Despite the apparent stagnation in the commercial real estate investment market, large and not-so-great deals were closed last year, although most of them were non-public. This year even more projects will find a new owner. Irina Skorokhodova, Vice-President of Alfa-Bank, whose area of responsibility is the management and control of the bank’s real estate portfolio, shares her experience in implementing large projects and working with investors in the interview for Property Times.
— What are the aspects of the sale of large real estate portfolios?
— The sale of bank property portfolios has its own specifics. This property is usually very different – from professional sites, bank offices in a good location to destroyed buildings in villages and parts of former factories. At the same time, you need to sell everything within a reasonable time and at a fair price.
Usually, the sale takes place in two stages. The first one is the study of each object, its potential, hidden possibilities, technical condition, rental serviceability, history.
The second stage is the segmentation. Objects can be divided into several groups. The first group is professional real estate, which should be managed by a professional team. Real estate suitable for rental and able to generate income during the period of its exposure time belongs to the second group. And the third group is represented by unsuitable for rent, technically obsolete objects that it is important to sell as quickly as possible. Depending on the segment, sales and administrative managers are appointed, sales channels are selected.
— What is price formation for real estate objects?
— We immediately begin to sell objects, show potential possibilities to investors. But still the object does not generate a projected income, few people are willing to believe in it and pay the price calculated on the basis of this forecast. The fact that real estate does not make a profit at the stage of sale will always be a reason for the buyer to ask for a discount. When you increased your income by yourself, optimized the expense, the same investor, who initially had said that he was willing to pay only for the current level of income, agrees to a completely different price. Thus, investors in the mall, where we have almost doubled our revenue over 2 years, almost doubled our offers too. Therefore, I am sure that firstly potential of the object should be revealed and only then be sold.
A clear understanding of the market price is very important in selling. To sell a property at a reduced price means to cause a loss. If the object is overassessed, resulting in the sale delay, it is also a loss.
— Who assesses the object and how?
— Unfortunately, in Ukraine, it is impossible now to rely on independent assessments. Mainly, they are formed on the National Standard of Appraisal, which is based on prices indicated in the sellers’ advertisements. These ads do not correspond to the prices of real transactions so much that the result is obtained with large errors. The appraisers themselves recognize it and confirm that any seller can evaluate the object better, as transactions pass through them, and through assessors – only ads.
‘A clear understanding of the market price is very important in selling. To sell a property at a reduced price means to cause a loss. If the object is overassessed, resulting in the sale delay, it is also a loss.’
— Are investors willing to buy a collateral property? Or, if we are talking about banking real estate, should it be owned by the bank?
— The buyer can be found both for a pledge and for an owned asset. But the prices will vary significantly. The legally cleaner an object is – without “traces” of credits, disputes, courts, the more expensive it can be sold.
— How do you evaluate investment transactions in 2017? What are the prospects for 2018?
— In 2017, the market noticeably revived – it is evidenced, among other things, by our things. There is the interest of foreign investors. I think in 2018 the interest will be increasing.
— Are there any large objects for sale in Ukraine? Are they interesting for investors?
— There are a number of very interesting professional objects on the market that are filled with foreign tenants and bring a steady income. It is a ready-made first-class business, which can now be bought at the prime cost of construction, but without the construction risks and risks of a long search of tenants. The market of Ukraine is now unique for investors. As you probably know, our bank is in the process of merging Ukrsotsbank and already this year the main offices and teams will unite under one roof in the Toronto-Kyiv complex. Thus, we are ready to consider proposals for the purchase of office buildings, where Ukrsotsbank and Alfa-Bank offices were located for many years. In addition, we have fully prepared for sale another office project, one of the best in Kyiv, both in location and in terms of its quality indicators.
— What objects are investors willing to buy in Ukraine?
— Investors are considering objects with a stable income, with potential development opportunities. I can say with confidence we have such in our portfolio and are open to offers.
— Irina, at the MIPIM exhibition in March 2017, you introduced a part of commercial real estate objects put up for sale by Alfa-Bank. What are the results?
— Yes, I introduced 8 professional real estate objects of Ukrainian banks. In order to present them correctly, we shot commercials which were constantly broadcasting on the stand and prepared special prospectuses. During MIPIM, we had more than 50 meetings with investors, at which the Ukrainian market and objects for sale were presented. Also, these objects were introduced while presenting the city of Kyiv.
A year later, we can already talk about the results. 5 of the 8 projects that we introduced have already been sold. There are both Ukrainian and foreign investors among the buyers.
— In your opinion, how useful is participation in MIPIM and similar exhibitions for the sellers of large objects?
— A number of meetings held at MIPIM with hotel operators and funds picking real estate have provided a preliminary interest in investing in Ukraine. We met some of them last year and again in 2018. Stable participation of Kyiv, including our presence, has significantly increased the recognition of projects both in Ukraine and abroad. I believe that MIPIM can be an effective platform if you properly prepared for it: worked in advance with the list of investors planning to visit the exhibition, entered into correspondence with them and arranged appointments directly at MIPIM.