1 / 38

Investing in Real Estate In the Ukraine

A few observations:. Real Estate in CEE was still a small sector prior to 2003?but then it came into vogue!Massive capital raising over past 2 yearsExpansion, share buy backs, new listings??Buy

luke
Download Presentation

Investing in Real Estate In the Ukraine

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


    2. A few observations: Real Estate in CEE was still a small sector prior to 2003—but then it came into vogue! Massive capital raising over past 2 years Expansion, share buy backs, new listings… “Buy & rent” approach doesn’t offer much upside Lots of people are now talking about the sector Development is profitable but very “work intensive”

    3. What RE investors are looking for: “Yield Compression” A Cap rate of 10% means that if you generate $100 in rental income the property is worth $1,000. To achieve a higher return: 1) Rents must rise (they may go to $130-140) 2) Capital in-flows drive cap rates down and value up Or, leverage at low rates to increase return But, what can go wrong?....

    4. We all want to avoid: “Yield De-compression” i.e., what if… Cap rates are based on artificially high prices… Interest rates go up (no leverage or higher interest…) Project risk… Political and economic risk—lower growth rates…

    5. Apartments: quality is hard to find!

    6. Comparing prices internationally—Kiev is not cheap!

    7. Who are the players? The majors:

    8. ImmoEast

    9. Meinl European Land

    10. GTC Poland

    11. Orco

    12. Local players in Ukriane:

    13. Which strategy— Yield vs. Development? RE sector premiums historically high (NAV + 15% plus…vs. 10-15% discount) Tight market, few quality assets, low liquidity One must develop in Ukraine!

    15. An opportunity to “lever up”! -- New law on Mortgage financing adapted in 04 -- from 2000-06 interest rates shrank 3X, to around 13% (usd) or 18% (local ccy) -- housing mortgages are now 60+% of total, half of all transactions use them,.. -- Now around 5% of GDP, should go to 15-20% in next 3 yrs-- New law on Mortgage financing adapted in 04 -- from 2000-06 interest rates shrank 3X, to around 13% (usd) or 18% (local ccy) -- housing mortgages are now 60+% of total, half of all transactions use them,.. -- Now around 5% of GDP, should go to 15-20% in next 3 yrs

    16. Extreme supply & demand mis-matches: Offices

    17. Mis-matches: Warehousing

    18. Absence of high quality!

    19. Charts from SSC/Dragon Capital estimates/Economist Intelligence Unit forcastsCharts from SSC/Dragon Capital estimates/Economist Intelligence Unit forcasts

    20. Retail (cont.)

    21. Housing Market—what small dwellings!

    22. Even wealthy regions have low stock per capita…

    26. Opportunistic: primarily development, across all segments (residential, commercial, office, warehouse space, etc…) Low entry cost, sourcing prime locations Exploit advantages such as relations with local officials, superior architectural and engineering capacity, vision on region, sector…)

    34. Identification of deals Constant monitoring of the market. Diversified information sources. Comprehensive evaluation of deals. Multi-level, cost saving project initiation procedure. Analysis of deals In-house marketing research team. In-house business planning team. Six years of real estate experience in local and international environment. More than 60 projects completed in all areas of real estate. Legal and technical due-diligence Diversified connections and cooperation with numerous professional legal companies and architecture teams (local and international). Expertise in local construction standards. Structuring of deals Strong experience in corporate finance. Multiple available and tested investment instruments and schemes. Established cooperation with local and international banks. Execution Constant supervision and monitoring of planning and construction processes. Control over quality and budget spending. Strong connections with local authorities. Established risk control and risk mitigation procedures. Management In-house project management team. Multi-level control and responsibility.

    36. Conclusions: A focused approach is best—don’t just throw darts! Structural window of opportunity open for several years Invest for consolidation in the sector Invest with people you know…

More Related