Unlisted opportunity vehicle acquires prime Podil Plaza office scheme for €38.2m, in a deal that pushes Kiev yields below 10%, following a doubling of city office rents
The $50m (€38.6m) sale of a prime office building in the Ukrainian capital of Kiev will set a new record low yield of 10% for the city’s emerging property market.
Europolis 3 Fund is set to buy the 19,800m² Podil Plaza complex for $50m (€38.2m). The vehicle’s manager, Austrian property company and fund manager Europolis, launched the €1bn Europolis 3 opportunity fund in September, targeting Ukrainian and Russian property.
Europolis would not confirm the deal but senior vice- president Alexander Bosak said he “is very interested in buying Podil Plaza”, which is owned by Demir Euroasian Investments. Banking group Investkredit and the European Bank for Reconstruction and Development are the two main initial investors in the vehicle.
The fund is the biggest unlisted vehicle to be launched for the region. It invests in offices, shopping centres, logistics and mixed-used projects. It will also undertake development and will aim for returns of 18% across the board. Gearing is up to 75% and the vehicle will have a life of around 10 years.
Podil Plaza, in the city centre, is let at around $33-$34 per m² a month. According to Terry Pickard, group chairman of property consultant NAI Pickard, Kiev office rents have doubled over the past 24 months.
“Investors who are buying assets now at yields of between 10% to 14% will be able to sell within three to five years at single-digit yields,” said Michael Lange, chairman of Jones Lang LaSalle in Russia and CIS.
He added: “The Orange Revolution in Ukraine has not yet brought about a ‘Poland’ effect, so stability is still several years away. However, there are a lot of opportunities for investors and developers that are more open to and familiar with manageable risk.”
