New Development Fund for the brownfield regeneration in Ostrava agglomeration has been launched

There are still many old and abandoned industrial and business areas in Ostrava agglomeration; areas which have lost their former splendour and purpose and it is now difficult to find a new suitable use for them. Such properties are of interest to the new Development Fund, which is funded by the European Union under the Operational Programme Enterprise and Innovations for Competitiveness. By 2023 hundreds of millions of crowns will have invested from the fund and thus will have contributed to the establishing of new facilities for industry, business, or services.

Daniel Foltýnek, the director and administrator of the Development Fund, comments on the news.

"Monuments of Ostrava’s industrial past are all around us. Speaking from our experience, the constraint that hinders the transformation of outdated areas into modern business real estate is not a lack of investment, but focusing too much on the risk instead of the opportunity - it is often a big problem for us to imagine something different, modern and nice standing on the site instead of the brownfield. And our Development Fund should address this barrier exactly and push the limits of investors' imagination a good bit forward.”

The Development Fund will act as a co-investor in the regeneration project through a junior mezzanine loan by which the fund will share in the risk of this project to a similar extent as the implementer's equity. Thanks to this recently invested capital, the feasibility of brownfield projects can be significantly increased, especially for the financing banking institutions whose co-financing will be a precondition for obtaining the fund's investment. The resulting business infrastructure should be, for the most part, intended for use by small and medium-sized businesses.

Financing of the Development Fund is provided by the Ministry of Industry and Trade of the Czech Republic from the European Union under the Operational Programme Enterprise and Innovations for Competitiveness, partly dedicated to the development of Ostrava agglomeration (ITI - Integrated territorial investment).

Marian Piecha, Deputy Minister of the EU Funds and Digital Economy Section, joins Foltýnek in acknowledging the advantages of this fund:

"By creating a new investment opportunity, we will encourage investments in larger areas of the region’s unused brownfields that would otherwise be unattractive for investors. In addition, it will be possible to repeatedly use the returned funds for investments in the region.”

The correctness of all processes and activities related to the investment of the Development Fund is supervised by ČMZRB investiční, a subsidiary company of Českomoravská záruční a rozvojová banka.

Martin Potůček, Chairman of the Board of ČMZRB investiční, comments on the specifics of this investment process:

"This is a specific case in which the provision of public capital investments from the structural funds is entrusted to a private administrator," he says. “The administrator’s knowledge of the region and the state of preparation of regeneration projects can significantly improve mutual understanding and cooperation between the public and private sectors. This model has not been widely used in the Czech Republic so far. The administrator was selected in a tender, our task will be to check their activities, whether they invest in projects in accordance with the investment strategy and applicable rules.”

The Development Fund is a follow-up to the European Commission’s financial instrument JESSICA (Joint European Support for Sustainable Investment in City Areas) which was used in the Moravian-Silesian region and which has already successfully supported the regeneration of several brownfields in the region in the past. In the coming weeks and months, the Development Fund will look for projects that fit into its investment strategy and, as a result, establish in Ostrava agglomeration a modern business sector.

More information about ways how to contact the Development Fund managers can be found on their website www.udfms.cz - the call for projects will be announced on their website at the beginning of May 2021.