DUPD buys 35% stake in major Ukrainian developer

Dragon-Ukrainian Properties & Development (DUPD) has acquired a 35% interest in Arricano Trading, a developer of upscale shopping centres in Ukraine. The acquisition was carried out through the issue of new shares by Arricano for $30 mln (EUR 23 mln).

Arricano will use the proceeds to fund further development of its shopping centre portfolio and repay existing debt. Arricano's current owner, Expert Capital - a Luxemburg-based company ultimately owned by an Estonian private investor, Hillar Teder - will retain a 65% shareholding in the company.

Arricano Trading's portfolio includes five Brand shopping centres with a total gross leaseable area of 232,000 m2, of which 128,000 m² are currently operational with the balance scheduled for delivery during 2011-2013. Two of the schemes, representing 60% of the total leasable space, are located in Kyiv - Sky Mall with 114,000 m² and M26 with 24,000 m². The other three projects - Sun Gallery, City Mall and Inter Mall - are located in large regional cities in Ukraine, Kryvyj Rig, Zaporizhzhya and Simferopol.

Expert Capital and DUPD said that they are also considering carrying out a further $60 mln capital increase to finance the acquisition of the remaining 50% stake in Sky Mall as well as to complete the development of the second stage of InterMall and repay certain indebtedness. As a part of its development strategy, Arricano is also planning to carry out an IPO on a reputable foreign stock exchange during 2012 in order to finance further growth through acquisition and the development of new commercial real estate projects.
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'Arricano projects, in particular Sky Mall, are professional shopping centres of international quality, a sector still nearly nonexistent in Ukraine,' said Aloysius van der Heijden, DUPD Chairman. 'I am also happy with the timing of the transaction, which is taking place a year after the Ukrainian retail market bottomed-out in 2H 2009, allowing the company to promptly capitalise on the ongoing recovery of the sector.' Chris Kamtsios, managing director of DUPD, added: 'With vacancies across shopping centres in Ukraine narrowing to 1-2% on average and rents increasing in H1 2010, we are convinced in the strong growth prospects of Arricano.'