In some of the best news for the Ukrainian investment climate in months, the European Bank for Reconstruction and Development (EBRD) has given a verbal go-ahead for a $35 million Kyiv hotel project. In the bank's opinion the project is solid.
'The structure of the project in proposed equity and finance,' reads an EBRD memo on the proposal. 'Is transparent and efficient.'
'The project is sound and profitable and has only minor commercial risks,' memoed back Raffeisen Property Invest (RPI), a subsidiary of Austrian RaffeissenZentraleBank (RZB), '
Hotel-operator Radisson and Ukrainian developer Double-W are the other two major partners in the project along with RZB, to be called 'The Radisson SAS Hotel Kiev'.
RPI will hold controlling shares in the three-way joint venture.
In somewhat of a departure from traditional corporate policy, Radisson will participate not only as an operator but also as a fully-fledged minority partner in the project.
The EBRD will provide partial financing, estimated currently at 25 percent of the project's total value. The joint venture will initially have 50 percent of value in equity from the three participants, making for one of the highest equity/debt ratios for a Ukrainian real estate project to date.
Debt service is protected by a cash flow guarantee with a cap. Partners expect the venture to turn a profit within nine years.
Kyiv architect Janosh Vigh executed the original design for the project, which has been on drawing boards for the last two years. Howarth Consulting acted as intermediary and consultant.
Austrian, German, Finnish, Turkish, and Yugoslavian firms tendered to become the general construction contractor. Vienna-based AMR Gesellschaft won the bid.
Planners estimate the total average key cost will be $126,400 per room, effectively half of probable costs for other similar projects currently under construction in Kyiv.
Ground-breaking at the Yaroslav Val site, currently a bombed-out apartment building in the Rodiansky district, is planned for this autumn. Construction is expected to last 20 months.
Aimed at the business traveler, the hotel will offer 214 rooms each with 31 square meters floor space. Another 30 serviced two-room suites are planned, each at 60 square meters floor space.
Other facilities projected are two restaurants, two or three bars, a conference hall, an office center, a fitness club, and 60 underground parking spots.
Founded in 1992, Odessa-based Double-W developed a Kyiv presence after winning contracts for roofing and other construction services on seven ministerial buildings, the Palats Ukrainy hall, and the Ukrainian President's Residence.
Formal approval of the project by the EBRD is planned later this month. Partners expect a joint venture set-up in August and an EBRD funding transfer in October.