Globus Ex-owner Forecasts RE Situation

Alexander Melamud, ex-owner of Globus SC and current owner of one of the biggest retail property in Kiev - Dream Town is trying to set kind of forecast for the future. He is stating that within 4-5 year real growth in real economy, as well as for the investment prices for prime properties is not possible.

Also he explained that ready to sell out his own properties, but there are no suitable offers so far. "I guess there is small possibility for that", said Melamud. "Now, I'm on the track with several real estate and restaurant projects in Russia, but I wouldn't like to discuss it".  

NAI Pickard Short Kiev Market Survey for 1H 2010

NAI Pickard has published a NAI Pickard survey of Kiev property market for the 1st 1H 2010. The survey highlights the main macroeconomic indexes for Ukraine and describes main trends in commercial and residential markets in Kiev.

Download link (PDF)

My New Challenge

Some of you, perhaps would kile to ask me - where I've been for a while. I have a reason. I'm very busy for now. From Dec 2009 I'm a Chief Operational Officer of ECO Tower - first A-class building in Zaporozhye (approx K800 people here). This is a big challenge for me, not only because Zaporozhye. In current market, to launch brand new property is pretty complicated goal, particularly for the city. The main problem - Zaporozhey has not any experience dealing with investment grade property at all. So, no one know, R/U, OPEX and many other things. But I guess it's just a time issue.


Couple words on my new business. ECO Tower (formerly known as Bayda Business Hall), is first project of well-known Austrian investment group - ECO Business Immobilien. That's public company with project within Austria, Germany, Hungary and Ukraine. The property should be commisioned at summer 2010, so we are very close to the finish line for the moment. ECO Tower is 19-storey office building with 3 retail floors. Total GLA about K11 sqm. There are 2-level underground parking for 92 cars. But greatest advantage is location. We all know "location, location, location". And we are the best one in Zaporozhye. ECO Tower is located in central square of the city, in front of region administration building. Now doubt - this is a best place for commercial building you ever could find.


I'm open for any business contacts, as usual. btw, I'm looking a business contact for corporate apartment hotel opportunity. 15th and 16th floor are great options for that.



So, I will try to back in track with the blog. Keep tuning.

Check the Back To Business!

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

Real Estate Cocktail Event in Kiev

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.

Empty Flats

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

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

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.

Totaly Useless Info About Mirax

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

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

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

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

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!

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

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

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.

Bye Bye C&W

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.

Shoking Numbers

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

The Ukraine Construction: Sharp Fall

With kind permission from CEEC Research, I've posted a brief report regarding Ukrainian construction market

Prague, 3rd April 2009

Total decrease in construction industry in Ukraine

The Ukraine construction sector is experiencing significant and unexpected changes. For the year 2009, 73% of construction companies expect Ukraine construction industry to decrease. These facts are brought by the CEEC Research, whose general partner is KPMG Czech Republic. The research results also show that the first signs of the decline started to appear at the beginning of 2008, nevertheless the companies did not perceive it as the start of a potentially broader and longer crisis. Now the economic crisis fully influences the sector in question. All interviewed companies feel itself limited in their business – mostly by insufficient financial resources as well as a poor demand and a tough competition. Due to mentioned problems the usage of capacities of construction firms decreased by 50 %.

Are there any positive signs for the future? What are the basic issues which will mainly influence the existence of the construction industry in Ukraine? What are the major factors limiting companies growth? How are new business contracts acquired? What is the experience of companies with tenders? Which information sources do the Ukraine construction companies use? These and other important findings are provided by the Ukraine Construction Qualitative Study.

Highlights from the Ukraine Construction Qualitative study:

• 73 % of the respondents expect the sector to decrease in 2009 (from the 2008 basis, which was already a 16% decrease on the 2007 results). ). If we look on a more detailed level, the reality could be even worse (36% of respondents expect a decline of more than 20%).For the 2010-2011 period, the expectations are a bit more optimistic: in average respondents expect the sector to grow by 3 %.
• 100 % of the interviewed companies experienced limitations to their business. It means a significant increase from the previous years – only 64% in 2007 and 82% of companies in 2008.
• The most frequently mentioned limiting factor was insufficient financial resources (68 %, 22 % in 2007), followed by tough competition (increased from 15% in 2007 to 68% in 2009) and high material costs (which have doubled from 33% in 2007 to 66% in 2009).
• Companies have also decreased their employment of foreign workers on their projects from 16% to 7% 2008/2009.
• The Internet is used by 100 % of the interviewed construction companies, 89 % of companies use internet for information search, 50 % for company presentatin and about half of the companies use the Internet as an information source for potential new business deals
• Long-term contacts were rated as the main source of information (91 %), followed by meetings and presentations and the Intenet.
• The most often used sources of new deals/contracts for construction companies are preferred partnering agreements (frame contracts), long term contacts/networking (personal contacts) and tenders.
• Companies were asked: “Have you ever been asked for a bribe during the selection process/tender? 19% of respondents replied that they have never been asked for a bribe and the same share of companies replied “yes”. Nevertheless there was a great increase in “no comment” answers.
• Construction companies provided the tenders with one of the lowest transparency rating in the CEE region (only 3.2 points out of 10max, even lower than in Moscow with 3,9 points), which indicates that the transparency level is very limited. 25% of companies shows that public tenders are completely non transparent.
• 59 % of construction companies assess their risk management as intermediate; 5 % as advanced (decrease from 13 % in 2008), 33 % as basic and 3 % as low level.
• Only 29 % of the construction companies have never breached their risk management policy. The majority confirmed that they breach their risk policy to secure a new contract either rarely (34 %) or exceptionally (26 %); 11 % of firms do so often (increase from 2 % in 2008).
• The most often used methods for the selection of suppliers are preferred partnering agreements (which have further increased their share from 68% in 2008 to 83% in 2009), followed by long-term contacts/networking (60 %) and also recommendation (growing from 2007 until 2009 – 49 %).
• Key criteria during the supplier selection process are: price, mentioned by 74 % of the construction companies, experience of the supplier (68 %) and applied technologies (60 %).
• In the long-term, companies predict that the major factors impacting their business development will be mainly: financial situation of their company (increased from 63% in 2008 to 73% in 2009).
• The key investment areas for 2008-09 will be project management processes (increased from 38% in 2008 to 51% in 2009), the construction mechanization (top priority last year) has slightly decreased its share in the respondents’ samples.

The Ukraine Construction Qualitative Study is the first succefull report published by the CEEC Research in 2009. The interviews with construction companies operating in this region were performed in the Q1 2009 and provide findings based on 47 face-to-face structured interviews with the representatives of the local construction companies.

The analysis results provide interesting insight into the current construction situation which is visibly impacted by the financial crisis. The report is focused on the three key areas which are crucial for the qualitative analysis of the sector. These three areas are: companies’ expectations for the sector development, used sources of information about new business opportunities and last but not least applied methods for acquiring new business deals.

The full version of The Ukraine Construction Qualitative Study can be downloaded on the CEEC Research web site: www.CEEConstruction.Eu free of charge. At the same place you can find all details about the methodology, targets of the research and also qualitative reports of the other nine researched countries. The Central and Eastern European Construction (CEEC) Research project was conducted in partnership with KPMG in the Czech Republic.

For Those Who Like Colliers Market Reports

If you a fan of Colliers Market Reports (actually, me either :) you can download them from Colliers Reports page. As usual - they're very informative and hi-level performed.