us.olena@yahoo.com uselena48 +38(067) 975 66 11

DRAGONовские appetites: Tomas Fiala Fund and George Soros two years swallowed 350 000 sqm of real estate

  1. Home
  2. / DRAGONовские appetites: Tomas Fiala Fund and George Soros two years swallowed 350 000 sqm of real estate
17.04.2018

The most active buyer of commercial real estate of Ukraine for the past two years has been the direct investment Fund of Dragon Capital, New Ukraine Fund (DCNUF), created jointly by Tomas Fiala and George Soros. Over the past two years, the Fund acquired 350,000 sq m of commercial real estate spending, according to experts, approximately $200 million

During the crisis there were not many investment deals on the commercial real estate market. Managing Director at Cushman & Wakefield, Nicholas cotton notes that in this segment remains low activity of, in particular, in 2017 was the volume of investments amounted to approximately $140 million Of open trades can be seen that active buyer of commercial real estate is the IR Dragon Capital. "On the market there are other, not so large, but active players. But Dragon Capital dominates the market," says managing Director, Colliers International Alexander Nosachenko.

Before the crisis the investment companies Tomas Fiala real estate can hardly be called successful. His Fund DUPD, established in 2007, never to build two cottage town near Kiev, and residential building in the Obolon was sold with a loss. The acquisition of shares in Arricano, which owns several shopping centres in Ukraine, turned to DUPD losses because of the conflict between shareholders capital SkyMall.

This time, Dragon Capital made a bid for the purchase of ready-made objects in the "low" market.

Not the best assets

Money on investing in commercial real estate Tomas Fiala found, creating in the fall of 2015 together with Ukrainian Redevelopment Fund LP (managed by George Soros), the direct investment Fund of Dragon Capital, Ukraine's New Fund (DCNUF). The stated size of the Fund is $150 million investment Company Dragon Capital, in conjunction with the Soros Fund are anchor investors DCNUF, which aims to invest in various sectors of Ukraine's economy, including real estate.

In the interests of the Fund, almost all real estate transactions conducted by the company Dragon Capital Investments Limited, which is part of the Dragon Capital. Since its creation DCNUF (fall 2015) it acquired fully or in a proportion of 12 commercial properties (see table. at the end of the material). 2 of the asset (logistics centers) bought a New Ukraine PE Holding, also in the interests DCNUF. Virtually all of acquired Fund's properties are located in Kiev and region.

Experts say that DCNUF, it is not the best and most promising assets in the market, at the same time, having stable income. With a few exceptions, are small objects, some of which in the coming years may require additional investments in reconstruction and renovation. Dragon Capital already said they plan to 2020 to renovate and expand the capital's shopping center "Pyramid", increasing the total area by 40% (now 16 000 sq m) and shopping on 70% (currently 11 000 sq. m). This shopping center was built in 2004 in Kiev, near the metro station Poznyaki. Will need additional investments in capital shopping center "Magelan" in the case of purchase (transaction not completed). It opened in 2003, after which significant updates has not been.

In the segment of office real estate requires the reconstruction of one of two buildings near the business center "Toronto", which is now DCNUF closes the deal, said the President of the "Toronto-Kiev" Yuri Torticollis. According to him, one of the buildings BC Dragon Capital buys from "Alfa-Bank", the second "Icing-Budproekt-Plus". It should be noted that this is not the only object that the Fund has bought from the Bank. A large portfolio of mortgages "Alfa-Bank" received after the acquisition of "Bank of Cyprus".

At the entrance to the Dragon Capital investment could show their investors a level of cash flow for the facility over a long period, including two periods of devaluation in 2008 and 2013, says the investment banker, who asked about anonymity.

Strategy DCNUF justified, experts are convinced. And here's why.

The best is the enemy of the good

The best objects on the market are not sold, and if sold at a high price. DCNUF purchased the items that were problematic for previous owners — banks and Western companies. These owners are ready to make concessions on price, in contrast to local property owners. "The deal on the capital's business center "Prime" and "Eurasia" was successful for both parties. The seller in the face of "BTA Bank" got rid of non-core assets and their maintenance costs, and Dragon Capital received filled with quality tenants marketable sites at below market price", — said the head of corporate real estate NAI Ukraine Dmitry Kornienko. He notes that the "Prime" and "Eurasia" the majority of tenants — representative offices of global corporations and large companies Microsoft, PWC, Deloitte, EPAM, Sanofi.

The same situation was with warehouses and logistics facilities, whose cost fell below the cost of construction, agree experts. Director of direct investments of IK Dragon Capital Volodymyr Tymochko said at the end of 2016, speaking about the prospects of the warehouse market that is ready ojbect at that time you could buy for 50% of the cost of construction.

At the end of 2017 Tomas Fiala said that the assets in Ukraine, the cheapest since 2000-2004, as investors appreciate the risks of the country and are not willing to pay more. Then he noted that in the West would have to pay three times more expensive. According to Nai Ukraine, the capitalization rate in Western Europe is 2-4%, in a stable Eastern Europe — 5-6%, and in Ukraine they are above 10% (the higher the cap rate, the cheaper the cost of the asset. — Ed.). Dmitry Kornienko said that given the current market situation DCNUF could buy the assets at a capitalization rate in the range of 12.5–15%, if we take the payback period of the objects to 6.5–8 years.

Despite the low price, the Fund buys too speculative objects (which have now no cash flow, but may be in the future), explained the investment banker, who asked to be unnamed. "Attracting funds from partners such as Goldman Sachs and George Soros, DCNUF can't afford to buy too speculative objects. The Fund relies on objects with a high occupancy rate, which provide stable cash flow," adds the source Retailers.

One of the founders of the investment company Soul Partners Igor Skygazer adds that Dragon Capital comes out in small cities where effective demand among tenants is lower than in the capital and the cities. Warehouse and industrial complexes in Bucha and Irpin ' are in a long-term lease Unilever, an international manufacturer of FMCG goods. At the time of purchase of the shopping center "Pyramid" was filled to 100% and logistics parks West Gate Logistic East Gate Logistic and the vacancy rate was at 8%, while the average rate on the market was 11%. It is worth noting that these two complexes also claimed the IR Concorde Capital Igor Mazepa, says Igor Skygazer. "Through tender sold the rights of claim on loans in the collateral which were the warehouses. Concorde Capital focused on loans, while Dragon Capital has agreed to purchase not only loans, but also a share in the object itself," — says the expert. The interest of a player in the financial market talks about the investment attractiveness of the Logistic and West Gate Logistic East Gate.

Prospects

The commercial real estate market just started to recover. The worst situation in the warehouse segment, where rents reached a historic low and are calculated in local currency. According to Cushman & Wakefield, at the end of III quarter of 2017 the rent in his country's currency was in the range of $2.8–4 for 1 sq. m per month. Volodymyr Tymochko noted at the end of 2016, in the next five years, most likely, the new storage space (on the open market. — Ed.) is not built. On the background of the development of retail chains (one of the key tenants of the premises. — Ed.) the demand for warehouse space will increase, and with it rents.

Regarding shopping malls, is not so optimistic. In 2018-2020 in Kiev can be inferred 600,000 sq m of retail space, the report said CBRE. This can cause a significant reduction of the cost due to the increase in vacancy rates in the market.

Dmitry Kornienko believes that now Dragon Capital could sell its assets for 5-10% more expensive. "Because of the legal and reputational risks for a new buyer will be minimal: the objects are carefully and thoroughly checked. In addition, rental rates have increased or increase," — says the expert. At the same time, Retailers surveyed investment bankers and consulting companies do not undertake to assess how the Fund's investments were successful, and note that it will be possible to speak only at the exit of the investment Fund of them.

In 2018 DCNUF plans to provide inflow to Ukraine to $300 million investment. "In the pipeline (the list of transactions available to the Fund) we have about 10 deals," said at the end of last year at a press conference Tomas Fiala, adding that the final amount will depend on the implementation of one or two major deals with investors worth up to $150 million.

Assets indirectly acquired Fund DCNUF in the segment of commercial real estate

Object

Total area, sq. m

Stage of the transaction

The value of the asset

(assessment experts)

The shopping center "Pyramid"

16 000

Completed 2016

$25 million

Logistics centers:

West Gate Logistic (60%)

East Gate Logistic

 

97 000

49 000

 

Completed 2016

 

A total of $45 million

BC "Prime"

Business centre "Eurasia"

33 000

9000

Completed 2017

$35-40 million

$13-15 million

Logistics complex

Industrial complex

31 500

10 200

Completed 2017

$11-13 million

Mall Victoria Gardens

102 000

Completed 2018

$70-80 million

BC ECO Tower class A

18 700

Obtained clearance from the AMCU

$17-19 million

BC on Bolshaya Vasilkovskaya str., 98

(the seller "Icing-Budproekt-Plus")

10 600

Obtained clearance from the AMCU

$17-20 million

Warehouses:

Omega 1

Omega 2

 

19 120

32 730

Obtained clearance from the AMCU

A total of $15 million

DP "land property"

Shopping center "Magellan" Nikolaev

Kiev

 

12 000

28 500

Obtained clearance from the AMCU

 

---

Author: Tatiana Hamster

Source: http://retailers.ua

Search

Articles and news