The company "Luštica Development" has requested the Government's approval to change the collateral for the 35 million euro loan that the company is contracting with AIK Bank. The change refers to one of the pledges no longer being shares of the Swiss-Egyptian "Orascom" in "Luštica Development", but to the right to lease 85 thousand square meters of state-owned land on which the company is building tourist and residential facilities.
The Ministry of Spatial Planning, Urbanism and State Property, in response to this company's request, has prepared a Proposal for Approval submitted to the Government, in which it proposes to consider the possibility of replacing the collateral. The document states that the Office of the Protector of Property and Legal Interests of Montenegro has indicated that replacing this collateral carries a certain risk, and that the Government is the one making the final decision.
“Luštica Development” has been developing a large tourist and residential complex since 2009, on about seven million square meters of state-owned land in Luštica near Tivat, in which, according to data from this government document, it has invested over 700 million euros. The company received the land from the state for 90 years with an annual lease payment of one million euros and the so-called operating rent. “Orascom Development” now owns 90 percent of “Luštica Development”, and the State of Montenegro has 9,96 percent. The contract also stipulates that the investor has the right to sell the leased land to its buyers along with the constructed facilities, and that the state receives 80 euros per square meter.
The Proposal for Approval states that in December last year, “Luštica Development” and AIK Banka concluded a loan agreement for 35 million euros, in which the collateral is a blank promissory note, a mortgage on the facilities under construction, a lien on receivables from purchase contracts, as well as “Orascom” shares in “Luštica Development”. The Government then gave its consent to register a mortgage on the facilities that this investor is building on leased state land and for which it has issued building permits and construction applications, as well as consent to pledge “Orascom” shares in the joint venture.
"Luštica Development" approached the Ministry on January 15 with a request to change the collateral, that is, instead of pledging shares in "Orascom", the pledge should be their right to use and lease a portion of state-owned land of 85 thousand square meters.
The document states that the realization and establishment of this type of collateral and the release of temporarily pledged shares of 'Orascom' in 'Luštica Development' is significantly more commercially advantageous for the investor.
The Ministry of Spatial Planning states that there were several meetings with the investor on this topic, and that they were presented with a plan for using this loan to continue the implementation of significant investments in Luštica.
It is stated that this investor has so far invested 700 million euros in the project over the past 25 years, and that there are clear benefits for the state because its budget has generated 90 million euros in fiscal contributions from these investments. The Ministry also states in the Proposal for Approval that "Orascom" is confirmed in government documents as an investor implementing one of the priority projects in the field of tourism in Montenegro, which is why they propose, among other things, that this request of theirs, namely the possibility of replacing collateral, be considered.
"Luštica Development" has been developing a large tourist and residential complex since 2009, on about seven million square meters of state-owned land in Luštica near Tivat.
Ministry of Tourism is late in selecting a controller, the Protector pointed out the risk
The Government gave its consent to the basic loan agreement and the collateral and mortgages at the time, but at the same time adopted several conclusions.
"With the above conclusions, the Government has tasked the Ministry of Tourism to launch a new tender for the appointment of a firm or internationally accredited accountant, with significant experience in the tourism sector, by the end of March 2026 at the latest, to assess whether the minimum investment obligations have been fulfilled, in relation to the provisions of the Lease and Construction Agreement relating to 'Luštica Development'," the Ministry's proposal states.
Finally, it is noted that the investment implementation controller has not yet been hired by the Ministry of Tourism, emphasizing that this is "an obligation that is necessary in order to adequately monitor the implementation of the project."
By the conclusions of that time, the Government tasked the Ministry of Spatial Planning and Urbanism of State Property to, in cooperation with the relevant ministries and the Protector of Property and Legal Interests of Montenegro, initiate the procedure for revising the Contract with the company Luštica Development.
"Also, the Government has instructed the Protector of Property and Legal Interests of Montenegro not to dispute the registration in question in the process of registering a mortgage over buildings under construction, which by its nature must be registered on the land on which the buildings are being built," the explanatory memorandum to the proposal states.
It was also stated that after the proposal to change the collateral, the Ombudsman's office remained the first in its opinion on the existence of a risk for granting consent to use the right to use and lease state-owned land as collateral for a loan, but that the final decision rests with the Government.
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