Ukraine Real Estate Market

Check the Back To Business!

2009-12-08T21:43:00.009+02:00

Hello!
There are some photos from Back To Business cocktail, kindly provided by Europaproperty.

Real Estate Cocktail Event in Kiev

2009-11-27T18:13:00.004+02:00

Hello everyone!

Sorry for short disappearing, there were couple reasons. Now, I'm back in track.

For now, I'd like to announce a great event of this last fall - Real Estate Cocktail Event in Kiev. In these days is very important to meet and share how it's going on the market.

Well-known Europaproperty is organizing this event in Kiev, December 3, at Hyatt Hotel. They are expecting around 150 guests at the event from Ukraine and also guests from outside Ukraine.

You can email to Mark Willis(email: mark@europaproperty.com: SKYPE: mark.europaproperty), who in charge for tickets and sponsorship opportunities

I'll be there and hope to catch up face-to-face definitely.

NAI Global Member in Ukraine Wins Major Commercial Real Estate Award

2009-10-31T17:22:00.002+02:00

NAI Pickard, NAI Global’s exclusive member serving the Ukranian market, has been named the Best Commercial Property Agency, Ukraine, by the Europe & Africa Property Awards 2009 in association with CNBC Arabiya.

The award is part of the International Property Awards program, one of the world’s most prestigious competitions dedicated to honoring the best real estate professionals around the world.

Terry Pickard, chairman of NAI Pickard, said of winning the award, “It shows that being entrepreneurial and aggressive in difficult times pays off ‘when the going gets tough, the tough get going.’”

The award will be presented in a ceremony on October 16th.

Source: NAI Global

BTW, this was my 400th post in the blog! Congrats myself :)

Expats In Ukraine: Let's Discuss How It's Going

2009-10-31T11:51:00.005+02:00

I've found an interesting article about living of expats in China. There are many unexpected issues, at least, for me personally.

And I wondered why we cannot discuss the such topic here, in Ukraine. It would be great if expats who (as I know) read the blog put a couple notes about their lives and feelings in Ukraine.

I hope it will be interesting

The Impact of the Global Liquidity Crisis on Ukraine and the Road to Recovery

2009-10-30T10:40:00.004+02:00

Yesterday, in my previous post it was mentioning about Sigma Bleyzer analytical materials.

The Bleyzer Foundation position paper "is a brief summary of the key economic challenges facing Ukraine. The disproportionately large impact of the recent international liquidity crisis on Ukraine, compared to other peer economies, calls for a thorough assessment of pre-crisis economic conditions and policies. A good understanding of these issues is necessary to evaluate the effectiveness of adopted anti-crisis measures. More than that, this analysis will help to calibrate current macroeconomic policies in order to achieve a quick and sustainable economic recovery."

The major issues covered by the position paper are:

1. Why did the international liquidity crisis affect Ukraine more than other emerging economies?
2. Ukraine’s main vulnerabilities to the financial crisis in 2008.
3. Why the local currency depreciated more than the currencies of other countries.
4. Why the real sector, including GDP and exports, declined so dramatically.
5. What measures taken by the Ukrainian authorities to deal with the crisis were adequate and what measures were inadequate.
6. Measures that the country could undertake to avoid deepening the crisis during the Presidential election period and until a new government is in
place.
7. Measures that the country should undertake in the medium term to accelerate economic development.

Today you can download this excellent report.

Ukraine Shows First Signs Of Economic Recovery

2009-10-29T11:24:00.000+02:00

From Interfax-Ukraine

Despite the first signs of economic recovery, the situation in Ukraine in the near-term will remain challenging: Ukraine's GDP may fall by 14% in the 12 months of 2009, experts have said.

This opinion was shared by participants in a press conference in Kyiv on Wednesday, which summed up the First Annual International Forum on the economic development of Ukraine.

The forum, which took place in Washington, the United States, on October 15, 2009, was attended by over 300 representatives from the world's largest companies, international institutions, financial organizations, namely from the International Monetary Fund, the European Bank for Reconstruction and Development, the World Bank, the European Union, as well as high-ranking officials. In particular, among the forum's attendees were Ukrainian Vice Premier Hryhoriy Nemyria and Ukrainian Economy Minister Bohdan Danylyshyn.

Speaking at the press conference in Kyiv, Director of the Institute for Economics and Forecasting under the National Academy of Sciences Valeriy Heyets said that despite the fact that the pace of economic decline in Ukraine has slowed recently, the general economic situation remains challenging.

The CEO of the Bleyzer Foundation, Oleh Ustenko, agreed. He said that the long-term economic forecast for Ukraine remains favorable, although the state of affairs of business environments should be improved to attract investment as a key source of economic growth.

According to the analytical materials issued at the press conference, Ukraine has survived one of the most serious downturns and the strongest devaluation of the national currency at the peak of crisis: in autumn 2008 the national currency fell by over 50% against the U.S. dollar, and the PFTS stock index plunged by over 70%, while real annual GDP shrank by 8% and 19% in Q4, 2008 and in H1, 2009 respectively. Moreover, over the last two months 2008, exports of goods fell by 16% in the annual terms, and in January-July 2009 they fell by 49%.

Starting from spring 2009, more signs that the economic adjustment has reached bottom in the industrial, trade and construction sectors have appeared.
"The further improvement of the economic situation this year will continue thanks to a low statistical base and thanks to recovery of commodity and material stocks and the introduction of fiscal stimuli. The reinforcement of the international economy will promote the more rapid recovery of Ukraine," the experts said.

Among the key achievement of the Ukrainian government in fighting the crisis were agreements with the International Monetary Fund (IMF, the Stand-By program worth $16.4 billion), and with the World Bank and other international financial institutions, which mitigated refinancing of the short-term foreign debt; the high level of fiscal discipline; the cut of the budget's deficit in 2010 to 4% of GDP and satisfaction of IMF quantity criteria regarding the monetary base.

However, the experts said that the Ukrainian government has not drawn up a common coordinated strategy for overcoming the crisis, has not allocated enough funds to support the domestic economy, while the rise in crediting stopped too sharply. The use of funds given by the cabinet to support liquidity was not controlled in the proper manner.

"It's likely that the funds were spent on the purchase of foreign currency to take aboard and not on the recovery of the domestic crediting market. This strengthened the devaluation pressure on the hryvnia," the experts said.

The Ukrainian cabinet has not implemented an IMF requirement to increase prices of gas for households, and on utility public services, to realize a comprehensive strategy aimed at restoration of solvency of Naftogaz Ukrainy and the Pension Fund, to realize initial privatization plans, which affected the financing of the national budget, the experts said.

According to the press conference materials, it is important to receive financial support from the IMF to avoid a worsening of the downturn within the next six months. The authorities should introduce a number of key economic measures agreed with the IMF, reads the document.
"In 2009, the deficit of the national budget should not exceed 6% of GDP, and the national budget for 2010 should foresee a deficit not exceeding 4%. This means that the increase of pensions and minimum wages should not be higher than inflation. Tax relaxations and a moratorium on tax audits should not be adopted.

"The financial state of Naftogaz Ukrainy and the Pension Fund should be improved to a level that will prevent there being a need for extra aid using budget funds," read the materials.

As for monetary policy, the experts said that the NBU should try not to print too much money and refuse proposals to finance projects linked to preparations for the Euro 2012 European football championship using the NBU's profit; to avoid monetization of the deficit of the national budget; improve the transparency of the bank refinancing policy and strictly control target usage of funds allocated to banks.

"The Ukrainian authorities will have to use new ways to increase direct domestic and foreign investment, which will promote growth in production and the creation of new jobs to boost the pace of economic development," the experts said.

Empty Flats

2009-10-28T10:06:00.002+02:00

To date, there are at least 30000 flats in Kiev being empty and only 600 lease deals have closed last couple month. Compare these figures with early 2008 when 3000 deals were only per 1 month. Why that's happen? People inflow in Kiev is lower, many flats moved from sale to rent conditions and they are still expensive.

So you have a good options to find a proper deal.

KDD Results - 1H 2009

2009-10-23T15:31:00.003+02:00

KDD Group N.V. reported results of its operations for the 1H 2009.

According to the company'report presented at the London Stock Exchange in January-June 2009 KDD Group received EUR 3.087 million net profit, which is 14,9 times lower compared to the same period in 2008.

According to the company, the total amount of management salaries for the 1H reached to EUR 374,000, while at the end of 2008 it amounted to EUR 874,000. To date of June 30 in KDD Group employed 92 people, while at the end of last year - 134 respectively.

Kiev Office Market - Fall 2009

2009-10-20T10:19:00.002+02:00

According to CB Richard Ellis, from January to September 2009 the number of deals on office lease has decreased compared to the same period last year, at least twice. This is confirmed by Colliers International, adding that to date more than 90% of transactions are due to migration of tenants from one office center to another one.

Now many are trying to rent in a prestigious office spaces, located in CBD. In particular this applies to the pharmaceutical, FMCG and IT-oriented companies working with offshore partners, as well as representative offices of foreign companies that were least hit by the financial crisis.

At Colliers International argue that because of this trend, A class vacancy is now less than 10%, whereas in the 1H 2009, it reached 15-20%. In some properties, for example, Leonardo 2nd phase, Prime or Podol Plaza, almost no vacant space left.

In B and C class average vacancy rate, grew from the beginning of the year with a 5-10 to 15-20%. Most affected outdated and the poor quality office centers, where there outflow is significant.

Situation is even worse with the unclassified D and E properties, where vacancy has increased since the beginning of the year from 18 to 25%. The most tenants such offices on the first floors - are banks, insurance offices, telecommunications companies, beauty salons - suffered from financial crisis stronger than other companies.

This fall in A, B and C classes most demand space is 100-150 sqm, whereas a year ago there was a strong demand for 2500-1000 sqm. That's the fact many companies have reduced the number of staff and no longer need large spaces.

Increased competition for customers has forced the owners of office property slightly lower prices for rent. If in April 2009 base rent for A Class space estimated as USD30-40/1 sqm - now uSD25-38/1 sqm, USD18-25/1 sqm - now USD 15-22/1 sqm for B class spaces and USD12-18/1 sqm - now USD9-13/1 sqm for C class respectively.

Owners of office centers are also ready to fix the base rate at UAH with fixed USD exchage rate with volatility no more than 15%. If it exceeds this figure, the UAH rent rate should be reviewed.

In turn, tenants are now trying to sign non-breaking lease agreements for a term from 5 to 7 years, offering the fixation of current base rates and penalties for the break up. But to get good terms is possible for limited number of tenants - primarily in the business centers, whose owners want to sell property in the next 2-3 years. Others agree to sign not more than 1,5-3 years with a subsequent renegotiation.

Total Collapse With Okey-Ukraine

2009-10-19T19:53:00.004+02:00

Okey-Ukraine is not pay for the delivered goods worth about UAH 130 million UAH, told the retailer' suppliers

A mobile phone of Raul Parusk is not responding. He is a manager of Expert Capital SA, Luxembourg which is owns Okey. Supplies cannot to get rest of goods delivered, thee disappeared.

Among the creditors were large companies such as Nestle.

Meanwhile, according to the suppliers, Okey-Ukraine has paid or agreed to restructure the debt to banks for loans at a much higher amount - about UAH 400 mln. The biggest lenders are Ukrsibbank and Finance and Credit. But Finance and Credit sold the equipment which was a pledge for a loan to Auchan. So, there is no debt from Okey, tell officials from bank

Suppliers have applied the criminal lawsuits against retailer, hoping to protect own business in such manner. They trying to prove that Okey' management was involved into the bringing to bankruptcy for the purpose. In that case, suppliers will have
chance to bring their money back from other owner' income, even from the other business.

Conflict may also affect on the other assets and business of Expert Capital. Until the end of the week suppliers will send a letter to the EBRD head office. They will ask the management not to issue a new USD 39.9 mln. tranche to Expert Capital for the shopping centers construction in Ukraine, due the owner is not fulfilling debt obligations. Last spring, the EBRD provided a loan to three companies belonging to the "Panorama Group", with total amount of USD 139.3 mln. The first USD100 mln. was transfered last year.

Please Join To My Joy!

2009-09-22T19:19:00.002+02:00

Dear friend of mine! Dear readers of Ukraine Real Estate Market. Today we are have stepped over 100.000 entries to the blog! I never imagine it can be real. But you did it! Thanks you very much. Blog helped me a lot, and I'd like to believe you either.

Hope to see you further! Good luck!

Totaly Useless Info About Mirax

2009-09-16T16:42:00.004+02:00

Moscow office of Mirax (hey, Ukrainian one has gone, remember?) fired 90% of its staff during last year. Before the crisis, they have around 3000 employee only at back-office. Now this figure down at only 300 people. As well as field workers - the same amount is.

And who knows how it would have ended if Mirax has not agreed with the Alfa Group, which had serious intentions to get his money back. Actually, this is Morgan Stanley loan to Mirax, which Alfa bought. But yesterday they had agreement to resolve that problem and Mirax may sleep well another 1,5 years.

In my mind, Mirax is biggest and brightest example of what's going on in development market across Russia and Ukraine.

Yuri Nartov Left Colliers

2009-09-14T14:21:00.003+02:00

One of Managing Directors of Colliers Ukraine, Yuri Nartov left a company these days. I know Yuri as an excellent professional and very kind person. It was a please for me to work together. That's why I'm sure he will be very successful in his new track.

Alexandr Nosachenko is only Colliers' Managing Director now.

Good Luck, Yura!

Intermarket Takes A Bankrupcy

2009-09-13T17:13:00.002+02:00

Intermarket retail chain, well known by its Arsen supermarkets, has been accepted as bankrupt by Kharkov Commercial Court. Early the retailer' suppliers reported on UAH 200 mln. bad debt from it. Then Intermarket proved only UAH 145 mln. As a final decision the new owner, Eurotech took responsibility to pay back only 75% of given amount

Vox Populi

2009-09-09T13:50:00.000+02:00

Attention to people from leading RE players at Ukrainian market: if you want to participate in new media project, feel free to contact me.

New Appointment in Colliers International

2009-09-07T18:27:00.002+02:00

Colliers International has announced the appointment of Hadley Dean to the position of Managing Partner in Central and Eastern Europe region.

In his new position Dean will be responsible for regional client strategy, as well as implementation of international initiatives and actios to Colliers International offices in the Czech Republic, Slovakia, Hungary, Romania and Ukraine. He holds his current position of Managing Partner of Colliers International in Poland, too.

Under his management office of Colliers International with 20 employee, grew to three offices with 120 people.

Hadley Dean works in commercial real estate market for 13 years. He began his career in London. In 1999 he moved to Prague to develop agency business. In 2000, Dean moved to Poland, focusing on strengthening the presence of Colliers International in this country.

New Season, New Episodes!

2009-08-31T10:37:00.001+02:00

Dear Ukraine Real Estate Market friends! I'm starting a new season of the show:) Almost 3 years together, this does matter. At this autumn - be ready to answer the questions. Stay tuned on UREM!

Retail Rates - As Bad As Possible

2009-08-30T16:59:00.002+02:00

According to local CBRE' office, Kiev is one of the TOP-3 city with rent rates fall (I even cannot name it as "decreasing"). Ukraine' capital with -32% figure follows to Buenos Aires (-37%) and Warsaw (-33%). CBRE notes that biggest down numbers are in the weak concept and poor location (50-70% fall) while more succeed SCs have about 30-40% rates fall. Actualy I don't understand how the determine the median (-32%) with provided figures. Sergie Sergienko from CBRE predicts that in case of poor consumptions rent rates will continues to move down at least up to 5-10% more.

Natalia Kravets from Colliers notes that vacancy is pretty predictable: from 1-2% for prime SC up to 5-7% for unlucky ones. Some figures: Globus rent rates (USD120-150 for now comparing with USD 200-250 the same period last year), Karavan (USD 100-140 for now; 150-200 last year), Piramida (USD 50-70 for now; 80-190 last year)

Hot Trend

2009-08-29T15:32:00.003+02:00

Taking into growing bad debt in the banks, almost no loans for cap operations, next elections, and low consumption I would be sure enough to make following decision:

Next hot trend in Ukraine is going "distressed assets" deals.

I see that some groups are ready to buy at much lower price level than before. But they have the liquidity. And they wait and tease. It seems these are the guys from Middle East, Russia, Israel. An we can predict the era of overpricing in Ukraine almost ended. Of course, many owners and land banks people can not even imagine such scenario, but life will put all on the table. Just recall XXI Century case.

METRO Changes its CEO

2009-08-25T20:19:00.002+02:00

CEO of METRO Cash&Carry Ukraine left the company and moved to Russia, in Lenta, one of the biggest Russian retailer

XXI Cenury Is Waiting For The Better Times

2009-08-23T16:53:00.002+02:00

XXI Centuury is not going to re-concept their shopping centers in development phase. They're speaking on Sevastopol and Lviv projects as well as Kvadrat on Miloslavskogo str (cheers to Colliers and Vladimir Timochko! :) CEO of the company said that initial concept is pretty good.

Also he did confirm XXI Century doesn't want to sell their flagship properties - Kvadrat shopping centres, at list on current bid.

About Current Situation On Kiev' Hotel Market

2009-08-21T17:28:00.002+02:00

Since the beginning of 2009 hotels occupancy in Kiev has decreased by 10-20%. This is stated in DTZ last report. Most declined segment is 5-star ones. In June this number averaged 35%, 20% lower than the same period of 2008. For example, «Opera» hotel room occupancy fell by 16% compared to same period last year.

The only way to retain customers for the hotel was cut the prices. In average at 1H 2009 that declining was for more than 40%. The biggest fall was 5-star hotels. For example, during last year, a standard room in Hyatt and Premier Palace was about USD550, for now, its price fell to USD 350/day. 4-star hotels (Riviera, Radisson) decreased the price from USD350 to USD230.

Net income per room has dropped significantly either. If in 2008, with each room with average price of $ 550 per night hotel having got USD303 income, in 2009 this figure only USD123 with average price of rooms at USD350 respectively.

However, to further cost reduction will apply, people say. 5-star hotels will not reduce prices, due significantly rosed cost of utilities. This is much expectable for the 3- and 4-star properties.

Bye Bye C&W

2009-08-04T17:40:00.003+03:00

Cushman & Wakefield close their Ukrainian office (as well as local entity) and terminate all activities here.

It's very pity, because they are very professional and stable team within other markets, friends of mine were working there and I had a bit relations with them in the past.

CU next time. Hope so.

O'Key Ukraine Change Strategy Again

2009-07-20T20:24:00.002+03:00

Till now «O`Key» declared the looking for a strategic investor to keep operations, but now the company is considering to sale the whole business.

The company was ready to sell 50% of the equity to raise funds necessary to maintain the growth - till 2011 the company had planned to take a 3-5% retail market share. Then, experts evaluated 100% of the chain approximately USD56 mln.

«The negotiations are almost done. Three strategic investor came in the last round of and in the next two weeks will be open the buyer», - reported «Renaissance Capital Ukraine», which is consultant of the deal.

There are the few details of expected transactions. In the «Panorama Group», which are the developer of shopping centers (have a same owner with the «O'Key») stated that the intention to terminate the lease with the «O'Key» in 3 SC. This is a "Sky Mall" in Kiev, "Sunny Gallery" in Kriviy Rog and "Flagman" in Zaporozhye.

«O'Key» develop four hypermarkets (total shopping area K36 sqm) in Kiev, Kriviy Rog, Zaporozhye and Kharkiv. Income in 2008 - UAH 740 mln. 100% share of the company (through «Expert Capital») own by estonian investor Hillar Teder.

Shoking Numbers

2009-06-11T13:04:00.003+03:00

All of you, who remember situation in commerical real estate in Ukraine, as well as some of my old posts, should be shocked with current cap rates in Kiev. Particurlarly, for property owners. For example 1-1,5 year ago a prime office property deals could be negotiated at 7-7,5% yeild only. But now these figures completely different: 16-17% for offices, 15-17% for retail and 18-20 for logistics.

Feel the difference? Credit crunch in action