Palo Alto Sur: debt at 10.5% per year for two luxury villas in Ojén

Next Tuesday, 29 September at 16:00 h (UTC+2), we will open the Palo Alto Sur project for investment, a new debt opportunity in Ojén, Málaga.

The transaction consists of granting a loan to finance the construction costs and general costs of two luxury villas in the Palo Alto Sur development, one of the most exclusive residential enclaves on the Costa del Sol.

Tranche A will amount to 1,560,000 euros, with a term of 24 months, a fixed interest rate of 10.5% simple annual interest and a total return of 21.0%.

• Opening for investment: Tuesday, 29 September at 16:00 h (UTC+2)
• Project webinar: Tuesday, 29 September at 11:00 h (UTC+2)

Two villas in Palo Alto Sur

The project involves the construction of two detached single-family homes on two plots of 1,077 m² and 1,129 m², with a total land area of 2,206 m².

Each villa will have 668 m² built, distributed across three floors — two above ground and one below ground —, with 4 bedrooms, 5 bathrooms, covered parking, a solarium on the upper floor, a private swimming pool and a garden.

The development is part of Palo Alto, a private mixed-use residential community with a single entrance, 24-hour security, an equestrian club, tennis courts, wellness facilities and restaurants.

A location between the mountains and Marbella

Palo Alto is located in Ojén, in an environment that combines privacy, nature and proximity to Marbella.

The asset is located 4.2 kilometres from La Cañada shopping centre, 4.6 kilometres from access to the AP-7, 7.5 kilometres from the centre of Marbella and 14 kilometres from Puerto Banús.

This location makes it possible to offer a luxury product in a private residential setting, with good connections to some of the main service, leisure and tourism hubs on the Costa del Sol.

The manager: Roel Homes

The project manager is Roel Homes, a real estate developer with 50 years of experience in southern Spain and headquartered in Marbella.

The company has delivered assets with an aggregate value of more than 215 million euros, with 298 units developed. Roel Homes is a 50/50 joint venture between Grupo Villarroel, as technical partner, and Ibérica Capital Partners, as financial partner.

The manager operates in a vertically integrated way, internally handling the design, development and construction of its projects.

Roel Homes has fully developed and delivered Palo Alto Norte, a development of 298 apartments. It is currently executing Palo Alto Sur, the single-family villa phase of the same master plan, where it has already launched 15 villas: 7 are practically completed and were 100% sold off-plan before construction began, and 8 villas are under construction, 2 of which have already been sold.

Licence granted and earthworks started

Both plots have a valid building licence and earthworks have already begun. Therefore, the project does not present planning or licensing risk before the loan drawdown.

The estimated construction execution period is 18 months, followed by a commercialisation and completion period of 5-6 months.

Commercialisation will mainly be carried out through the manager’s internal sales channels and specialised agencies in the area. The expected launch price is 4 million euros per villa, 8 million in total, placing the product approximately 20% below the market price of a comparable completed villa in the development.

10.5% per year and total return of 21%

The transaction is structured as debt, through a fixed-rate loan, with a total amount of up to 4,670,000 euros and structured in three tranches:

• Tranche A: 1,560,000 euros, corresponding to this opening.
• Tranche B: 1,460,000 euros.
• Tranche C: 1,650,000 euros.

The main characteristics of tranche A are:

• Amount: 1,560,000 euros
• Interest rate: 10.5% simple annual interest
• Total return: 21.0%
• Term: 24 months
• Possible extension: additional 6 months
• Minimum return: equivalent to 18 months of interest
• Principal and interest payment: at maturity

The use of funds from tranche A will be allocated to financing the first phase of the construction costs of both villas, as well as the project’s general costs associated with that period.

Loan guarantees

The loan has a guarantee package consisting of:

• First-ranking mortgage over the two assets being financed, with mortgage liability of 135% of the principal.
• First-ranking pledge over the shares of the borrower company.
• First-ranking pledge, without intervention of funds, over the project’s bank accounts, including the VAT account.
• Letter of commitment to contribute additional capital, under which the developer undertakes to cover any cost overrun not contemplated in the business plan.
• 100% cash sweep of the income generated by the sale of the two villas.
• Additional cash sweep over the net cash flows generated by the sale of other homes in the development owned by the manager or related companies.
• Irrevocable sale mandate, exercisable in month 24, or in month 30 in the event of extension, at a minimum price equivalent to 80% of the updated valuation value.

In addition, the role of Project Monitor is included, which will review construction certifications, construction progress, possible deviations in time and cost, and approve the monthly loan disbursements.

Exit strategy

The planned exit for Urbanitae investors will take place through the income from the sale of the two villas.

The expected launch price, 4 million euros per villa, is below the estimated market value for a comparable completed villa in Palo Alto. This strategy seeks to strengthen the product’s commercial competitiveness and facilitate the sale within the expected timeframe.

The project also has a favourable commercial due diligence, which validates the proposed prices and the developer’s business plan.