Business news from Ukraine

Auction for sale of Ocean Plaza shopping mall is being prepared

The Auction Commission has set the starting price of privatization of the state share (66.65%) in the authorized capital of LLC Investment Union Lybid, which owns Ocean Plaza shopping mall, at UAH 1.65 billion, the press service of the State Property Fund (SPF) reported.
According to the report, the starting price and terms of sale should be approved by the Cabinet of Ministers of Ukraine, FGI will prepare a draft of the relevant decision.
After the government approves the starting price, the date of the auction will be set, the agency said. The state share in the authorized capital will be put up for electronic auction in the system “Prozorro.Sales”.
As reported, the FGI plans to hold an auction on privatization of shopping mall Ocean Plaza in the second half of the year.
Ocean Plaza shopping mall was opened in Kiev in December 2012 on Antonovycha Street, 176. Its total area is 165 thousand sq. m. Investments in the facility amounted to about $300 mln. UDP Company and K.A.N. Development LLC acted as partners in the development of the project.
The mall was sold to Arkady Rotenberg’s Russian TPS-Nedvizhimost in 2012. Later, in 2019, Ukrainian businessman Vasyl Khmelnytsky indirectly through UPD Holdings Limited acquired a 33.5% stake in Ocean Plaza mall. In 2021, he sold his stake to entrepreneur Andrey Ivanov. The deal was finalized in summer 2023.
In June 2023, the Cabinet of Ministers transferred to the FGI a 66.65% stake in the authorized capital of Investment Union Lybid LLC, which owns the shopping mall, for further privatization.

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State Property Fund of Ukraine sold complex of premises of Uman Correctional Colony for UAH 29 million

The State Property Fund of Ukraine (SPFU) has sold a complex of buildings of the Uman Correctional Colony for UAH 29 million at a privatization auction, which is 194 times higher than the starting price.

According to SPF Chairman Vitaliy Koval on Facebook, 42 companies and entrepreneurs participated in the auction. The starting price of the lot was UAH 149.4 thousand.

According to the results of the auction on the Prozorro.Sale website, the winner of the auction was Borys Pakholyuk. According to Clarity Project, he owns a number of agricultural enterprises and farms in Cherkasy and Odesa regions.

The lot includes a complex of non-residential buildings and structures with a total area of 3.1 thousand square meters and a land plot of 0.59 hectares. The property had not been used for more than 20 years.

Koval reminded that the Ministry of Justice transfers unused penitentiary institutions to the SPF for further privatization.

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More than UAH 11 billion for budget and increased business activity. What else has last privatization five-year period demonstrated?

Vitaliy Koval, Head of the State Property Fund of Ukraine

Small-scale privatization has been systematically gaining momentum over the past 5 years (from 2019 to 2023) with some interruptions, in particular due to a full-scale invasion. Last year’s performance largely surpassed all previous results and demonstrated the effectiveness and timeliness of privatization in general.

Budget revenues

As a result of small-scale privatization in 2019, which was carried out by the State Property Fund of Ukraine, the budget received approximately UAH 561 million. The following year, this amount increased almost 5 times and exceeded UAH 2.69 billion. In 2021, the budget received UAH 3.5 billion. In 2022, when there was a break in privatization until September, the Fund transferred assets worth UAH 1.74 billion to private investors in less than six months.

Last year, proceeds from the privatization of state property amounted to UAH 2.84 billion. The state has fully resumed this process and is helping to support the state budget with funds that ensure our protection and defense against the aggressor. In total, over the past 5 years, privatization revenues, excluding large-scale privatization objects, amounted to UAH 11.34 billion.

As for the price of the assets sold by the Fund, the final value of the property increased the most compared to the starting price in 2020.

Increase in the sale price of assets relative to their initial value

After the fall of this indicator in 2021, it has been growing over the past two years. Thus, in 2023, the sale price was 2.7 times higher than the initial price.

Competition in auctions

The increase in budget revenues and the growth of the final price indicate an important thing. Participants in the auctions held by the SPFU through the Prozorro.Sale system are interested in state assets and are ready to fight for them. The indicators of competitiveness in 2023 leave no doubt about this.

Average competition in privatization auctions

Over the past 5 years, competition in successful auctions has been growing steadily. But while from 2020 to 2022 its level was in the range of 3.1-3.6 bidders per auction, in 2023 almost 5 bidders competed for each lot on average.

This year, there is every chance of exceeding even such strong results: in the first quarter of 2024, more than 5 bidders took part in each successful auction on average.

Business interest in state assets

Business activity in privatization auctions is driven by many factors. Some companies need to relocate to regions far from the front line. Some entrepreneurs want to build a business on a ready-made material base, with the infrastructure, equipment and communications offered by the state when it sells, for example, single property complexes. Others need real estate, warehouses, workshops, garages, etc. to expand their current capacities.

So entrepreneurship in Ukraine is developing even in the face of war and other difficulties. And the government is striving to provide business with resources that will help it do so.

There are lots in which the market sees such great prospects and value that dozens of participants compete for them at once. The record was set in 2020, when 48 bidders competed for an unfinished garage for 50 cars in Kyiv. The second  lot was non-residential premises in Uzhhorod. This auction, which had 47 bidders, took place in 2023.

As a result of this demand, the price of the first property in Kyiv increased almost 35 times (from just over UAH 1 million to UAH 36 million). And the cost of the second lot in Uzhhorod increased 818 times (from UAH 12.2 thousand to UAH 10 million).

Businesses are interested in assets of different sizes, but the vast majority of lots sold through privatization cost up to UAH 1 million.

Distribution of successful auctions by the final value of the privatized object

In 2020, the share of auctions where the sale price of an asset was up to UAH 1 million reached a maximum of 86%. At the same time, in 2022, the share of auctions with the final value of the object from UAH 1 to UAH 10 million and even in the range of UAH 10-100 million increased significantly. Last year, the trend went in the opposite direction again: the number of assets sold for up to UAH 1 million began to grow.

It is also important to understand the overall economic context in Ukraine. A sharp drop in the hryvnia exchange rate, the crisis in many markets, the occupation of territories, and many other things have affected the ability of businesses to operate. This has hit small businesses particularly hard, as their already scarce material resources have been significantly depreciated and other problems have been added.

The return of demand for inexpensive, small state assets suggests that small and medium-sized businesses are resuming activity and continuing to grow after the first shocks of the full-scale invasion.

The average number of bidders in privatization auctions, relative to the final value of assets

At the same time, large market players are also interested in large state-owned assets when they come up for sale. Thus, in 2023, an average of 14.1 bidders participated in auctions with a sale price of more than UAH 100 million. At the same time, the average competition in auctions up to UAH 1 million last year amounted to 3.9 participants.

Efficiency of privatization processes

Overall, privatization auctions attracted thousands of players from different markets. The highest number of bidders, namely 2035, was in 2023. This is 3.3 times more than in 2022 and almost twice as many as in 2021. In 2020, this figure exceeded 1340 bidders. And in 2019, when privatization had just intensified, there were about 800 of them.

Legislative changes, business activity, competitive bidding, and their transparency and openness have helped to increase the efficiency of privatization processes. At the same time, the State Property Fund has also changed its approach in recent years and improved the process of preparing objects for sale. Information about the availability of state assets for privatization was disseminated through various communication channels to draw attention to these lots. In general, all information about the current lots, how to participate in the auction, and the results of privatization is collected on a separate special resource.

The Fund has developed a mechanism for sorting (triage) state assets, depending on their condition and market needs. The property that has no value or exists only on paper will be liquidated or bankrupt. Those objects that can work for the benefit of the economy in private hands will be privatized.

Effective steps taken by the SPFU and the interest of private investors have yielded results: in 2023, the share of successful auctions increased many times over compared to previous years.

Increase in the share of successful SPFU auctions

The lowest rate of successful auctions was recorded in 2021-2022: it was 17% of all announced auctions. Therefore, the peak result of almost 47% last year is a difference of 2.8 times.

Over the past 5 years, privatization has become more efficient, increased revenue, and attracted the attention of more and more entrepreneurs. This proves the success of Ukraine’s privatization strategy, when the state, instead of subsidizing unprofitable assets, gives them a new life and helps generate funds for the state budget at a time when the survival of our country depends on these revenues.

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Kholminsky distillery sold at auction for UAH 45 mln

The State Property Fund (SPF) of Ukraine has sold Kholminsky distillery in Chernihiv region for UAH 45 million at an auction in the system “Prozorro.Sales”, which is 2.9 times higher than the starting price, said the chairman of the SPF Vitaliy Koval.

“Three participants competed for the object. Its cost has increased in 2.9 times of the original”, – he wrote in Facebook and added that the FGI will continue denationalization of the alcohol industry.

The head of the FGI specified that the funds transferred by the winner of the auction to the state budget will be directed to the financing of the Defense forces of Ukraine.

According to Prozorro.Sales, the winner of the auction was Terminal Frost LLC.

According to the online resource, the company was registered in 2017 in Kiev. Specializes in non-specialized wholesale trade, providing financial and consulting services, renting its own or leased property. The authorized capital of the enterprise is 155 thousand UAH. The beneficiary of the enterprise is Anastasia Bashtova.

It is stated that the postal operator or express carrier must submit an additional register of international mail or express shipments if the goods are not subject to export duty or are not subject to restrictions provided for in Article 197 of the Customs Code.

Head of the Parliamentary Committee on Finance, Tax and Customs Policy Daniil Getmantsev in Telegram expressed hope that these changes will help to reduce business costs and speed up logistics.

As reported, the Verkhovna Rada adopted as a whole the bill No. 9456 on amendments to the Customs Code of Ukraine regarding customs clearance of biomethane.

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State Property Fund is preparing to sell Ukraina Hotel and Ocean Plaza shopping center

The State Property Fund has completed the valuation of the Ukraina Hotel and plans to hold an auction for its privatization in late summer 2024, and for the Ocean Plaza shopping mall in the second half of the year, Vitaliy Koval, the head of the SPF, said in an interview with Mind.

“We have already completed the valuation of the hotel, which amounts to UAH 1.039 billion excluding VAT. We are now preparing for the auction, which we plan to hold in late summer, maybe even in the third quarter,” he said.

According to the SPF head, foreign operators are interested in privatizing the Ukraina Hotel, in particular, as they are considering upgrading it to a five-star hotel.

In addition, according to him, more than three bidders are considering participation in the auction for the privatization of the Ocean Plaza shopping center, and the Fund has received inquiries from investment funds and development companies.

As reported, the Ukraina Hotel is a state-owned enterprise managed by the SPF. It has 363 rooms, six conference halls, and meeting rooms. There is a parking lot for 80 cars and a shelter with a separate auditorium for 50 people. At the same time, the hotel’s debt is over UAH 45 million.

Ocean Plaza was opened in Kyiv in December 2012 at 176 Antonovycha Street. Its total area is 165 thousand square meters. Investments in the facility amounted to approximately $300 million. UDP and K.A.N. Development LLC acted as partners in the development of the project.

The mall was sold to Arkady Rotenberg’s Russian TPS Real Estate in 2012. Later, in 2019, Ukrainian businessman Vasyl Khmelnytsky indirectly acquired a 33.5% stake in Ocean Plaza through UPD Holdings Limited. In 2021, he sold his stake to entrepreneur Andriy Ivanov. The deal was finalized in the summer of 2023.

In June 2023, the Cabinet of Ministers transferred a 66.65% stake in the authorized capital of Lybid Investment Union LLC, which owns the mall, to the SPFU for further privatization.

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Another Ukrainian distillery is put up for auction

The State Property Fund (SPF) of Ukraine has announced a privatization auction for the sale of the Gannopolskiy distillery (Khmelnytskyi region) on January 25, the press service of the agency said.

According to the message, the asset consists of 48 real estate objects located on a land plot with a total area of 16.11 hectares. The main of them are the main building with the area of 1250.9 sq. m, vodka bottling shop and cleaning department – 1392.4 sq. m, stables – 529 sq. m, malt house – 1171.1 sq. m, grain warehouse – 1198 sq. m and others.

The starting price of the object is UAH 3.8 mln.

You can register for the auction until January 24.