Real estate leasing market in Ukraine. Overview





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09.12.2009 11:26
Submarket lease real estate in Ukraine is rather young - the first deal it had signed in 2004 According to preliminary estimates of the International Finance Corporation since 2007 in Ukraine there are more than 70 companies providing leasing services.

Of these, according to operators, real estate takes 10-15 firms belonging mainly to banks and large financial groups ("Ukrainian Leasing Company (BNP Paribas)", "Universal Leasing Company, Raiffeisen Leasing Aval", "VAB-leasing" "Capital Lease", "Panta Rei Systems", "Laska Leasing, etc.). Apparently, in the near future real estate leasing services will provide the company "ING Lease Ukraine and UniCredit. Nevertheless, talk about a serious competition in this submarket is too early - these services from companies not yet in high esteem and often are not the core business. Leasing real estate professional will do no more than 10 operators, because very few companies can afford to work with "long" (at least 10 years of age) and relatively "cheap" money. For example: the office area of ??100 square meters. m worth $ 700-800 million (not every leasing company is able to attract a similar amount from the bank for a long time and a small percentage. - Ed.) "- says Andrew ?ilina, CEO of Capital Leasing (Kiev, leasing , p. 2006; 12 people.; total sales in 2007 - $ 20 million).

As for the scope of this submarket, there is observed a complete lack of uniformity in assessments. For example, according to the IFC, which operates the only official data, the volume of services in real estate leasing in 2005 amounted to only $ 1 million, and in 2006 - $ 2.7 million, market participants are dealing with numbers in order (and even on two. - Ed.) above. "In 2007, funding deals has reached at least $ 50 million", - said Mikhail Merkulov, General Director of Immorent Ukraine (Kiev, leasing since 2007, 6 people).. Other operators are talking about $ 200 million difference in estimates can be explained by the fact that market players are not very willing to divulge information about the real value of assets transferred in a lease (see also "Problems ..." on p.117), and the real estate market remains in the shade. According to operators, the leasing of real estate in regions practically do not know (I must say that in Kiev, not all potential customers have heard about it. - Ed.).

Benefits and drawbacks


Having received a real estate leasing transaction, the company simultaneously solves several problems. First, it receives (after the term of the lease) facility in the property. Second, instead of a large amount required for its purchase, pay a fixed payment amount which slightly exceeds the rent. Third, before the end of the lease (as opposed to a loan agreement) the recipient of the property bears no risk of ownership and enjoys certain tax advantages.

Among the disadvantages of leasing scheme for the buyer include the difficulty in counting the real costs of the lessee at the rate appreciation, which operate the majority of leasing companies, the presence of advance payments (10-20% of project cost), etc.

As for the objects of transactions, it is primarily for leasing schemes are implemented for office and warehouse space (the size of the deal to buy office center could be $ 20-30 million and stock - $ 10.5 million), commercial premises. This can be explained unsaturation of the commercial and warehouse property and the lack of available funds from companies wishing to buy them. "Often apply for the purchase of complete property complexes (which is prohibited by Ukrainian law. - Ed.). Least popular leasing of industrial premises, "- says Tatiana Ekimov, director of economics LC" Panta Rei Systems "(2004, 8 people.; Lease portfolio in 2007 - 76.8 million UAH. In 2007 - 156 transactions in general). As for the interference of submarket Ms. Ekimova also indicates greater complexity of processing the transaction for the lessor, rather than by leasing other types of fixed assets. First of all, of the contract must take into account all factors affecting the success of the transaction (the lessee's financial position and forecast its cash flow, quality, property, etc.). And as proof of ownership the seller to the property, an expert valuation of the premises, the registration of real estate in the BTI, legal registration of the delineation of responsibility for payment of utility bills, compliance with fire safety, etc. In short, a lot of paperwork.

Problems


Operations on the market of real estate leasing regulated by the Law "On financial leasing (hereinafter - the Law). As acknowledged by the experts, it is well spelled out the rights and obligations as a lessor and lessee, which is conducive to market development. About this may indicate a relatively small percentage of delinquencies and defaults of payments - the experience of judicial review of such disputes was only 32% of leasing companies (however, this fact can be explained by the fact that due to the high demand for property there is a fairly rigorous selection of lessees. - Ed.) . However, there are explicit in the Act and the "brake". First, it prohibits the leasing of common property systems, as well as land, which limits its scope. For example, in Europe the majority of leasing real estate transactions involve the transfer of the land lessor in the property in Ukraine is in addition to leasing property must register the site on which the object is placed in long-term lease, and it is not an easy process, and no one is not immune from errors. "Improper registration of ownership of the land on which the property, makes it difficult to finance such a deal," - observes Andrew ?ilina. Secondly, the Act and regulations do not contain a clear procedure for registration of leased property (even though an indication of the development of this order in the Act itself is. - Ed.). Therefore, the lessor must register it in a general way with the local authorities, which requires significant time and material costs.

In addition, reprimands players in the taxation of leasing operations. "Worldwide, financial leasing is a financial service. In Ukraine, such financial services as insurance, banking services, not subject to VAT, unlike the financial leasing (VAT, which was introduced in March 2005). In addition, the depreciation rate, which offers tax laws, less than the actual economic depreciation ", - said Nadezhda Ryazanov, financial adviser of the project" Leasing in Ukraine IFC. Even in the draft Tax Code provides for accelerated depreciation for vehicles and equipment. In addition to the purely legal issues (which, incidentally, in the near future are unlikely to be resolved, because the bills amending the Act have not yet seen), there are market realities that constrain the development of this submarket. Affects an opaque market history of objects and the lack of available information on buying real estate leasing. "Often, leasing schemes used within groups of companies to protect the property from the raiders' attacks. Also there is a transaction in which the lessees are not used to publicity, are not yet ready to disclose their names ", - says Mikhail Merkulov. In addition, not all domestic banks are willing to take risks and take the pledge (of leasing companies), real estate, do not put into operation. Leasing companies as profitable to buy unfinished objects, because they are cheaper than those already constructed.

Forecast


Submarket operators almost unanimously predict that at least a doubling of the leased real estate portfolio in 2008 Thus, according to their forecasts, repeating the pattern of market development in general. In fact, again according to preliminary estimates, the cost of assets leased in 2007, was $ 1.2 billion, and this year, according to forecasts, the market "heats up" to $ 3 billion increase in the same volume of real estate services they primarily associated with the arrival in Ukraine leasing divisions of large foreign banks (Societe General, BNP Paribas, UniCredit bank, Universal bank, etc). As expected, the data company, with powerful sources of funding, offer more attractive interest rates and flexible payment terms, rather than resident banks and leasing companies they finance. However, the question arises: Are foreign players to enter the Ukrainian market with its terms? "Despite careful pre-deployment training Immorent, have already started operations in Ukraine, spent 2-3 months on the adaptation of processes, terms and documents to the Ukrainian market. In addition, still having all sorts of difficulties with the docking of a standard document and Ukrainian realities ", - complains Mikhail Merkulov.

We must not forget that the potential domestic lessees are not yet ready, they say, take a relatively new to cheer for the Ukrainian market the service and perceive more mortgages. "If someone wants to sell the property, you may do so without any lease, because the demand for it is now far exceeds supply. Companies wishing to acquire the property, can apply for a bank loan for his bail. This scheme is more understandable, and suitable conditions can be negotiated with the bank ", - says Vladimir Bartash, CEO of Worldwide Manufacturing, ED (Kiev, the production of consumables for computers, since 1993, 150 people.; Turnover in 2007 - about 120 million USD).. So that the consumer must also educate ...

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