What projects are investors investing in?

What projects are investors investing in?

There is now a construction boom in Ukraine – housing, office and shopping centers, large industrial sites and small coworkings are being built. The MFC format is gaining in popularity. Clean housing or business are no longer so interesting, but for mixed-use from complementary centers is definitely the future. For example, our project in the Dnieper – MFC Alfa Mall – is a 200-thousandth, which consists of housing and trade. And it will be in demand for investors and buyers with tenants.

What is a great home? In residential real estate, a short life cycle, which means that you can quickly return the invested money, with a relatively low threshold of entry – you need $ 1-2 million to dig a pit, put a fence, hire great salesmen and cool marketers and start sales. And if the reputation is already formed, then the exit to self-sufficiency becomes even closer. Of course, there are also high risks in the form of publicity, documentation and competition that can easily offset all the benefits.

Trade works the other way around – it’s a long and expensive project. The most unpleasant thing about a commercial real estate project is the need to have 100% of the amount for sale. If we are building a 100,000 object, we need to immediately receive $ 100 million. And this is a very serious investment, which requires a clear understanding of the exit strategy – it will be a quick sale or a “pension fund”, operated before the first reconception.

In Ukraine, a quality shopping center pays off for 5 years, at worst – 6-7. There are objects that pay off for 8-9 years, but there are many questions about the concept. Why is it important to have a 5-year payback? Because having such an indicator, you can sell your object to an institutional investor at a price corresponding to 8-10 years of payback, and accordingly get double earnings – for the period of operation and sale with a large multiplier.

But if you do not understand how to get out of a commercial project, then it is better not to start. Because sooner or later it will be necessary to stop and make a reconception, and if by this point you do not put money into a special trust fund, the project will be depreciated and it will be bought within three years of payback.

These are just a small part of the issues that a successful developer needs to solve. The construction itself is probably the tenth position in importance in the project implementation. Foremost is always the conceptualist, marketers, designers, lawyers and financiers. It may not sound harsh, but almost all real estate projects are only about generating income, not creating an architectural masterpiece. And the ability to correctly place emphasis and combine different approaches in management – the key to the emergence of strong and professional investors in the project.

Andriy Ryzhykov, CEO and Managing Partner of DC Evolution

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