sandstone embankment, which several specialists considered a natural heritage site.
Hestlinger, the previous owner, claimed the construction was needed to prevent erosion by the sea, and an official inquiry into the matter found nothing criminal.
Criticism flared up again a few months later, when the developer was found to have cut down a large share of trees in the area and a public forest nearby. Criminal proceedings were commenced, yet Hestlinger managed to prove once again that its questionable activities were backed by official permits.
In the end, all the controversy proved lethal for Hestlinger. Sales died down, and building contractors filed for its bankruptcy in late 2002. This was followed by a failed auction at an initial price of 120 million kroons, and subsequent offers of 70 million and 61 million kroons fell by the wayside as the investors failed to come up with the cash.
Since that time the trustee has held direct negotiations with potential buyers.
The total amount of claims in the bankruptcy case was said to be a hefty 130 million kroons. With the sales tag of 61.2 million, however, all claimants other than Uhispank, Hestlinger's former financier, are likely to be left empty-handed.