TALLINN – Opposition Social Democratic Party (SDE) MP Raimond Kaljulaid has sent a written interpellation to Prime Minister Juri Ratas over the government's decision to provide a credit to the Porto Franco property development project in the passenger port area of Tallinn.
Kaljulaid described the government accepting a second mortgage as collateral for the loan, while asking for a several times smaller interest than banks would do with a first mortgage, as the most questionable aspect of the government's decision.
According to Kaljulaid, the interest rate on the loan provided by the government is at least two times lower than the rates usually charged by banks and four to five times lower than is usual for second mortgage loans.
"Was attention paid during the discussions that preceded the government's decision to the fact that securing a loan by means of a second mortgage increases the risk for the lender to a very significant degree? Was the government, in making the decision, aware of it that the banks active in Estonia, for instance, would under no circumstances provide a loan against a second mortgage as collateral? Why did the government accept so high a risk and, what is more important still, very unfavorable conditions for the state, in lending taxpayer money?" Kaljulaid asked according to spokespeople for SDE.
Kaljulaid also described the selection of the project for crediting as questionable.
"The Porto Franco development contains a substantial amount of new commercial space -- in a situation where we have new malls on the local retail market that are in an extremely difficult economic situation, whereas the trend after the coronavirus crisis is further towards e-commerce. Did the government consider also these circumstances when making the decision?"
According to Kaljulaid, it is impossible to understand why a commercial real estate project has to be supported by the state altogether. Also, the background of the developers and their family ties to the financing of the prime minister's party are a cause for concern.
"The field of real estate would be helped much more if the state and municipalities made their conduct of procedures significantly faster and more effective, which would enable to carry out projects faster. All developers would benefit from this equally and it would have a positive effect also on consumers through lower real estate prices," Kaljulaid said.
He said that the current arrangement looks questionable to many, especially since the developer's family members have supported the prime minister's party, have been under trial for that and admitted their guilt, and it is known that the Center Party led by Juri Ratas has serious financial problems and money is needed very much as local elections are coming nearer.
The opposition MP also said he wants to see the draft of the loan agreement or get to know its terms in greater detail.