VBL Group, a key player in the Valletta real estate market, has announced plans to issue €10 million in secured bonds with a 5.2 per cent interest rate, maturing between 2030 and 2034.

The bond issue, which will be listed on the Malta Stock Exchange, will run through the offer period from 7th to 18th October 2024.

VBL Group has established itself as a niche player in Valletta’s real estate market, with a diverse portfolio spanning hospitality and commercial properties. The group’s operations focus on acquiring, developing, and managing assets across the Maltese capital.

The company aims to use the net proceeds of €9.7 million to fund ongoing development projects, upgrades to existing properties, and for general corporate purposes.

In its prospectus, VBL indicated that the funds raised from this bond issue will be allocated as follows:

• €5.2 million: Completion of the Silver Horse Phase 2 and Orangery Lodge Phase 2 projects.
• €1.2 million: Refurbishment and upgrades to existing owned and leased properties, including hospitality accommodations, office spaces, and retail outlets.
• €3.3 million: General corporate funding needs.

Silver Horse Phase 2

Silver Horse Phase 2 refers to the property situated in Strait Street, corner with St Christopher Street, measuring circa 5,808sqm of gross development area. Overlying the Silver Horse Phase 1 development, which consists of nine commercial outlets (known as ‘The Gut’), the second phase is in an advanced stage of development despite temporary delays due to unexpected technical obstacles related to the fact that the property is a historic building, dating back to the 19th century.

These technical issues have since been resolved and development resumed, the company said.

The company also implemented upgrades to the finishings and internal features, with a view to increasing overall quality of the product, improving the energy efficiency and sound insulation of the building, against an increase of circa 20 per cent to the development cost.

It said that “it is expected that these improvements will result in higher rental yields and less expensive property operation during the lifespan of the development, allowing for recovery of part or all of the said increased development cost.”

VBL forecasts that the development of Silver Horse Phase 2 is expected to deliver recurring rental revenues in excess of €2 million per annum as from mid-2026.

Although the current development permit (PA/10091/18) involved the renovation of the block into 20 modernised dwellings, together with an office and a restaurant, the company has since applied for a change to use to convert the same approved structure into a hotel or guesthouse.

Orangery Phase 2

The property on West Street will be developed into nine apartments for accommodation purposes and one retail unit at ground floor. The development will use the already developed access areas, common areas lift, and other infrastructure of Orangery Phase 1, which will allow for a better utilisation of the existing floor area and more efficient operation following development.

In line with VBL’s declared renovation and development strategy, Orangery Phase 2 will also benefit from a significant re-use of the currently deployed building materials (e.g. xorok, Maltese tiles, and stone) which will be recycled into modern and appealing new hospitality units, with an emphasis on traditional Maltese design and style.

Renovations and upgrades to existing assets

VBL Group also plans to improve, renovate, upgrade, or expand its existing operational assets, following hospitality client comments and recommendations.

The properties to be upgraded include the Lucky Star, the Old Lodge, and the Old Bakery.

Gearing

While VBL Group has traditionally been financed with equity and its own financial resources, the increase in revenues and EBITDA has allowed for the employment of a conservative ratio of long-term development bank financing.

This currently results in a circa 12.6 per cent debt-to-equity ratio, which is projected to increase to circa 22-25 per cent following the bond issue.

VBL states that its strategy remains to maintain a healthy and conservative gearing ratio of under 30 per cent.