PRAGMATIKA.MEDIA: Are objects of historical heritage in Ukraine and Kyiv attractive to potential investors?
Denis Drozdov: Today, investors do not want to buy buildings with the status of an architectural monument in Ukraine. Historical buildings are a game of "borrow". In addition, the state does everything to prevent investors from wanting to "play".
The buyer of a monument of architecture will have to spend months, or even years, on an infinite number of documents, permits, going through instances that coordinate each other's decisions. It is necessary to pay not only for the building itself, but also for its restoration. The reconstruction will cost even more, but according to experience, it is almost impossible to get permission for it in Ukraine. You will have to wait five years or longer for the return on the investment. In addition, the margin is 20–30% lower.
Rarely, but they buy monuments of architecture in good condition, which are resold by the previous investor, who has already gone a long way and agreed, who collected all the documents. Or buildings that, by a court decision, are excluded from the list of objects of cultural heritage and deprived of protected status.
Another important point is the reaction of the public. Any history with a monument of architecture causes disapproval: from posts on social networks to street protests. This is not the main problem, but it still gives investors a headache.
Photo: Yury Ferendovych
PM: To what extent do reputational risks affect the intentions of investors? Are they ready to interact with citizens on the principle of a win-win strategy or do they still think that their opinion can be ignored?
D. D.: According to the type of reaction, investors can be divided into three types. The first works according to the principle "the dog barks - the caravan goes." This was the case, for example, with the "monster house" in Podol. The developer laid the foundation, protests began. I waited an hour for people to calm down, then I ran up three floors. Protests again, I waited again. Thus, a 12-story building appeared on Nizhny Val, which is about to be put into operation.
The second type is "made money on the ugly, now it's possible to be beautiful." Usually these are companies that managed to hand over a lot of identical "candles", but now they want to create something lasting, about which they could proudly say: "We did it." They have already realized that they are not losing money. A beautiful, stylish building, for example, with parks and art objects becomes a magnet point, which means that the price tag per square meter increases.
The third type is investors who try to find a common language with citizens and activists. For example, a company is building a high-rise building and is obliged or promises to build a kindergarten, open a park, build a children's playground, and equip a promenade. The developer drives out the foundation, the first three floors and, without delay, builds a kindergarten, plants trees and brings in swings, cleans weeds and lays tiles in the river so that people can see that they are not being deceived. And although in the short term such a strategy is economically unprofitable - these are not apartments, you won't get money for them - but in the medium term it accelerates sales and pushes the price tag up. A house with infrastructure and without - two big differences, as they say in Odessa.
The second and third types are investors who understood the benefit of the win-win strategy, but there are very few of them.
Denis Drozdov, expert on the sale of assets of insolvent banks, investment broker
PM: How do the Ukrainian conditions differ from the investment climate in the same Europe? After all, there are not so many abandoned old mansions in the old centers, unlike in Kyiv.
D. D.: Take, for example, Prague. Everyone admires the beauty and authenticity of the center of Prague, there are so many tourists that they cannot get through. The historical center of the city works like a magnet, attracting people and money. And this means that real estate is steadily increasing in price. One sq. m in the center of Prague today costs 5-10 thousand. euros, and prices will continue to rise. But it wasn't like that right away.
Before making a profit, investors invested a lot of money. It is fundamentally important that the authorities willingly help businessmen. If you buy a monument of architecture, the state strictly dictates how it should look, but they help you with documents, permits, and explain what and how to do it in order to fulfill all the conditions.
Investments in architectural monuments are everywhere a "long-term" game with deferred profit. The difference is in the conditions that are created — or not created, as in the case of Ukraine.
The vast majority of our real estate investors do not care about the city, history, beauty, or magnet points. They want profit here and now
PM: Why do our domestic investors rarely and not so willingly invest in renovation projects of urban spaces, but much more often invest in a series of typical faceless 24-storey buildings?
D. D.: The vast majority of our real estate investors do not care about the city, history, beauty, or magnet points. They want profit here and now. They don't want to wait until, thanks to the beautiful old buildings, the area becomes more attractive and real estate is capitalized. In Ukraine, it is very difficult to predict and plan anything, at any moment some district court will overturn some decision, adopt a new law, change norms, and so on.
But if the situation stabilizes, it will become predictable, if the investor can count on receiving the necessary documents at the appointed time and as prescribed in the regulations and laws, then there will be those who want to play long. Foreign investors will also come. Now, in fact, there are none of them on our real estate market. Yes, we have Dragon Capital, but this is only one of the referrals. They buy buildings that interest them, regardless of whether they are listed as architectural monuments or not.
Photo: Yury Ferendovych
Foreign companies do not enter Ukraine due to the same unpredictability. The usual scheme is when Ukrainian partners say to the foreign: you transfer the money, and we will buy the land, draw up the lease, do the documentation and start building. More than once, foreigners were "thrown" for millions of dollars. We hear examples of foreign companies privatizing large industrial facilities, and then nationalizing them again, or some district court suddenly canceling the deal. The investor, as a minimum, needs security guarantees. As a maximum, a detailed business plan with calculations of how much and when it will earn. While there are no guarantees and business plans, there are no foreign investors.
Taking into account all the problems, it is easier and more profitable for investors to invest in a new high-rise building and increase the investment by 2-3 times in an hour or two, than suffering with a 2- or 3-story monument of architecture for an unknown amount of time and with unpredictable costs and profits.
Only guarantees, predictability and transparency can give Ukraine a chance to preserve its architectural monuments. And not just preserve, but also give them a second life.
