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Friday, April 27, 2007

Time To Invest IV - Most useful presentations - Ober Haus

Next presentation form this event - "Kiev Residential Market. Is the “Trend Your Friend?” from Peter Gage Morris, Managing Director, Ober Haus.


The average selling price for A Class office space, Kiev, March 2007

(Ukrainian News, 04/13/2007)

In March Kyiv office realty market saw average prices for A Class premises grown by 11.7% or USD 394.5 to USD 3,752.5 per square meter compared with February.

This follows from a message of the Traektoria realty company, a copy of which Ukrainian News has obtained.

Average cost of B Class office premises grew in March by 3.8% or USD 94.4 to USD 2,533.3 per square meter, as compared with February.

Price for C Class premises rose by 2.6% or USD 46.1 to USD 800.3 per square meter in March.

A Class offices are premises in new office complexes conveniently located and optimally planned, finely finished and engineered and also automated with human factors systems.

B Class offices have almost the same characteristics as the A Class offices though not so prestigious (as a rule, A Class offices after 5-7 years of use).

C Class offices are premises, whose characteristics correspond to the B Class but with disadvantages in location and equipping.

Thursday, April 26, 2007

The average rent for office spaces, Kiev, March 2007

(Ukrainian News, Hanna Diakonova, 04/13/2007) The average rent for Class-A office space in Kyiv rose by USD 2.1 or 6% to USD 37 per square meter in March, compared with February.

The Traektoria real-estate agency announced this in a statement, a text of which Ukrainian News obtained.

The average rent for Class-B office space in Kyiv rose by USD 2 or 8.3% to USD 26 per square meter in March, compared with February.

The average rent for Class-C office space rose by USD 2.1 or 11.2% to USD 20.8 per square meter in March, compared with February.

Class-A office space is office space located in new office complexes that are conveniently located and are optimally designed with high-quality finishing and engineering, and automatic vital systems.

Class-B office space has practically the same characteristics as Class-A office space, but it is not so prestigious (as a rule, these are Class-A office space that have been in use for 5-7 years).

Class-C office space is office space with characteristics similar to those of Class-B office space, but with shortcomings in terms of location and equipment.

As Ukrainian News earlier reported, Ukrainian Trade Guild (Kyiv), which operates on the real-estate market, is not ruling out the possibility of rents for space in shopping and office centers rising by 20-25% in 2007.

24 April - Current prices for residential real estate, Kiev.

Current prices (average weighted) for one-room apartments on Kiev primary real-estate market has become USD 2,009 per sq. m., the average prices of two-room apartments on the primary real estate market on USD 2,670 per sq. m., for three-room apartments USD 2,471 per sq. m.

Secondary market shows such figures: the average price for one-room apartments on Kiev secondary real estate market is USD 3,036 per sq. m., two-room apartments on the secondary real estate market on was fixed at USD 3,087 per sq. m., level, for three-room apartments - USD 2,975 per sq. m.

Time To Invest IV - Most useful presentations - PwC

I'm going to offer to you some most valuable info from the participants of Time To Invest IV, took place in Kiev 18-19 April, as I've mentioned before.

Let's start with PricewaterhouseCoopers. There is presentation "Tax Efficient Structuring in Real Estate" from Svetlana Bilyk, Senior Manager.

Tuesday, April 24, 2007

Short news - Quinn Group is going to buy another one property in Kiev

Main shareholder of "Tekstil-Kontakt" holding, Alexandr Sokolovsky sells shopping centre "Alta-Centre" to Irish "Quinn Group", which already owns in Ukraine a "Leonardo" business center and "Ukraine" shopping centre. The amount of the transaction is about USD 40 mln.

But according to the owner "Alta-Centre" the deal still in progress of negotiations. "We talks with Quinn Group is ongoing, but so far nothing has been signed. So far we only communicate," he says.

According to market players, property has been offered for sale in the end of 2006. They say the Irish made good deal because its payback period for this investment is about 8 years. While that the average PB period now for retail is 10-12 years.

Kiev construction news - 20 April

Kiev City council has leased a 1.07 ha land plot located at Hlybochytska Street, in Shevchenkivskyi district to the VK-Brok company for construction of an administrative and residential complex.

Kiev City council has leased a 0.85 ha land plot located at Hlybochytska Street, in the Shevchenkivskyi district to the Kyivmiskbud holding company for residential construction.

Kiev City state administration failed to find an investor for reconstruction of underground passage with construction of retail facilities under Peremohy Avenue near Polytechnic Institute subway station.

Kiev City state administration choose Comfort Market Lux to invest construction of a retail and entertainment complex at the intersection of the Chervonohvardiiska and Chervonotkatska Streets in the Desnianskyi district.

Kiev City state administration has selected Kiev Terminal company to invest into reconstruction of the Kharkivska Square.

Kiev City state administration selected Budmarket Group to invest construction of retail and entertainment complex and a hotel in the Desenka Bay in the Dniprovskyi district.

Monday, April 23, 2007

XXI disclosed their plans for the next few years

Learning from company' press releases I could to deliver some fresh info their future activities:

Office center at 3 Melnykova Street in Shevchenkivskyi district till end of 2009. There will be K21 sqm. GLA. Total investment amount of the project is USD 37,5 mln.

Huge residential and commercial complex, located on 55 Ha land plot in Poltava. This project scheduled for 2010 with shopping area and till 2015 there will finish residential buildings.

XXI are intend to open their branded retail Kvadrat in Zaporizhia, Sevastopol and Simferopol (Crimea) in 2009.

There are residential building planned for Sevastopol, Zaporizhia, Alupka.

Sound great, but we'll watch what's going on in real life.

Illegal Corporate Raiders

I decide to post it because there are a lot request and opinion on Ukrainian legislative system and corporate relations. This is extremely important for investors in RE, and other ones at all.

Now, Illegal Corporate Raiders are broadly presented in corporate conflicts. So, I thought you have to read and know this. I'm appreciate to American Chambers of Commerce in Ukraine and its President Jorge Zukoski personally.

Recently, under the auspices of the Chamber, a Working Group has been active in analyzing the issues surrounding the activities of illegal corporate raiders and proposing recommendations to addresses these impediments to current and future investment. The Working Group is comprised of representatives of Ukrainian and foreign companies specializing in legal and consulting services as well as specialists in the sphere of corporate governance.

The current deliverable developed by the Chamber Working Group is a White Paper entitled "Illegal Corporate Raiders". The document contains information that highlights issues and remedies which require the joint efforts of Ukrainian executive and legislative authorities, both the foreign and domestic investment community, representatives of the judiciary, as well as experts and scientist who are engaged in the sphere of economic and corporate governance reform. The recommendations put forth are directed to the prompt and effective implementation of a transparent system of property rights protection governed by the rule of law in Ukraine.

The Chamber anticipates that the White Paper will provide another tool to stimulate a discussion and provide a catalyst to positively influence much needed change. The Chamber's Policy Team and the Chamber Working Group on Illegal Corporate Raiders stands committed to working with our partners among the Membership, in the Ukrainian government as well as the diplomatic and donor community to advocate for much needed changes in this sphere.
As we continue forward with the advocacy plan on this issue we are pleased to offer an opportunity to our Members to submit to our offices all relevant data, figures and explanations relating to your company's experience on the issue of Illegal Corporate Raiders.

The Chamber would like to thank our professional colleagues who provided invaluable assistance in developing this White Paper and who are genuinely concerned about the negative impact of illegal corporate raiders on the business community and international reputation of Ukraine. The Chamber Member companies actively involved include but are not limited to (in alphabetical order): Baker & McKenzie, Bunge Ukraine, Grischenko & Partners, Magister & Partners, USAID - Commercial Law Center. The Chamber thanks them for their proactive involvement and invaluable contribution to the document.

We would also like to express our appreciation to all Members of the Chamber's Legal Committee (Mr. Oleksandr Martynenko, Baker & McKenzie, Co-Chair), the Chamber Board of Directors Policy Committee (Mr. James Hitch, Baker & McKenzie; Mr. Jacques Mounier, Calyon Bank Ukraine; Mr. Myron Wasylyk, The PBN Company; Mr. Sergiy Yanchyshyn, Motorola) as well as to all Members of the Chamber's Illegal Raider Attacks Working Group for their contribution, involvement and support.


Sunday, April 22, 2007

Recent Developments in Ukrainian Legislation, Feb-Mar 2007

There is a good tradition to spot on legislative issues and trends in Ukraine. Please read Chronicle of Recent Developments in Ukrainian Legislation from Russian-Ukrainian Legal Group.

Friday, April 20, 2007

Ukraine: room for retail

Recently, I've wrote about Auchan' starting in Ukraine. So, seems that big international retailers develop their activities seriously, not just a nice words about. So this article from Oxford Business Group delivers a comprehensive outlook what does happen in Ukraine in this market.

Oxford Business Group, UK, Friday, 23 March 2007

French retail giant Auchan announced last week it plans to open 10 new hypermarkets throughout the country within the next two years, with the first scheduled for January 2008 in Kiev.

Local press reports the total investment in the country will amount to hundreds of millions of dollars, especially in light of the surging price of land and projected size of the developments.

Auchan, the 10th largest retailer in the world, has partnered with Ukraine's second biggest supermarket chain, Furshet, in a deal that will give Auchan a 20% stake in the domestic retailer. Kyiv-based Furshet owns 69 stores in Ukraine and one in Moldova.

According to the agreement, the two retailers will create two new companies. One will operate Auchan's future chain in Ukraine while the other will develop Ukrainian shopping malls designed to include either an Auchan or Furshet outlet.

Auchan's announcement echoes intentions voiced by other foreign retailers, such as Germany's Metro and Russia's O'key. Metro, who currently operates 13 wholesale outlets in the country, has been considering the introduction of its Real hypermarket brand in Ukraine.

The interest of major international hypermarket retailers in the Ukrainian market is not surprising. According to industry insiders, the market is still big enough for multiple players as the hypermarket niche remains largely unfilled.

The retail sector has experienced tremendous growth in recent years. According to Moody's, which performs financial research and analysis on commercial and government entities, the sector expanded by 25.3% in 2006, adding to the 23% recorded in 2005.

The State Statistics Committee reported that total retail sales amounted to around $24.5bn in 2006, with Kiev, Dnipropetrovsk and Donetsk accounting for the largest growth.

With personal incomes gradually rising and easier access to bank loans, hypermarkets are not the only gainers. More Ukrainians are investing their earnings in the purchase of new cars.

According to Gennady Ovcharuk, the general director of a Kiev-based distributor of Bentley automobiles, the Ukrainian new car market jumped 40% year-on-year in sales in 2006. "In 2005, 265,000 new cars were sold, and in 2006 that figure grew to 371,000," he said.

In comparison, the Western European market grew by only 1%. Moreover, Ukrainians are increasingly inclined to buy mid-range foreign automobiles. Ovcharuk told OBG that Ukraine ranked 9th in the world in terms of imported car volumes. Ukrainian car dealerships posted $6.1bn in car sales last year, up from $3.6bn in 2005.

Another beneficiary of retail growth is the restaurant sector. Oleg Derevianko, the CEO of Ukraine's largest restaurant operator Kozyrna Karta told OBG that the growth is not just rapid, but the clientele is changing. "It is no longer just the wealthy who eat out.

The restaurant business is growing across all segments. If restaurants in Ukraine fail, it is not because there is no market, but because they aren't delivering the right concept at the right place." The group currently operates 60 restaurants and plans 20 more projects.

Much like the hypermarket segment, the restaurant niche has thus far not had significant foreign investment. Market potential should lead to more foreign chains exploring possibilities in Ukraine.

The entry of foreign retailers such as Auchan and the expansion of domestic players is likely to continue as long as unemployment remains low, wages continue to grow and easy credit access helps growing an increasingly large middle class.

However, some structural challenges could hinder development of the sector, most significantly the limited availability of land. In Kiev, particularly, property prices have risen substantially, and plots suitable to large hypermarkets are difficult to find. Controls on the sale of agricultural
land and bureaucratic hurdles exacerbate the problem.

Swedish retailer IKEA has delayed entry into Kiev for three years due to its problems finding land suitable for its megastore. Insiders say that land issues have also been one of the barriers to the introduction of Metro's hypermarkets in the country.

IKEA originally planned to construct an outlet over 55-60 acres on the outskirts of Kiev near Borispil airport. The proposal amounted to between $350m and $400m of investment and envisioned construction of six stores across Ukraine, as well as the creation of parks and amusement complexes.

Although this plan was rejected by city officials, the company recently agreed to purchase a 30 acre site in Kiev's suburbs, though several ownership issues remain unsettled.

All in all, 2006 proved a growth year for Ukraine's retailers in spite of higher costs for energy, political instability and strong inflationary pressures. Spending growth remained in double digits throughout the year.

2007 is expected to be another year of double-digit growth, as year on year growth for the first two months has exceeded the 2006 level. Moody's reports retail turnover came to UAH 10.11bn (US$2bn) in February, a 31.2% growth compared to February last year.

Wednesday, April 18, 2007

Out of blog for a while

Hello all.

Now, I participate in the main event in Ukrainian commercial real estate - Time To Invest Kiev IV international conference in Radisson SAS, Kiev. So I'll try to deliver to you a comprehensive info and details about this gig.

Regards, Sergey.

Tuesday, April 17, 2007

16 April - Current prices for residential real estate, Kiev.

Current prices (average weighted) for one-room apartments on Kiev primary real-estate market has become USD 2,009 per sq. m., the average prices of two-room apartments on the primary real estate market on USD 2,670 per sq. m., for three-room apartments USD 2,471 per sq. m.

Secondary market shows such figures: the average price for one-room apartments on Kiev secondary real estate market is USD 3,036 per sq. m., two-room apartments on the secondary real estate market on was fixed at USD 3,087 per sq. m., level, for three-room apartments - USD 2,975 per sq. m.

Economy data from Sigma Bleyser

Some of you ask me about more detailed info about Ukrainian economy. Sure there is real estate news and data mainly, but I'm trying to satisfy all request (within our mainstream topics, for sure). So, here you can find current economy review (actually February one) from Sigma Bleyser, international company operates in Western Europe.

Monday, April 16, 2007

New big fish in Ukrainian RE

International investment company Heitman International plans to establish a fund Heitman Russia and Ukraine Property Partners. Core activity as you understand - development and property management in Ukraine and Russia. Heitman Russia and Ukraine Property Partners acquire for that purpose USD 150 mln. at least.

Heitman intends to invest in Russia and Ukraine Heitman Property Partners USD 5 mln equity, and rest of funds they're planning to borrow from the European Bank for Reconstruction and Development (EBRD), the institutional investors from Europe and North America. In May, the EBRD will consider the possibility of taking part in the formation of the fund.

There is some additional info about the project from EBRD.

Bank expert predicts a decreasing commercial RE rates

Within 2 or 3 years it is expected stabilize, and perhaps a slight fall in rental rates on commercial and office real estate in Ukraine.

Such forecast was made by director of the Centre for project finance of BNP UkrSibbank Valery Povreznyuk.

In his view, the demand for commercial and office properties in the regions remains high but in Kiev, it is close to balance between supply and demand. "Lack of hotels and logistics is everywhere - these segment are behind the current development for a few years," he added.

According to Mr. Povreznyuk, for today the bank finances about 20 big projects for the construction and about 10 are under review process. The largest loan amounts comes for retail (55%), logistics parks-25%, office real estate is 15%, hotels 5%.

60% of commercial projects financed by the bank, built on leased land. That trend, he explains with complicate process of land buying, including the constraints of local authorities, unpredictable economic changes, as well as the specifics of the project.

Friday, April 13, 2007

Waiting a municipal architecture things

Ukrainian News

The Kiev City state administration intends to establish a municipal design institute.

Kiev mayor Leonid Chernovetskyi has disclosed this to reporters.

"It was new for me that the institute, which designs junctions was sold into private property by the old authorities for some reason and today I ordered to establish such an institute by the Kiev city state administration," said Chernovetskyi.

The first deputy chairman of the Kiev City administration Anatoly Holubchenko explained to journalists that the future project institute will be engaged in designing roads, traffic junctions, industrial and residential construction.

Holubchenko explained the administration's intention to establish a design institute with that the city has no controlling interest in any design institute, though the city needs design works.

New State Agency for land regulation

Cabinet of Ministers signed a regulation on the State Agency of Land Resources.

According to the regulation, the agency ensures implementation of the state policy and management in the regulation land relations, usage, security and monitoring lands, keeping land cadastre. They're involved in demarking regions, districts, cities, districts in city, villages and settlements as well.

The Agency must provide the documents and submit them for adoption to the Environmental Ministry. The Agency has own local branches in all regional cities.

Thursday, April 12, 2007

Short news - Kiev zoo move to the suburb

Kiev city Administration is trying to move out from city Kiev zoo and get a very valuable asset - a land where zoo is located. Average price for that land is approximately 70 mln. and this figure constantly growing. They intend to replace a famous object in in Vyshgorod, with the remaining 40 hectares of zoo' land for shopping centre and single-house gated community.

I guess this is a stupid idea and society and govt must to say their strong opinion against such deal.

Wednesday, April 11, 2007

March 30-April 6 - Residential rent prices

From Ukrainian News

The average rent for one-room apartments in Kiev fell by 4.8% or USD 24.8 to USD 491 per month on March 30-April 6.

According to information of the Real Estate web-portal, the average rent for two-room apartments in Kiev fell by 2% or USD 16.6 to USD 813 per month, the average rent for three-room apartments fell by 1.9% or USD 26.1 to USD 1,317.1 per month on March 30-April 6.

The lowest one-room apartments rents in Kiev rose by 1.6% or USD 5 to USD 314 per month, for two-room apartments remained at the level of USD 419 per month, for three-room apartments fell by 1.7% or USD 10 to USD 573 on March 30-April 6.

The highest rents for one-room apartments fell by 6.4% or USD 75 to USD 1,100 per month, for two-room apartments fell by 38.5% or USD 1,242.4 to USD 1,985.6 per month, for three-room apartments fell by 6.7% or USD 250 to USD 3,484 per month on March 30-April 6.

As Ukrainian News earlier reported, the average rent for one-room apartments in Kiev rose by 4.3% or USD 21.2 to USD 515.8 per month on March 23-30, the average rent for two-room apartments rose by 1.7% or USD 13.9 to USD 829.6 per month, the average rent for three-room apartments fell by 1.6% or USD 22.2 to USD 1,343.2 per month.

9 April - Current prices for residential real estate, Kiev.

Current prices (average weighted) for one-room apartments on Kiev primary real-estate market has become USD 2,009 per sq. m., the average prices of two-room apartments on the primary real estate market on USD 2,670 per sq. m., for three-room apartments USD 2,467 per sq. m.

Secondary market shows such figures: the average price for one-room apartments on Kiev secondary real estate market is USD 3,044 per sq. m., two-room apartments on the secondary real estate market on was fixed at USD 3,085 per sq. m., level, for three-room apartments - USD 2,974 per sq. m.

The office real estate: where landlord is the King

The office real estate in Kiev is big boom market now. A growth of rental rates is about 30%, and today they are 35-45% higher than in other capitals in eastern and central Europe.

The reason for this phenomenon is the imbalance of supply and demand, so, the vacancy level for the offices A and B+ class at the end 2006 only 1.7%. In international practice it is assumed that the market is changing for the better conditions for the tenant, with a vacancy at least 10%.

By the end of 2006. total amount of professional office space that leased in Kiev reached 574K sqм., including in the new business centres – 120K sqm. According to the market info, at 2007 a new constructed proposal on the market slightly grow up to 140K sqm. Of course, to date, the investment climate in the market has improved, but tenants will be able to feel changes only after 3-5 years, it is the time required for the implementation of those projects are now in the work.

But it is encouraging investment expectations somewhat flawed by a series of problem constraints. The biggest one is the lack of suitable land at an affordable price. In addition, many foreign investors are considering buying an empty land plot without authorization documents as a significant risk.

According to experts, the lack of vacant land in the central business district of Kiev for the construction of office facilities, force the developers to look out the more remote areas, which means that not only can reduce the rental rates, but also a decrease in the office (and the road flows) in the centre of Kiev. Also, in the near future, may also be expected to grow the real estate business in the most dynamic regions, Dnipropetrovsk, Odessa, Kharkiv. The cap rate for office real estate in Kiev last year for A Class has been at 9,5-11% level, for B Class - 10-12%. The payback period is estimated by developers as 5-7 years. Projects scheduled for completion in 2008-2010 will have much longer payback period, but cap rates are is unlikely to fall, in spite that the demand for professional real estate office in the Kiev continues to grow, and international companies are biggest demand player among class A and B+ offices with 71% share. The structure of transactions on the office real estate market dominated by rent (88%). But most of company would like to buy office spaces as property. There is huge demand for such kind of deals.

In the next few years the share of foreign companies in the structure of the demand for office space in the Kiev is steadily high. Moreover, the cap rates will decreasing due low risks and higher supply in the Kiev office real estate market.

Sunday, April 8, 2007

Short news - 2006 Ukraine mortgage figures

The volume of mortgage lending in Ukraine tripled in the past year and by the beginning of March 2007 reach USD 28 bln., said Executive Director, Head of of banking regulation department of the National Bank of Ukraine (NBU) Alexander Kireev.

According to the report, 81% of the total mortgage loan amounts, or USD 22.8 bln. are loans in foreign currency. The share of loans issued to private persons in the total amount of loans is USD 21 bln USD. "Every 4th loan is lends as mortgage", said A. Kireev.

Friday, April 6, 2007

Another shopping centre from Velika Kishenia

Velika Kishenia, one of the leading Ukrainian retailer opened a new shooping and leisure centre "Ekvator" is the Chernivtsi. This is the 14th city in Ukriane when the Velika Kishenia operate and 5th where there are such retail format.

Notably, the first objects were not in the Kiev, but in Kirovohrad, Nikolaev, Sevastopol and Kharkiv. According to the management, the company is interested to open retail centers and hypermarkets in each city with a population exceed 50,000 people, despite in the Kiev the people have strongly buying force.

Developing a regional zones declared as a priority, it is active expansion in the regions. According to developing plan, which was launched in September last year Velika Kishenia for 3 years (2006-2008) will build more than 10 shopping centers. For that purposes they borrow about USD 250 mln. Thus a significant part of the total 35 supermarkets and hypermarkets declared at the opening would be in their own buidings. Investment consultant of project is Dragon Capital.

Tuesday, April 3, 2007

Short news - restrictions for State companies to lease their property.

Verkhovna Rada intends to exclude state-owned company to lease a property exceed 200 sqm. per company.

Parliament intends to make changes in the Commercial Code put such rules in the law.

In 2006, government revenue from the lease of state property amounted to UAH 326.5 mln UAH. The 2007 budget revenues from the lease of state property set at UAG 310 mln.

Yuschenko vs. skyscrappers in Kiev center

President Viktor Yuschenko has urged Kiev city state Administration to restrict for high-rise construction in the center of the city. City state administration has to work out and endorse scheme on location of such buildings outside of the historical part of the city.

The President urged Kiev city state administration to set borders of such territories and endorse regime of their use. The administration also has to define a special historical and cultural territories and provide legal limitation of their building.

The President urged Kiev city state administration to keep Kyivans' interests during designing and construction of entertainment complexes, children and sports objects, parks, etc.

According to the bill, the administration has to inform about intends of construction and attract representatives of local communities to discussion.