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One of the largest and most visited shopping malls in Ukraine is up for sale

October 31, 2018, 20:51 (PX Newswire)

The business duo of Garik Korogodsky and Aleksandr Melamud have announced their intention to sell Kyiv based Dream Town shopping mall, which is the most visited and second largest in Ukraine. Their decision is likely driven by Ukraine’s commercial real estate market robust recovery since 2015 dip as prime rates have risen 45%, while the average vacancy rate has dropped threefold to 4.5%, according to Cushman & Wakefield. Improved fundamentals and limited supply of modern retail property have triggered real estate M&A spree and pushed capital rates for prime commercial properties in Kyiv from 15% to 10% over the last two years.

The sale of Dream Town would be the second major real estate deal pursued by its shareholders. In 2007, they shook the Kyiv market with the biggest real estate deal at the time, having sold the centrally located Globus shopping center to London & Regional Properties, a global private investment company, for USD 200 mln.

Globus’s developers are well-known for picking prime locations for their projects, with Dream Town being no exception. Located within walking distance of three metro stations in the densely populated Obolon district and with primary and secondary catchment areas of one mln. shoppers, the mall enjoys record-breaking attendance being most visited shopping center in Ukraine with approx. 25 mln shoppers per year. Two phases of the mall have a total GLA of 105,500 sq. m. with a 70% efficiency ratio.

The deal offers several lucrative upsides, said Alexander Griban, the investment banking director at Concorde Capital who is also the property’s exclusive sales agent. One of them is USD-linked NOI in combination with UAH-denominated leverage amid the continuous devaluation of Ukraine’s local currency. Another one is constantly growing revenue. Since beginning of 2018, the weighted average rental rate has increased to USD 23.8 per sq. m. from USD 19.5. This way the mall’s appreciation potential is warranted by rising rental rates on the back of improving macro fundamentals in Ukraine. According to Mr. Griban, the property’s asking cap rate of 11% effectively transforms into 14-15% yield in mid-term. These indicators also improve the potential exit options for investors, with the opportunity to secure a balanced principal repayment structure offering significant debt reduction in the five-year horizon.

Concorde Capital is the leader in M&A and debt-restructuring deals on the Ukrainian market. Founded in 2004, it has attracted more than USD 3 bln for Ukrainian companies, with its trading and research desks earning international recognition repeatedly as leaders on the Ukrainian market in their respective fields.

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