International aliances become stronger in Ukraine real estate market

From Cleveland Business Online

Developers Diversified Realty Corp. is preparing to develop a mall in Russia and another in Ukraine through a joint venture with ECE Projektmanagement, a development concern in Hamburg, Germany.

Scott Wolstein, chairman and CEO of Beachwood-based Developers Diversified, disclosed the plans in the real estate investment trust's in a conference call with securities analysts.

Mr. Wolstein said his REIT, which specializes in shopping centers, "plans to start construction with (ECE) in the near future." Developers Diversified spokesman Scott Schroeder said he was unable to provide details about the proposed transaction.

Shopping center trade magazines frequently refer to ECE as the owner of Europe's largest shopping center portfolio, with 66 centers, and ECE describes itself that way.

According to its web site, ECE is active in Eastern Europe and is a natural to be on the front lines in developing shopping centers in Russia and Ukraine.

ECE owns two shopping centers in Hungary and five in Poland. It is developing centers in Lithuania and Bulgaria, as well as additional centers in both Hungary and Poland. ECE is a diversified developer itself; according to the company's web site, it also engages in health care, industrial and office developments.

Rich Moore, a Beachwood-based REIT analyst for RBC Capital Markets, said he believes entering foreign markets through joint ventures with developers familiar with the territory is a solid strategy for Developers Diversified.

He said there's an element of uncertainty to a retail development venture in Russia or the Ukraine because it is unknown how such a venture will do.

"For a company DDR's size, they could totally botch it up, write it off and no one would notice," Mr. Moore said. "But I don't think they'll botch it up."