New applicant: Alexander Yaroslavsky is interested in buying the SEC Respublica

The group DCH owner and one of the successful businessmen of Ukraine Alexander Yaroslavsky can acquire the country main unfinished building – the Kiev SEC Respublica.

Several sources on the market – a consultant on the retail real estate, an investment company top-manager and the brokerage business owner at once confirmed to RAU the information about the businessman’s interest in this asset. “Yaroslavsky is one of the few in Ukraine who can afford such an acquisition and he has an intention to carry out this transaction,” – one RAU source said on the condition of anonymity.

At the same time, the DCH group confirmed in the commentary to the Interfax-Ukraine agency interest in the SEC. “We are considering various projects and assets, including the SEC Republic, in the DCH Real Estate development,” –  the DCH press-service reported.

The bargain

The SEC Respublica is one of the most ambitious projects of retail real estate in Ukraine. The facility construction, which was estimated at $ 350 million, began in 2012, and the facility commissioning was planned in 2014. The total square of ​​the unfinished SEC should have been 298,000 sq., which would allow it to become at that time the third largest in Europe. The construction was suspended in 2015 by the owner decision. The SEC investor was a well-known businessman Dmitry Firtash through the company Megapoliszhilstroy. The media also linked this company to the name of another Ukrainian businessman, the former head of the Presidential administration, and now deputy from the “opposition bloc” Sergei Levochkin.

The company Megapoliszhilstroy took a loan from Nadra Bank (which also belonged to Firtash) to finance the SEC construction, providing corporate loans for the unfinished SEC as collateral for the loan. After the bank became bankrupt, the NBU put up for the auction the rights of claims on loans secured by the SEC. The starting price was about 2.5 billion UAH, but buyers for the asset were not found either at the first or fifth auction, when the starting price of the lot fell to 1.1 billion UAH.

The SEC was ready for 98%, and preliminary contracts with tenants were signed for 75% of the square at the time of the construction stop, according to the director of the consulting company UTG (she was the exclusive broker for renting premises in the SEC) Yevgenia Loktionova.

The future of the SEC Respublica

One of the most interesting questions is: what for Alexander Yaroslavsky the largest country SEC. He owns, from the assets in retail real estate, a chain of shopping and entertainment centers Karavan: in Kiev, the Dnepr and Kharkov with a total square of ​​almost 250,000 sq. But the “youngest” of it’s – in the Dnepr – was opened almost 10 years ago – in October 2008.

It is not excluded that he decided to return to active development of this direction with considering of the relatively low cost of the SEC Respublica at the moment, and the growing interest of large international chains – H & M, IKEA, Koton, DeFacto and others – to the Ukrainian market. Best shopping centers in the country are already practically filled and owners can vacate the squares required by foreign retailers, only by evicting existing tenants. The commissioning of a modern huge SEC guaranteed to attract in such conditions the attention and potentially give an opportunity to immediately form a powerful pool of tenants.

Another option is the purchase of an object for the further resale purpose. Yaroslavsky buys enterprises that are in a difficult situation for a relatively small amount of money, invests and develops its, leads it’s to good indicators – and then sells, while remaining in favor. Again, in respect that now the SEC Respublica is sold for about $ 40 million with the announced investments of $ 350 million – the purchase of the asset fits perfectly into the business-strategy of the Kharkov billionaire: “buy-develop-sell.”

And finally, the third option. Alexander Yaroslavsky can buy the SEC for third parties, for example, the same group Firtash / Levochkin. They cannot directly in one’s own name claim to buy the SEC, whither they invested a lot of money. But quite a working, albeit an unlikely, option is to seek help from an old partner in order to unofficially retain the control over the object, while formally remaining on the sidelines.

In any case, the next, already the sixth in a row, auction for the sale of the SEC Respublica, scheduled for February 27, did not take place: again no candidate was found. DCH did not apply for participation in the bidding, despite the confirmed interest to the center.

The deterrent factor

The SEC Respublica itself can be attractive for investors as explained by the lawyer of LF Goro legal Yana Belaya. However, according to her, the buyer will be able to gain control of the SEC itself only if he in a court order will foreclose on the subject of a mortgage. “However, with considering that Megapoliszhilstroy in court order tries to invalidate the treaty between the NBU and Nadra Bank, we can assume that the next step will be an attempt to invalidate the auction or the mortgage agreement,” –  the lawyer suggests.

Partner of the law firm TOTUM Yuri Hapko adds that the buyer must also get under his control and corporate rights to a legal entity – the customer of construction, namely the company Megapoliszhilstroy. “The consideration of the action on the suit of the NBU to recover the share of corporate rights Megapolzhilstroy is scheduled for August 2018. Only thereon the Supreme Court will put an end to this matter it will be possible to talk about any clarity in the situation,” – Hapko explains.

A ticket for the war

The lawyer also draws attention to the fact that buyers may have risks of conflict with the construction customer. Any potential investor can regard the acquisition of this asset as the purchase of a “ticket for war” with former owners and customers of the SEC construction. Other market experts agree with him.

Another deterrent factor was mentioned in its time in the investigation of the portal Realist. According to the publication, in late 2015 the Bank “Clearing House” under control of Levochkin has issued for itself a part of the land around the SEC. One of the entrances to the SEC Respublica from the metro station Teremki was to pass through this land. Thus, the future owner of the SEC will literally be surrounded by the land of Levochkin’s structures and will have to take this into account.

New applicant

Until recently, almost all market experts were confident that the only candidate for the purchase of the SEC could be only one person – its previous owner, Dmitry Firtash. Despite the fact that the businessman has been outside the country for a long time, he has enough leverage to keep his property and remain the only candidate for the acquisition of the lot.

But in order to receive this asset in his management, Yaroslavsky will not only have to buy the loan requirements, but also negotiate with the former owners. In this matter, the fact that businessmens already had a successful experience of negotiations on buying and selling large assets can play Yaroslavsky’s hand. In 2011, Firtash purchased from the Yaroslavsky the Cherkassy “Azote” – the plant for the production of ammonium nitrate and ammonia. The approximate amount of the transaction was estimated at $ 800 million. How much Yaroslavsky will have to pay for the SEC – it remains a mystery. Experts do not exclude that the preservation of Firtash and Levochkin some shares in the SEC may be the terms of the arrangement. “Whatever the case, the future of the SEC Respublica is not in the legal and is not in the economic field, but in the contractual one. And taking into account the fact that the agreements will be with the sub-controlling owner, the transaction will be quiet and non-transparent,” – one Ukrainian investment-analyst predicts.

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