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Sunday, May 20, 2007

Role of the local and international players in Kiev commercial RE

There is one sustainable trend in Kiev commercial real estate: local developers build and sell international ones - buy and operate.

Each ones have own reasons:

Local players:

  • Close relations with Kiev city council (many key persons are deputies as well)
  • Direct access to attractive land plots
  • Possibility to solve many restrictions and problems with permissions
  • Cheap labor cost
  • Great profitability
  • Attractive cap rates (10-11%)
International operators:
  • Lower risk to buy instead to build
  • Stable income stream
  • Well-proven operating and maintaining technologies
  • Low rate longterm funding
  • Huge demand for quality spaces
  • Attractive yield (12-18%)

Most significant last time deals are form Quinn Group ("Ukraine" shopping center, "Leonardo" business center, 1 phase and perhaps 2nd, too. Some tell about Alta-Center shopping center as well). Some rumors are about Deutsche Bank's intends to buy "Globus" in the Kiev' heart. Apollo Real Estate Advisors bought "Piramida" shopping centre. And many deals still in progress.

I sure that in the near future that trend even boosts. It seems to be truth, 'cause for transaction amount of 1 shopping center, ex-owner able to build 3-4 new ones.