Short news - UTG and Auchan Have Signed An Agreement

UTG and Auchan, have signed and agreement for cooperation. According to this deal, UTG will prepare a Kiev retail market study for French company.

As I posted before, Auchan and Furshet took a close relationship in Ukrainian retail market.

Short news - KOBA Is Going To Invest

KOBA International Real Estate Consultants (Danmark) invests USD 120-180 mln. in retail parks development. This project should cover 6 objects across Ukraine.

Target investment amount for each ones is USD 20-30 mln., says Vitaly Dubinko, representative of their company. He did not open in which cities do they intend to build, but said that there is no Kiev projects.

Concept of the future parks - open areas with several large retail facilities on the site, which are placed a number of small shops.

XXI Century Expands Its Presence On Kiev Office Market

"XXI Century" together with "Solidarity" going to the project office of center at Petrovka area.

International consultant for the project is CBRE Noble Gibbons. Architecture solution from FORM (Poland)

So office building will be built on the land plot of 0.9 hectares, which given by Kiev City Council on lease for 10 years until 2017, with zoning for an office complex with underground parking.

Office center will be built nearby the subway station Petrovka in Moscow Prospect, the main route connecting the right and left bank of Kiev.

Projected total area of B+ business centre is K68 sqm, including K45 sqm office cpaces , K4 sqm shops and amenities and 518 parking lots. Construction of property is scheduled to February 2008, to opening in 4Q 2009.

Now project has received a lease on land, a marketing, economic, financial and architectural design concept, passed Urban Development Advisory Board.

Another Big Shot On Office Market

Following by recent information, there is a news about activity of Kazakh investors, related with Turan Alem.

19 June they bought one of the biggest commercial real estate property in Kiev - A class office center "Iceberg" with total space exceeds K39 sqm. And the deal price is impressive as well - EUR 104 mln.

Quite interesting what is NEST (ex-owner) going to do with the funds? I'm sure we have to looking for new development from the company.

Local Developers Becomes Stronger

Recently, I've wrote about Kharkov company Avek, which builds office center Ave Plaza. Today, I found new info on its plans regarding logistic market. Company started seeking a land plots in various regions of Ukraine.

The development of logistics centers approved by the shareholders and management as strategy for company in 2007-2011. The initial planned investment in this business is about USD 50 mln.

Business plan includes the development of a logistics center in the southern, western and eastern regions of Ukraine. As most attractive places for the location of logistic complexes, company considers area surrounding Odessa, Kharkiv and Western Ukraine. Besides, Avek plans and development the similar objects in Russia (Belgorod region), on border with Ukraine.

For that construction will be established Avek-Logistic, which in the future may become manager of logistics centers.

It's great that local companies, like Avek, invest significant fund in development, especially at their own regions, where Kiev developers not presented yet.

Kyiv Administration Asks Court To Terminate Land Lease Agreements With 6 Companies

From Ukrainian News

The Kyiv City Administration has turned to court for a termination of lease agreements with six companies who took land on lease for construction purposes.

Anatolii Mukhovikov, who heads Kyiv's main land relations department, disclosed this to Ukrainian News.

The companies and the land plots are Interproekt, 10 Berezniakivska Street and 21 and 91 Tychyny Street, purpose - construction of high-rise houses with office space; Aviakov, 3B Tupoleva Street and 60 Palladina Avenue, purpose - construction of gasoline filling stations; NVP Budivnytstvo, at the corner of Lukianivska and Hlybochytska streets, purpose - construction of a residential complex.

The others are Business Support Center, 5 Nemyrovycha-Danchenka Street, purpose - construction of a residential house; Olimpbud, 12H Koroliova Avenue, purpose - construction of a residential house; Polius Plius, 12A Nahorna Street, purpose - construction of a residential house.

The city council had earlier nullified its decisions on allotment of land plots to these companies due to protests of local residents, Mukhovikov explained.

"There is [in the city council decisions on cancellation of allotment] an instruction to turn to court for a termination of agreements. The court claims have been elaborated, signed by the mayor and lodged," he stressed.

Mukhovikov added here that litigation may take long time, but the city administration is ready to go through all instances even up to the Supreme Court in order to terminate these agreements.

As Ukrainian News earlier reported, the Kyiv city council has nullified many of its decisions on land allotment for construction purposes because of public protests.

Accor Group and XXI Century Became The Partners

Accor Group and the XXI Century signed a protocol of intent about building in Lutheranskaya str. new 5-star Sofitel for 270 rooms. Besides they discussed the possibility of constructing a 3-star IBIS hotels, 4-stars NOVOTEL in Kiev, Lviv and other big cities in Ukraine.

According to Vladimir Ilyichyov, regional director of business development in Russia and the CIS of Russian companies Hotel Management Company (Accor Group), the terms of cooperation will be discussed as a delivering new land plots for the construction. will

Accor will serving as a hotel operator, assisted in the design, construction, equipping, staff training, hotel' launching and the subsequent management of this business.

Kyiv City Council Advices Kyivans Not To Buy Apartments From Mars Company

From Ukrainian News

The Kyiv city council is recommending Kyivans not to buy apartments from Mars company, which took on lease a land plot at 29 Miliutenka Street in the Desnianskyi district for building a residential house.

The recommendation was issued by a city council session on Thursday, May 24.

"To make it public with the aim of informing citizens about possible negative consequences from the purchase of apartment in the aforementioned house," the recommendation says.

The city council advises Mars not to sell apartments or conclude investment contracts for apartments until the city council decides on renewal or termination of its lease agreement.

The city council issued the recommendation following the decision passed by the Desnianskyi district council in March about inadmissibility of residential construction at 29 Miliutenka Street because of public protests.

Moreover, Mars, which took the land on short-term lease for three years in 2004, did not use it for construction purposes in the next three years, though began selling apartments in a house, which is yet to be constructed.

Anatolii Mukhovykov, head of Kyiv's main land relations department, said that 60 individuals, seeking to buy an apartment, concluded agreements with Mars to a total value of around UAH 12 million.

People started turning to courts, he added.

Mukhovykov thinks the city council should not extend the lease agreement with Mars.

The agreement expires in June.

As Ukrainian News earlier reported, the Kyiv municipal administration has registered 1,220 investors who have suffered from the Elite Center apartment fraud.

The fraud became public in early February 2006 when the committee of investors in the Elite Center construction investment group said that the company's executives had stolen over USD 100 million invested in construction of residential buildings in Kyiv.

Kiev Construction News - 15 June

Companies Parus and Alliansbud companies won the investment deal for reconstruction of the underground space under Peremohy Avenue near Polytechnic Institute subway station.

Companies Kuna and IBA offer Kiev City planning council to approve the project of reconstruction with additional floors and extension of the office building at Bohdana Khmelnytskoho street in Shevchenkivskyi district.

Capital Investments company offers Kiev City planning council to approve initial project offers on the re-building of industrial complex, located at Hlybochytska street in Shevchenkivskyi district, for public and business center.

Kiev City planning council recommended to Liko Holding to improve architectural design of the buildings’ facades in the quarter, situated in Holosiivskyi district of Kyiv.

Investment Giant Has Interested In Ukraine

The Merrill Lynch is ready to invest in preparation for the Euro-2012 in Poland and Ukraine, representatives of the Global Investment Bank Merrill Lynch told a meeting with Ministry of Economics Anatoliy Kinakh.

In particular, the matter concerns with investing in projects intended for improvement of transport infrastructure, modernization of airports and hotels. "In fact, the Bank shows interest in Ukraine, especially in terms of Ukraine's accession to the WTO, adaptation of the Ukrainian legislation to the European and world's standards", Anatoliy Kinakh pointed out.

Short News - New Transaction In Office Market

Turan Alem Bank, a very aggressive Kazakh investor acquired an new investment object in progress - a new business center on Zhilyanska str. aka New Technology Business Center 2. Total space of office building is about K10 sqm. Price info for the property from different sources - USD 55 mln. So we have a price for 1 sqm - USD 5500/1 sqm.

TMM Is Going To Logistic

Actually, we all know that well-known developer TMM is residential, office and retail player. But now they intend to go further. Company released information that they plan to build about 10 logistic complexes in Kiev region with USD 7 mln. cost each of them.

According to market information, the construction of the first complex could start as early as next year.

Now, the cost of logistic construction is USD 700, at least. And if we will take a standard size for such project, which could be around K10-15 sqm, so minimal investments in every single complexes will USD 7 mln at least, depending from type of property.

Of course, such "big fish" could not pass through great demand for logistic. From several assumptions the demand for free spaces can increase up to 1 mln. sqm.

"This market segment Western investors considered to be less risky than residential. Moreover, the profitability of construction of warehouses is acceptable to us. So we are planning to diversify our portfolio, "says CEO of TMM Nikolai Tolmachev.

Regarding funds for the project, they are likely to be obtained through the IPO, as I posted recently.

Euro-2012. A New Initiative. Or Just A Joke?

There is one news which could be funny, smart and strange in the same time. It is in close relation with Euro-2012.

According to the experts, almost K500 tourists are going to visit Ukraine for this event. So, Ukraine needs a lot hotels and housing to receive such huge number of people.

Lyudmila Mescherskih, Chief of Regional Development and Public tourist resorts has own solution She said that according to the concept developed by the Ministry of Family, Youth and Sports and Ministry of Economy, in a city where the championship will be held (Kiev, Donetsk, Dnepropetrovsk and Lviv), to be built 50 to 70 hotels of between 3 and 5 stars.

However, Mescherskih noted that after the championship these hotels will not be filled and thus might not be profitable for investors.

"... let this be a small residential district in which the State would build the infrastructure, and companies that want to make investments, to build housing," said Mescherskih.

According to her, in the there will be built multifamily houses, which after a championship can be sold to young families on the program of youth housing loan.

"It is much better than build luxury hotels, as in Kiev is not enough hotels for middle-class tourists who could not buy expensive hotel suites," she said.

Sounds very unexpected. Is anybody asked the tourists if they want to live in multifamily residential houses instead hotels??

Short News - Ukraine Needs 30 bln. Euros Investment To Host Euro-2012

Ukraine needs EUR 25 to 30 bln. to host the Euro 2012, Economy Minister Anatoliy Kinakh said. According to him, 90% of the investments will be private. The means will be allocated for development of the transport sector, hotels, airports, communication, tourism and highways.

Experts predict 400,000 football fans to arrive in Ukraine to watch the final match.

Source: Government Portal

MLP Leases Over 30K Square Meters of Offices and Warehouses

MLP company (International Logistic Partnership (Russia) has leased over 30,000 square meters of warehouses and offices to Fordon logistic company at MLP Chaika logistic complex in the village of Chaika in Kyivo-Sviatoshynskyi district of Kyiv region.

MLP company disclosed this in a statement, text of which Ukrainian News has.

Colliers International company, which represents interests of the leaser, was the consultant of the deal.

Fordon received an independently located building with the area of 30,000 square meters, which is to be leased in October-December 2007.

Two warehouses with the area of 75,000 and 7,800 square meters are planned to be leased in January-March 2008.

Leasing negotiations are currently being held.

Fordon Ltd was created in October 2005.

The company aims building of large and up-to-date logistic company in the Ukrainian conditions.

As Ukrainian News earlier reported, in October 2006, MLP started construction of the MLP Chaika logistics complex near the village of Chaika in Kyivo-Sviatoshynskyi district of Kyiv region.

The Aerobud company is the general contractor for the construction project.

Investments in the construction project will total USD 78 million.

The company is aiming its project at major tenants: Ukrainian and transnational manufacturers of consumer goods, distributors, and complex logistics operators.

Warehousing space will be leased by Colliers International Ukraine at USD 12 per square meter.

MLP and the Kyiv regional administration signed a memorandum on cooperation and coordination of their actions on September 29.

MLP specializes in development and management of international-class warehouses in Russia and Ukraine.

The aim of the company is to create and manage a large network of class-A logistics parks with a total area of 1.3 million square meters in Russia and Ukraine.

Source: Ukrainian News

IFC Helps Identify Opportunities For Growth In Ukaine's Leasing Industry

A couple days ago one good recruitment guy phoned me and asked about reliable person for real estate leasing company. By the way, Italian one (UniCredit Group??). He told me that there is huge demand for leasing professionals and almost no offer from the job market. So, it seems that that sector of Ukrainian real estate is going to big launch with international players and their experience. That's why I decided to post some information from International Finance Corporation (IFC) about developing leasing in Ukraine. I guess it should fit on real estate as well.

International Finance Corporation (IFC), Kyiv, Ukraine.

IFC, the private sector arm of the World Bank Group, today released the results of a survey on Ukraine's leasing industry that highlight growth in the sector and indicate expansion of the nation's financial markets.

The survey reveals that challenges remain, including the relatively high cost of leasing, which prevents some businesses from accessing this option to upgrade equipment or expand production.

This study is the third annual survey conducted by the IFC Ukraine Leasing Development Project, with support from the Agency for International Business and Cooperation, part of the Dutch Ministry of Economic Affairs.

The results, which assessed performance during the year 2005-2006, are based on responses from 60 leasing companies.

Findings indicate that demand for leasing services as an alternative financial instrument has grown significantly in Ukraine: the total value of the leasing portfolio expanded by more than 108 percent, while the number of leasing companies in operation increased by 20 percent.

The leasing industry is stabilizing and supporting an increasing number of jobs, long-term contracts are on the rise, and industry employment grew 50 percent during the period.

Several factors are contributing to this growth, such as increased interest in leasing from foreign-owned banks entering the market, growing public awareness, rapid development of Ukraine's financial markets, and improved access to credit.

While the potential for growth remains high, the survey finds that there are still many obstacles. Issues to be addressed include changes in the tax code to make leasing a more viable option for businesses, and the absence of credit bureaus and a well-developed secondary asset market.

At a roundtable discussion to present the findings, Ernst Mehrengs, IFC Project Manager, said, "Leasing is an effective mechanism for the replacement of equipment, increasing sales volumes of equipment producers, encouraging technological progress in the design of equipment, and creating new employment opportunities."

Mehrengs noted that the government's recent effort to amend the national tax code with incentives for leasing is an additional step in the right direction. "If the draft of the amended tax code is approved, leasing will become less expensive for the lessee, thus increasing overall demand for leasing products and benefiting the overall economy," he said.

ABOUT IFC

IFC, the private sector arm of the World Bank Group, promotes open and competitive markets in developing countries. IFC supports sustainable private sector companies and other partners in generating productive jobs and delivering basic services, so that people have opportunities to escape poverty and improve their lives.

Through FY06, IFC Financial Products has committed more than $56 billion in funding for private sector investments and mobilized an additional $25 billion in syndications for 3,531 companies in 140 developing countries.

IFC Advisory Services and donor partners have provided more than $1 billion in program support to build small enterprises, to accelerate private participation in infrastructure, to improve the business enabling environment, to increase access to finance, and to strengthen environmental and social sustainability. For more information, please visit www.ifc.org.

ABOUT THE DUTCH AGENCY FOR INTERNATIONAL BUSINESS AND COOPERATION

The Agency for International Business and Cooperation is part of the Dutch Ministry of Economic Affairs. Its mission is to promote and encourage international business and international cooperation.

As a government agency and a partner with businesses and public sector organizations, its goal is to help public and private institutions achieve success in their international operations.

A growing number of organizations, government institutions, and companies have come to rely on the agency for information about foreign markets, governments, and trade and industry. It develops products and services that meet the needs of its customers and clients.

Information comes from its network of Dutch and international organizations, which include international finance institutions, the European Commission, embassies, chambers of commerce, local business support offices, trade representative associations, and other trade and industry groups. For more information, please visit www.evd.nl.

Dragon Heating The Market

Hot topics nowadays - Dragon steps to strength its role in local RE market. Another news now.

Dragon-Ukrainian Properties&Development PLC (DUPD), one of the leading investment fund in Ukraine, has obtained USD 208 mln. at end of the spring on the AIM, is going to get more. They're planning to receive up to USD 600 mln. during 2008-2009 with debt financing, including bank loans and bonds.

DUPD Board member and Dragon Capital CEO Tomash Fiala says that company intends to attract USD and UAH financing, and it could be done even at LSE, if the capital exceed USD 1 bln. in the next 5 years.

Fiala noted, that company valuate now more than 100 project in Ukrainian real estate, where 10-15 will remain then. Also he has mentioned that for the company are most profitable investments are retail and offices, hotels and residential then, and logistics is last.

"The supply is pretty low in every segment of the commercial real estate market" said Mr. Fiala. Especially comparing with any Eastern Europe country. "We expect increased demand within next 5 years. And there are huge demand for attractive income property, so fund is sure about profitable and stable exit.

According to Dragon-Ukrainian Properties&Development PLC strategy, company is planning to invest in Kiev commercial property and other big cities than with stake exit after 12 month after construction completing.

Additional info from Reuters

Ukrainian Land FOR SALE: Yes & No - Terry Pickard

I continue to post most interesting and useful presentation from Time To Invest Kiev IV. Now the material from Terry Pickard (NAI Pickard) - Ukrainian land FOR SALE : Yes & No

Kiev Region - Current Land Prices, May 27

- Kiev-Svyatoshin district - ↓2,63% (i.e. $2.36) to $87.19/1 sqm;

- Obukhov district - ↑1,33% (i.e. $1.08) to $82.28/1 sqm;

- Borispil district - ↓ 4,03% (i.e. $2.36) to $56.09/1 sqm;

- Vyshgorod district - ↑4,31% (i.e. $2.44) to $58.96/1 sqm;

- Brovary district - ↓8,31% (i.e. $3.94) to $43.43/1 sqm;

- Vasilkiv district - ↓0,22% (i.e. $0.08) to $37.72/1 sqm;

- Makarov district - ↓0,41% (i.e. $0.09) to $22.20/1 sqm;

- Borodyanka district - ↑6,71% (i.e. $1.39) to $22.10/1 sqm.

Using source: SV Development

Short News - New Shopping And Office Center in Kharkov

The company "Avek" (Kharkov) are building now a shopping and office center "Ave Plaza" for USD 20 mln. Completing of the project expecting at March 2008. Sources report that more tan 70% of spaces are rent already.

There are K23.4 sqm of total space, including office area (K5.5 sqm), retail (K3.8 sqm), food-court (K1.9 sqm) with 97 parking lots.

Monthly Economic Monitor Ukraine, May 2007

Pretty long time I have not posted Monthly Economic Monitor Ukraine from Institute for Economic Research and Policy Consulting. Here is May issue.

Main topics

• The President and the Prime Minister agreed to hold early parliamentary elections.

• In the first quarter the real GDP increased by 8.0% yoy.

• The State Property Fund law was passed by Verkhovna Rada.

• Ukraine's membership in the WTO is likely to be postponed until 2008.

• Central fiscal surplus reached 1.4% of the GDP due to high tax revenues and considerable under-execution of expenditures.

• Between January and March real wages grew by 14.8% yoy.

• Inflation accelerated to 10.5% yoy in April.

Are You Ready To Build Retail? Are You Ready To Demolish It?

If you have been in Kiev, you have to know huge construction nearby National Olympic Center. I'm taking about development of biggest shopping and entertainment complex on B.Vasil'kivska str., aka "Troitskiy" with K107 sqm. And , of course, you should know about Euro-2012 in Ukraine and Poland. Is there any connection between that? Ask Igor Surkis, who is Chairman of Football Federation of Ukraine. He knows the answer.

A couple days ago, he proposed to demolish(!) existing construction and stop the future development. Because it hampers to future championship and this a requirement of organizational committee.

But I guess there is and another reason. People say that Surkis would to control this project and it wasn't be done. Taking into this fact, the way of existing project was pretty clear. And now is the time.

As I know NEST who was the developer of this project has obtained all permits and documents. And my personal opinion that such object could fit to existing city planning and it could be useful for EURO-2012's visitors.

And retail spaces supply in Kiev still very low. Keep stopping.

Lviv Offer New Land For Euro-2012

Perhaps you know that Lviv is one of the host city for Euro-2012. Taking into this fact, local authorities bring "on the table" 30(!) land plots for development new facilities for this event. And , of course, these should be quite attractive ones. Regarding 8 of them, there is approved decision, including one (26 ha) for new local stadium and another one (17 ha) for the exhibition center nearby new sport complex.

So if you are going to participate, you should hurry up.

Great Report From AmCham

I highly recommend to download new report from American Chambers of Commerce in Ukraine regarding Real estate, Construction and Legal issues. Contributors include: Baker & McKenzie, Colliers International, DTZ in Ukraine, Squire, Sanders & Dempsey L.L.P. and The Silecky Firm, PC, Vasil Kisil and Partners.

There are many figures, data, sources and explanation for all involved in Ukrainian real estate and construction market.

Karavan Sells Stake For Next Steps

Many of you know one of the leading retailer in Ukraine - Karavan Megastore. There is one not wide-open news about development of its business.

Renaissance Capital, well-known investment banker, set as a lead manager for Karavan's share private placement among international portfolio investors. Actually it was done for Karavan Real Estate Limited, which is main holding company of the group.

Total amount of issue is USD 55 mln. So, looking out of Karavan's expansion strategy, we should wait new shopping centers and new sities for them.

Investment Tenders on Construction to be Conducted in Kyiv

On May 24th the Kyiv City Council adopted the Procedure Regulations for Conducting Investment Tenders for Construction, Reconstruction, Restoration of Objects of Living and Non-living Destination.

Pursuant to this document Chief Department for Economy and Investments of Kyiv City Administration will be in charge of preparation and conducting of the invest tenders. The novelty also presupposes principle of so-called "one window", as all package of permit documentation will be prepared by the state officials in course of one month and will be presented to the tender's winner.

According to the Deputy Head of Kyiv City Administration Mr. Denys Bass stated that first tender based on the approved regulations might be conducted already at the end of June. Also, it was noticed that new regulation procedures will give new impetus to large inflow of domestic and foreign capital into the Kyiv City construction sector.

According to the experts, the document contains several controversial issues. In particular, it is stipulated that public hearings in regards to investment projects may be conducted upon necessity; also investment tender can be considered valid even if one participant is involved. Market operators see these provisions as stimulating corruptive schemes.

Source: American Chambers of Commerce

Most Required Financial Advisers

Most required financial advisers in M&A deals in Ukraine. Red lines are the summary amount of the deals, USD, mln. Right column is number of deals.

Thanks to Roman Bondar for the source.

First TMM's IPO

TMM (Kiev) placed trough IPO 13% company's stake. The issue was made using BONY's GDR with USD 15.45 per share. Total placement amount is USD 105 mln. The owner of the company and CEO, Nikolai Tolmachev said it recently. And the total capitalization of the company reached USD 800 mln.

According to Igor Mazepa, CEO of Concorde Capital, which is the underwriter of IPO, the deal will be completed next week.

The funds figure has been greater than expected, Mr. Tolmachev said. TMM intended to receive USD 100 mln. Due the session the demand exceed supple, so the TMM decided to rise proposed stake from 10 to 13%.

The company is going to invest the funds to ongoing and new project, in master planned communities, for example. We plan to build gated community, and has already acquired suitable land," he said.

TMM is the second Ukrainian developer, which placed shares on foreign stock market. Firt one was XXI Century with IPO's placement in LSE for USD 139 mln (35% share capital)

Land Resourse Agency On The Road

The State Land Resources Agency intends to compete land inventory by 2008, said First deputy chairman of the state agency Yurii Alekseenko. "We plan to settle the issue in at least half a year and a year maximum," he said.

Head of the state agency Ihor Yatsuk considers it the agency's priority to simplify allocation of land plots.

In late March, the Cabinet of Ministers appointed Yatsuk as the head of the State Land Resources Agency. With its decree of January 31, the Cabinet of Ministers reorganized State committee of land resources in State agency of land resources.

At the beginning of March, the chairman of commission for reorganization of State committee for land resources, first deputy chairman of state committee for land resources Mykola Kaliuzhnyi forecast end of reorganization of the committee and the beginning of work of State agency of land resources on April 12-13.