Yuriy Kryvosheya, Managing Partner at Toronto-Kyiv on issues that impede entering foreign investors Ukraine, possible ways of their solutions and what sectors should be considered as the most promising to invest in
Instead of listing typical issues that hinder international investment inflow in Ukraine, that are extensively covered in the media, I would like to add that market perception is one of the obstacles. In particular, a significant number of investors, and representatives of business community in general, form their opinion based on the media headlines and/or on the brief summary reports without diving into deep analysis. While this is a common approach in today’s world of excess information, a number of foreign investors ignore some attractive opportunities, which they would not necessarily do so with proper due diligence, or simply they are not even aware about some investment options in our country that already properly fit their established investment guidelines. Here, I am trying to say that investors also need to step up, especially if they are hunting their desired IRR; otherwise, going forward they might be a few steps behind the investors who are already in the country and strengthening their competitive advantage as we speak. For example, just a few days ago GE signed historical $1 billion deal, which is one of the biggest US investments so far. Of course, I do not deny the fact that we, as the country, still need to do a lot of significant enhancements in general and to improve the perception of our market, but, at the end of the day, the complete investment decision is also not made based solely on the glance at the balance sheet of the investee and/or merely with the cap rate consideration.
On factors/solutions to let more investors do business in Ukraine
In my opinion, it is not about ‘letting or not letting’ investors into Ukraine, but it is about joint efforts because it takes ‘two to tango’. First of all, we have to progress much further with reforms and the set up of the proper environment with transparent & equal rules of the game for all market participants. Secondly, each one of us, representatives of the Ukrainian business community, has to become an Ambassador of our market in order to help to improve the image overall because, in reality, there are good opportunities & projects on the market that sometimes simply lack liquidity. On the other hand, foreign investors, a significant number of whom today have excess liquidity and constantly complain about the lack of decent projects, have to realize that existing market prospects in Ukraine can bring much more attractive returns than in other markets, especially if they are structured together with the proper reputable partners, including IFC and EBRD, which are well established on the market.
On real estate sectors, which are going to be perspective in the nearest future
Overall, we observe noticeable rejuvenation in various sectors of economy, including Real Estate, and diversity in the growth of the economic activity certainly sends positive signals. In terms of Real Estate, quality commercial space in both office and retail will offer new opportunities for investors. The reasons for that are not only decreasing vacancy rates and recent positive spikes in absorption in these subsegments, but I can say that the nature of demand has also positively changed. For example, while a few years ago the market had observed the trend of renegotiations of the existing leases, today, an increasing number of perspective tenants are actively looking for larger area sizes and are ready to allocate noteworthy CAPEX budgets for the new shell & core spaces. Furthermore, we see strong improvements in the hospitality market in many aspects, including the corporate segment, where a number of global companies that did not book since 2013 are coming back to the market again. And, the aforementioned positive developments are only examples of many more positive happenings in Ukraine today.
Author: Yuriy Kryvosheya