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Kyiv. 27.10.2016

Foreigners are not investing yet, but they are already coming

As part of a joint project with a real estate search engine, LU.ua ABCnews continues a series of interviews with market leaders in development. Budhouse Group Commercial Director Maxim Gavryushin told ABCnews about why patriotism in fashion retail did not become economically justified, why bowling in the capital's mall became unprofitable, how the regional mall worked in crisis conditions and why the company does not intend to sell any of its plots.
Tell us about the project on Lutheran street. There was originally planned hotel, Sofitel, but in the current economic conditions, you decided to change the concept?
This will be a residential complex of a premium level, about a hundred apartments. We left the facades of the famous English architect John Sifert, but inside the whole project was reworked by the architectural bureau of Andrey Pashenko. That is absolutely a new format for our market because of how apartments will be planned there, how flows will be organized, what will be the infrastructure.
And what will be there? Your sport complex with a swimming pool?
No, we are just moving away from such service. It seems like an advantage, but in practice it places a burden on all of its residents, including those who do not even use them. In fact,not a lot of people use the pool or sports complex in houses of premium level. First of all, because most of those who buy such apartments live in them several times a year. These are regional or international businessmen who are visiting country on business. Therefore, we placed more emphasis on other elements of the infrastructure that will be used daily. For example, such simple things as a room for guards and drivers. While in residential complexes such premises do not provide. We tried to make accents for such trifles: black kitchens, various elevators for various purposes.
We believe that the careful forethought of the service, but not the availability of a pool, will make our home premium. Also, we use engineering solutions that are practically not used in residential construction in Ukraine. Although these are simple things that are actively in use in other countries, even for business class housing. For example, central air conditioning, no split systems.
When do you plan to bring “Linden” to the finish line?

Next spring we will begin sales. I think by this time the readiness of the project will reach 70-80%.
How attractive is now residential real estate?
Residential real estate is not interesting to us in the economy or business format, those bursts of activity that we see now in Kiev are not market-based. This is due more to the reinvestment of the hryvnia, which has accumulated in a lot of people. I believe that there is a crisis in the economy housing market, because a lot objects are building, and there is no certainty that the entire volume will be absorbed. And since half of the construction projects are expected to be completed with sales revenues, many projects will have difficulties. At the same time, all capacities are now occupied in Kiev, it is extremely difficult to find construction equipment in the capital. If some miracle does not happen, for example, the launch of a certain state program, problems cannot be avoided.
There is one hotel project in your portfolio, Khortitsa Palace in Zaporozhye. Did occupancy improve after you refused to cooperate with an international brand and take control of yourself?
Compared to last year, the figures are much better. In October, on weekdays, for example, the occupancy rate reaches 90%. Thanks to the flight of Turkish airlines, we constantly have guests from Turkey.
Let's talk about retail real estate. How true is the information that your mall “Fabrika” is one of the largest employers in the Kherson region?
We sent a request to the statistics department. Yes, we are the largest enterprise in the city, we give work to about 3 thousand people. And the gap is significant for the second number in the rating is three times less employees than ours. In addition, by the level of salaries, the “Fabrika” ranks the second position in the region.
Is it a minus or a plus for your business to understand that the entire region is holding on the mall?
For the image it is good that we have such a large and significant enterprise for this region, which is now one of the main taxpayers. Every year, only the local budget receives about UAH 50 million from the “Fabrika”, but I cannot say that the entire region rests on the mall. The region lives mostly not at the expense of the work of large enterprises which are  working at full capacity, but at the expense of tourism, sailors who sail and send money home, agriculture, which also has foreign exchange earnings. Therefore, of course, it’s bad that in Kherson there are currently no enterprises that would surpass the “Fabrika” in the number of employees, but this is a fairly active developing region.
When you launched this project, it was emphasized that it was designed not only for residents of Kherson, but also for people from neighboring areas. What is the share of such visitors now?
Within a radius of 300 km from the “Fabrika” there is no such object, with so many entertainments and such anchors. About 10% of visitors from the Nikolaev region and the northern part of the Crimea. Now, however, a little less of the Crimeans, they used to come by buses before. The main reason for the arrival is the entertainment part, but they also go shopping, as the nearest stores of such network brands as Inditex and LPP are in Odessa.
What is the vacancy of the Factory now?
About zero. Moreover, there is a queue of about 50 potential tenants for small lots. Many large-format chain stores, including international ones, also want to join us, but we can’t offer them anything. Over the past couple of years we have made some significant changes. Among them, the reduction of the area of Comfy and the opening of the store in a new format, and they started to trade much better. We brought two new interesting players “Sinsey” and “Goldi” (Rivne flax factory). Also transformed the children's entertainment part, combining two children's entertainment centers into one. Now we have a children's center with an area of more than 3 thousand square meters. By the way, one of the largest in Ukraine.
What issues with the TEC “Fabrika”  weren`t solved?
We have a part that we booked for the water park, and it still stands undeveloped. Initially, we agreed with one investor, but then there was a crisis. It will be an investment partnership project, someone should just take and make this business for themselves. But unfortunately we do not have network operators for water parks. And this is the only one concept that has not  been implemented.
A year and a half or two years ago, the tendency of professionalization of Ukrainian brands was very active. Many shopping and entertainment centers experimented with formats, providing space to domestic producers. Experiments were failed?
This is not a general Ukrainian trend, but an attempt by shopping center owners to fill them with something new. In fact, in 2014 and the beginning of 2015, there was a high vacancy, and there was no one to donate these areas against the background of a falling economy and the dollar growth, so they were looking for who and how to quickly fill the emerging holes. There is no economy in this.
Does the Goldi show good results?
Goldi is a company that has historically engaged in sales. They prepared clothes for sale and sold them in large quantities, first through the markets, through a network of distributors, then gradually went into retail through their own chain of stores. And today it is a systematic, fairly strong retail player. They can not only sew clothes, but also make shops. And, in my opinion, this is the only example of the emergence of a new ukrainian network brand during the crisis. There is no other who has opened at least ten stores. There are those who opened two or three stores within a separate region, which grew out of online commerce or a design studio.
Have you tried to run this pro-Ukrainian format?
Yes, we also tried to experiment, opened the zone of local designers of Kherson, Nikolaev, but very quickly realized that this did not work. Yes, maybe they sew interesting clothes, but they cannot provide volume, assortment, model range, even a dimensional grid. And most importantly, they do not know how to trade. Therefore, we very quickly turned it over and filled these places with normal network players. Today we do not have a pro-Ukrainian project, but I admit that some of the metropolitan shopping centers that are experimenting with this format will eventually be able to professionalize it and turn it into a truly network-based project.>
Within your regional projects, is the “Fabrika” the most powerful?
It depends on the way how to compare. If you mean size, attendance, degree of loyalty of people, then absolutely yes. We expect about 10 million visitors to the end of 2016, in a city with a population of 340 thousand people. But if we compare the effectiveness of a square meter, then “Lyubava” is more efficient: GLA 18 thousand square meters and attendance of 5 million people per year, while the GLA of “Fabrika” 65 thousand square meters and attendance of 9.5 million people. And if we compare by architecture, quality of execution, significance for the commercial real estate of Ukraine as a whole, then here “Forum” is ahead. Due to the fact that this is a joint Ukrainian-Dutch project, it is already very well known in Europe.
Which activities chose  people in regions more often?
It all depends on how a particular operator approaches the question. An eloquent example is bowling. This topic in the capital in the past two years has died. In Kiev, there is not a single profitable club, they all work either to zero or to negative. There are no people, the tracks are empty. At the same time, Lucky Strike clubs successfully operate in Cherkasy and Kherson. They have installed the newest equipment, remembered about marketing, hold a huge number of events, celebrated professional holidays and birthdays. The Ukrainian Bowling Championship took place a couple of months ago in Cherkasy, where, although there are ten tracks, For example, in Kiev, some clubs have thirty  with good equipment. The same can be said about children's centers. People love to spend family holidays all together, so there is a steady demand. But if you do not constantly work on improving the service, then people will look for an alternative in other places.
You have two objects at the construction stage. There are “Nikolsky” in Kharkov and “Yessa” in Odessa. When will we see them completed?
At “Nikolsky” we stepped up work. Although it cannot be said that we are working at full capacity, but we are doing much more than last year. We have already erected walls, finished the frame, this year we will close the perimeter, and in the spring of next year we will make a lantern. This is the most difficult part of the work from a constructive point of view. The German designers designed the lantern, the metal will be made by Ukrainian companies, and the coating will be not glass, but from special German membrane. The amount of investment in the project has not changed during the crisis: about $ 100 million. We cannot promise that we will put “Nikolsky” into operation by the end of next year, but by this time he will have a finished appearance and we will start letting tenants to adapt.
How many tenants do you already have in “Nikolsky”?
Signed almost all areas. Everyone is waiting for the opening.
And what about the project in Odessa?
We will do it when we open our TEC in Kharkov. On this project, construction work has already been completed by a third. The problem is that we do not have sources of external financing, we develop all projects from our own funds. Of course, we are looking for potential partners, but now they just come to meet and talk, they like everything and go to think. But well, thanks that they come. Last year, we corresponded only with potential partners, no one ventured to fly there and see it in real.
Is there any option of selling land on which your projects are planned, for example the territory for “Hartz” on Victory Avenue in Kiev?
No, the option of selling the site is not considered. We have no illiquid sites, the concept has been thought out for everyone, and it does not change. “Hartz” on Victory Avenue will appear sooner or later. In Zaporozhye, we have a good site in the city center of 12 hectares for “Fabrika-2”, there is already a project, and it can be implemented fairly quickly.
If the “Fabrika” format goes well to Zaporizhia, do you intend to create a chain of TEC`s with this name in the regions?
Not everywhere. We approach very carefully. We will develop only where is a favorable competitive environment and where the city really needs it. Zaporozhye is definitely needed and in demand is not inferior to Nikolsky. Retailers are ready to go there.

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