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More Joint Venture and Real estate M&A Deals to Appear on the Market

Natalia Kochergina, Partner, Head of Real Estate DLA Piper Ukraine

In 2016 and 2017 Ukraine’s economy demonstrates slow but stable recovery. The military conflict on the south-east of Ukraine is “frozen” and political measures for its resolution are being developed with the support of international partners. Stabilization of national currency and lowered inflation provided certain stability for the market.

Though the prices and rent rates for real estate remains low, many market players noticed increased activity of tenants and reduction of vacancy in high quality retail and office premises. The projects, which were frozen in 2014-2015 are now resumed by many market players. Foreign investors express increased interest in Ukrainian assets, which already turned into several real estate M&A deals with participation of international investment banks and retail chains in 2017. New famous retail chains are entering the market and already announced several openings this year. What is this, if not the sign of improving situation on Ukrainian real estate market?

To support the positive tendency on the market, the government and parliament continue working on improvement of conditions for business within the country and development of real estate market. Recently, a number of positive initiatives in construction regulation sphere, anti-raider measures and reform of title registration system were implemented. High expectations are laid on judicial reform launched in June 2016, as well as number of anti-corruption measures and establishment of independent anti-corruption bodies.

Though most of investors consider projects in Kyiv and western Ukraine, this year we noticed a tendency of renewing interest to the projects in eastern regions. Many investors note the deficit of vacant sites for development in Kyiv. The most desirable sites for retail and office development were already acquired or leased by local market players before 2013 and because of recent crisis events were “frozen” and left until the best times. Now, when the investment climate improved, such projects are resumed, but, due to lack of funds and deficit of debt capital within the country the local players are looking for foreign partners and buyers. For this reason, there is a big probability that we will soon see more joint venture and real estate M&A deals on the market.

Such M&A deals will require the investors to carefully check the assets, sites allocation history and business history of asset holding companies. Recently, this task become easier, at least for the lawyers, thanks to reform of Ukrainian real estate title registration system, making state land cadaster publicly available, establishment of digital real estate registers with online access available for any third party, allowing to check existing arrests, encumbrances, third parties rights and court disputes with respect to real property on a pre-deal phase.

In this perspective, as a legal consultants, we consider EE Awards 2017 to be a good opportunity to contribute to development of Ukrainian real estate market by raising investor’s awareness of the positive developments and reforms in Ukraine as well as share best practices. We also believe that such events help business people to find each other, talk on potential mutual project, share their success stories and demonstrate that Ukraine has a big potential.