Two investors - one American, one Canadian - plan to buy apartments in Kyiv that are more than 100 years old and renovate them to Western standards as rentals aimed at the diplomatic community.
Their Kyiv
Real Estate Fund has entered the market at a critical time. While foreign
investors have become scarcer, the diplomatic and consultant community is
growing amid Ukraine’s crises of revolution and war in the last two years.
Embassy staff typically rent for three-year periods.
“I’ve
talked to the British Embassy, the Canadian Embassy, the German, French and
Italians. They were all like ‘please buy apartments and rent them to us.’ There
is nothing nice to rent here,’” said John David Suggitt, managing director of
the fund, formerly of Dragon Capital and co-founder of Concorde Capital, who
has been in Ukraine for 15 years.
“That’s one
of the drivers. The lack of really Western-style apartments,” said John C.
Crockett, managing partner of the fund and an investment banker who worked for
12 years in New York followed by 5 in Moscow.
“Yevropisky remont, as we know, is not
really European,” said Suggitt.
So far
they’ve bought one apartment and are about to close on a second. They hope to
have three or four by the end of the year but are in no rush.
“We really
wait to get the best deals as opposed to just buying places right away and that
takes time” said Crockett.
“It’s location first,” added Suggitt.
The
strategy is to buy two-to-three bedroom places for families in historic quarter
of Kyiv, unofficially known as the diplomatic quarter due to its popularity
among expats and proximity to the embassies.
“We look
for buildings which we can tear apart, gut and then redo completely,” said
Crockett.
As two long
term expats themselves, in Kyiv and Moscow, they believe they understand what
people are looking for.
“Part of
thing is really understanding your client and ours is the diplomat. The
diplomat is often for whatever reason a man and he is often coming with a
family – I know it’s a stereotype and I don’t mean anything by it – She (the
wife) doesn’t speak the language. She doesn’t have a job…The culture shock is
massive. The last thing she and the family need is an apartment that is also a
culture shock,” said Suggitt.
“It’s hard
to get around,” said Crockett, “You can’t put the baby carriage down the steps
or the toilet is not in the bathtub room.”
The pair
say they will try to customize and maintain the apartments as much as possible.
“Want us to
change the tiles in the bathroom – done and for free,” Suggitt. “You don’t like
the entry way, no problem we’ll fix it all up. You don’t like the color on the
wall we’ll repaint it – all for free.”
Ukraine’s
property market is young and in some ways difficult to predict. But profits
have been high for those who bought at the right time — and now may be such a
time with depressed prices.
“I’ll
tell you why I’m excited. I bought 10 apartments here in 2003 for $1,000 per
square meter and put in $200 – $300 a meter in renovation and sold them all for
$6-$7,000 a meter (in 2008),” said Suggitt. “I never thought I would be able to
do it again. I thought it was a once in a lifetime opportunity and here we go
again.”
According
to Crockett, it’s currently between $1300-2000 per square meter for a nice place and they plan to invest a maximum of $500 per square meter.
“It’s a
horrible thing but that’s how investing works,” said Suggitt. “Things got so
bad here, that real estate is so cheap.”
In five
years, if all goes well, they plan to start a second fund with institutional
investors. It would buy and renovate some of the many ruined pre-Bolshevik
Revolution buildings while “preserving their architectural integrity,” the
value of which few property developers have failed to recognize.
Suggitt and
Crockett’s business does not rely on the country changing quickly.
“We are not
starry-eyed foreigners who are coming here thinking things are changing. Things
are not going to change [immediately]. If they do change [fast], wonderful,” said Suggitt.
Kyiv Post staff
writer Isobel Koshiw can be reached at [email protected]
This article has been updated to correct the price per square meter which was originally $500. In fact it is between $1300-2000.
This article was also updated to correct John C. Crockett’s employment history. The original story stated that he worked 6 years in Moscow, in fact it was 5.
