Like in many other countries around the world, Ukraine’s real estate market took a direct hit from the global recession. Banks cut back, sometimes drastically, on financing and several companies defaulted on loans, causing many projects to be put on hold for an indefinite period of time.
Working in the Ukraine’s favor, however, is a glaring under-supply of quality space across all major real estate segments, especially when compared to other CEE and European countries. Those market players who have survived the last few years are well positioned to benefit from the high demand, the drop in competition, and of equal importance, a decrease in prices for key construction inputs. For example, the price of cement has fallen 35%, concrete by 36% and metal, 30%.
KDD Group is one competitor that has weathered the crisis and is forging ahead with new projects. Established in 1994, KDD was one of the first companies to develop modern commercial and residential projects in Kyiv. Today, the group has a diverse portfolio comprising projects from nearly all segments of the real estate market.
Completed developments include Kyiv-Donbass, one of the country’s first modern office centers, located in Lev Tolstoy Square; Vvedensky residential complex in the capital’s prestigious Pechersky district; Diplomat-Hall, a residential and office property complex finished in 2005; and the Botanic Towers, completed one year later, comprising a 25-storey residential complex and a 12-storey business center.
Although KDD Group has suffered some setbacks in project financing and has had more difficulty of late finding a strategic partner for a couple new projects, the management has set realistic goals and due dates for completion.
Of the group’s nine new projects – totaling a planned gross area of some 29 million square feet – three are already under construction, and all are scheduled for completion between 2012 and 2015. One of these, Sky Towers, is set to be “the biggest, most expensive and most beautiful building in Ukraine,” according to Alexander Levin, chairman of the Board of KDD Group. “I do not think any other companies in Ukraine have the expertise and power to build something like this.”
A Hong-Kong based company is responsible for the engineering and design of Sky Towers, which will include a hotel, a 27-floor tower and an 8-storey underground parking lot. Adding to the project’s cachet is the exclusive Swissotel group, who signed a letter of intent for the hotel project last year.
Construction of KDD Groups’ PecherSky project, a planned premium residential development in central Kyiv, was suspended in late 2008 due to a lack of funding from the bank. This past February, however, KDD announced that works had resumed and that the project should be finished by late 2012. PecherSky is another attractive project designed as a series of joined, cascading towers with 197 apartments and nearly 39,000 square feet of office space.
Over the past 17 years, KDD Group has stayed abreast of the competition, thanks in large part to its prudent management, its focus on high investment grade properties in prime locations, its strong cash reserves, and its cutting-edge construction technologies.
The group has proven itself a solid player in Ukraine’s real estate market and offers opportunities for collaboration with foreign investors. “We are very open to foreign partnerships, especially with Americans because we want them to come over,” says Mr. Levin. “There is great opportunity to develop here. You only need good partners.”
“Our shareholders and top management speak English and we have good contacts in the international community. Investors have to understand that we are a big group and we have survived and we are healthy enough to survive,” explains Tatiana Radomyslskaya, CFO of KDD Group.
“We manage our operational costs and minimize them as much as we can. We are a good quality partner and investor. We know that the margin that can be generated by this business is enough to share with our partners. Now is the right time to enter the market,” she adds.
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