AIM-listed Argo Real Estate Opportunities Fund is opening the third and final phase of its Riviera Shopping City, Ukraine's largest shopping and entertainment complex. The 80,000 m[sup]2[/sup] scheme is the first Ukrainian retail project inaugurated by an international developer in the past year since the global credit crisis sparked a credit shortfall in the country, says manager Robert Provine.
AIM-listed Argo Real Estate Opportunities Fund is opening the third and final phase of its Riviera Shopping City, Ukraine's largest shopping and entertainment complex. The 80,000 m2 scheme is the first Ukrainian retail project inaugurated by an international developer in the past year since the global credit crisis sparked a credit shortfall in the country, says manager Robert Provine.
'It is difficult to deliver a retail scheme in the country because of the tight credit markets and the still-recovering retail sector but, if you can succeed in delivering a high-quality project, Riviera has demonstrated that it can perform well and generate a good income, mostly due to the market's low retail supply,' he adds.
Located in Odessa, the scheme offers over 80 shops including Zara, OBI DIY, Marks & Spencer and Benetton stores. It features a leisure component including a nine-screen Imax cinema, a 15-lane City Bowling and Karaoke complex as well as a food court operated by Seven Continents. Riviera is now 94% leased with additional lettings currently in negotiation. DTZ is the leasing agent for the retail gallery, with all the anchor tenant leasing managed directly from Argo's Kiev office.
Phase One of the centre opened in October 2009 with Phase Two following at the end of 2009. The development of the loan was financed with a EUR 68 mln loan granted by Marfin Popular Bank.
Provine says that the mass exodus from the Ukrainian market occurred in 2008 and 2009 has opened up an opportunity for Argo to create a dominant position in the country's retail market at a time when it is 'out of favour'. Provine: 'Ukraine was the flavour of the month in 2006 and 2007, with land prices going through the roof and numerous international banks buying out local lenders at exorbitant valuations. Now, it is off the map again, and this is a good time to grow due to the lack of competition.'
He adds: 'If we look at market fundamentals, Ukraine is one of the largest countries in Europe and is largely undersupplied in terms of retail space. Investors will come back, it is just a matter of time.'
Retail sales have started to stabilise and the market is already seeing a gradual recovery. 'The cost of sovereign debt rose to as much as 16-17% during the crisis. But in the past two months we saw that the Ukreximbank, the country's largest sovereign-controlled bank, was able to place a EUR 500 mln bond at below a 6% margin.'