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Why Bilshovyk plant in Kyiv was sold three times cheaper than its real cost?

Author : Olena Holubeva

Source : 112 Ukraine

The territory of the Bilshovyk plant is 35 hectares of land on Shulyavka, suitable for the construction of expensive commercial and residential real estate. They were bought by a couple of famous Kyiv businessmen (co-owners of the Zhuliany airport, Kyivkhleb, the scandalous Kyivenergoholding, the bursting Khreschatyk bank) Andriy Ivanov and Vasyl Khmelnytsky for only 53 million USD. The real cost of this site could be two to three times higher. The state would have gained much more from the sale if it had not been for the agreements and undercover games that accompanied this privatization
13:00, 1 November 2021

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Ideal location for a residential and office quarter

The main event of the outgoing week was the sale of the Kyiv machine-building plant Bilshovyk – with the main and most valuable asset in the form of a 35-hectare land plot near the Shulyavska metro station in Kyiv. And although a plant with all the accompanying infrastructure - a health center on Trukhanov Island and production workshops in Cherkasy, Odesa, and Chernihiv regions - was put up for auction - the pearl of the lot was the "large land complex" of the main production site, located 5 km from Khreshchatyk. "The main production site is located in an area with a developed transport system (Shulyavskaya metro station, Peremohy Avenue, Vadym Hetman Street, Mala Okrugna Road,” the State Property Fund informs.

Related: Kyiv plant Bilshovyk sells for $54 million

"The territory of the Bilshovyk plant from the developer's point of view is gorgeous, one of the best in the city, with a good location. In fact, it is the center of Kyiv. The site borders on the highway, which is part of the small Kyiv Okruzhna road, there is a metro station next to it. A whole microtown may grow on the site - the territory is promising for the development of commercial, residential real estate with associated infrastructure (kindergartens, schools)," Lev Partskhaladze, President of the Confederation of Builders of Ukraine, said.

It is noteworthy that the State Property Fund also positioned the object as "an ideal place for a residential and office quarter." "The combination of the excellent location and the large size of the plots makes it possible to create a multifunctional complex with a modern city-within-a-city concept ("15-minute city"), the body says. Saturation of the territory with infrastructure facilities and common areas, the useful area of ​​real estate may exceed 1 million sq. m.

The place can generate huge profits for its owners, which will exceed the initial investment by tens of times. Now the cost of renting office space in the Bilshovyk area is $ 17-18 per sq. m. The price of residential apartments in this area also bites.

What scared potential investors?

Why was only one step from the starting price of UAH 40 million made in the auction for such an attractive asset? The object was sold for 1,5 million USD with a starting price of 52 million USD. Only three participants took part in the auction - General Commerce, connected with Vasyl Khmelnytsky and Andrey Ivanov, which became the winner, as well as Stepan Chernovetsky's Investment Innovation and Vitaliy Khomutynnik's DK Kaskad. The auction lasted only 10 minutes. With the exception of Chernovetsky's company, two out of three bidders made one minimum step each.

At the same time, shortly before the auction, the SPFU press service reported that 15 potential investors are interested in buying Bilshovyk. In particular, the owner of the Dragon Capital investment company Tomas Fiala, the owner of SAGA Development Andrey Vavrysh, the Kadorr Group of the famous Odessa businessman Adnan Kivan, Intergal-Bud Volodymyr Zubyk spoke publicly about their interest in the asset. None of these companies made it to the auction.

“Khmelnytsky and Ivanov sent messengers to all potential investors of Bilshovyk and urged them not to take part in the privatization of the plant. We won't give it up just like that," Ekonomichna Pravda writes.

The media believe that entrepreneurs are involved in the alienation of five buildings on the territory of Bilshovyk in 2019 and the sale of them to Agromil Distribution. The SPFU appealed these agreements in court. At the time of the auction, four more processes were ongoing in the courts of various instances. This was another factor that scared off potential investors.

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"The sale price (54 million USD) is 2-3 times lower than the market price. The main reason for such a low price is the decision taken by the Northern Appellate Economic Court of Kyiv on October 12 to recognize part of the plant's territory as private property," writes Legal hub, citing a source in Office of the President. “A few days before the deadline for filing applications, the appellate court makes such a decision, as a result of which 15 potential participants refused to participate in the sale. property of 36 hectares of land in Kyiv at a price three times less than the market price. That is, this privatization cannot be called exemplary for sure, no matter what the SPF says.”

In addition, few people were ready to risk buying a large object without documentary guarantees that it could be redesigned for public needs, Lev Partskhaladze told 112ua.tv. "The future object must be approved in the General Plan - without this formal thing, it is impossible to move on and draw up town planning documents. Not all companies were ready to take such a risk - to pay more than a billion hryvnias without guarantees of approval of the future object in the General Plan. The price of the object is quite high," said the President of the Confederation of Builders of Ukraine.

Partskhaladze also noted that only a company that is well aware of all the risks could apply for the purchase of the facility: after all, the Kyiv City Council may not support some of the decisions, and then the project will be delayed or even stop altogether. And not all companies can afford today to freeze such a large amount of money in a project for a long time.

To put it bluntly, it could only be investors who had secured guarantees from the city authorities in advance that the legislative changes they needed would be promptly approved. "The OP understands that the winners - the General Commerce company of Andrey Ivanov, Vasyl Khmelnytsky, and Oleksiy Baranov - agreed in advance to pass through the Kyiv City Council a decision on re-registering land from industrial use to building land. brought the necessary communications to the site, "writes Legal Hub, citing a source in the President's Office.

It should be noted that General Commerce was registered in 2018 in Kyiv, its authorized capital is 130 USD. The founders are Volodymyr Dolgopolov and two Cypriot offshore companies. However, on the market this company is associated with the name of Khmelnytsky, who has developed good relations with the current government. Khmelnytsky himself, after winning the tender, issued a statement in which he was glad of the success and promised to create a "comfortable infrastructure" in Shuliavka.

Real price of the Bilshovyk plot on Shulyavka

Head of the M4U company Volodymyr Danylenko and the former top manager of SAGA Development Igor Raikov, prior to the start of the auction, estimated the land plot of Bilshovyk on Shulyavka at 120-150 million USD.

Today in Kyiv land is sold not at the price of a hundred square meters. And based on an assessment of the potential for development. The cost of one hundred square meters of land is not as important as the intended purpose of the site, its location (which determines the number of storeys of buildings), the absence of bans on construction, Partzkhaladze notes.

Related: Voitsekhovsky's fake construction scheme in Kyiv: Avalanche of defrauded investors

"If the state had changed its purpose, approved the project in the General Plan, would have made a concept, considering that it could be built on this site, much more could have been gained from the sale of the object. It would have been sold as an investment-attractive object, and not based on the regulatory property valuation of the plant Bilshovyk. the number of those wishing to compete for an object would increase in proportion to the reduction of risks," he said in a comment to 112ua.tv.

It is likely that in the near future we will witness other auctions at which land will go for next to nothing. Kyiv is densely built up and there are no free areas for building, especially large plots, in the city for a long time. The construction of industrial zones that are not used for their intended purpose is currently the only way to obtain free plots. For Khmelnytsky and Ivanov, the purchase of Bilshovyk is not the first case of obtaining land plots for construction at a discount: businessmen bought up shares in the Rosinka combine on Shulyavka, and are developing Unit.city on the territory of an idle motorcycle plant. In the same way, as in the case of the Bilshovyk site, they bought a plant from the State Property Fund, which had 20 hectares of land, at a reduced price.

In his release after the purchase of Bilshovyk, Khmelnytsky noted that there are still many such objects in Ukraine, which are better for private investors.

In the capital, about ten thousand hectares are still occupied by industrial zones. If they are sold following the example of Bilshovyk, then apart from the profit not received by the budget, the city will not receive the desired improvement. Where is the guarantee that having bought the territory cheaply, entrepreneurs will start investing in the construction of beautiful real estate?

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