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On September 14th at the President Hotel took place the annual UREC Hospitality Forum, organized by the Ukrainian Real Estate Club. UREC Hospitality Forum brought together about 150 representatives of investment, real estate, legal and consulting companies, whose interests are connected with the development of hotel real estate segment in Ukraine. Speakers of the event were the leading hotel real estate market experts: Vladimir Goraschenko (Double W), Irina Pshenna (Vertex Hotel Group), Dejan Djordjevic (ESTA Holding), Sebastian Kraemer (Reikartz Hotel Management), Aleksei Evchenko (ArtBuild Hotel Group), Daniel Bilak (CMS Cameron McKenna), Andrei Brynzylo (UniCredit Bank), Vladislav Bayraka (Bank of Cyprus), Yuriy Kryvosheya (Toronto-Kiev), Anton Andrianov (ISTIL Real Estate), Alexander Abramovich (Hanroc Developments), Daron S. Rose (ArtBuild Hotel Group), Andrei Pivovarsky (Dragon Capital), as well as Alex Slesar (Jones Lang LaSalle Hotels).
The moderators of the event were Natalia Lisnyak (ArtBuild Hotel Group) and Andrei Nazarenko (Double W).
During the second session of the forum, experts discussed the basic requirements for hotel projects from banks, creditors, and the prospects of attracting funding during and after the crisis, as well as models and strategies to raise funds for projects in this segment. Speakers of the Forum raised the issue of investment attractiveness of the hotel business in Ukraine in general.
Alex Slesar outlined general trends and sentiments in the investment market of Ukraine in the hospitality segment. According to the expert, this market attractive to foreign investors, especially in terms of return on projects, unlike other European capitals, in Kiev there is a fairly high (65%) occupancy of hotels at a relatively high price of accommodation. Interesting for investors may be projects in the last stage of construction, as well as ready Soviet hotels.
On the other hand, constrain factors for investment companies are the negative trends in macroeconomics, the gap in expectations of investors and the pricing. Investors also feared the sharp overflow of the hotel market, as it happened in Warsaw and Yekaterinburg. Reluctantly, according to experts, companies will invest in projects at the stage of «pit».
Noted in the first half of 2010 the restoration of the hotel business, as noted by Alex Slesar, was imaginary: the good performance was the result of increasing population density in hotels, while reducing prices to a minimum. Objectively, the growth of rates, to date, is still very slow.
Daron S. Rose added that before the global financial crisis, it was enough investors wishing to come to the Ukrainian market. Now the main lenders of hotel projects are banks, for which important practical aspects of the project: market research, functionality, competent financial structuring, etc., but not only the existing interim agreement with the international hotel operator (LOI). Also an important role is still played by the location of the hotel.
Andrei Brynzylo said the basic conditions under which the bank is willing to work with hotel projects, such as a stable cash-flow model of the project (including the parameters LTC*, LTV**, DSCR***) and the excellent reputation of the owner. The project budget should take into account all elements of development and meet the requirements of the hotel operator. The project must also be defined risk sharing with the operator (guarantees of sales or mortgage payments and / or subordination of commissions). It is also important to have a general contractor that already has experience in the construction of hotels.
Vladislav Bayraka confirmed that for the bank is not as important agreement between the operator and owner of the hotel, although such agreement increases the chances of obtaining the necessary credit. In general, binding conditions for the loan remains the insurance and expert assessment of building volumes, its correspondence the amount requested from the bank.
Yuriy Kryvosheya expressed confidence that the developer should take the lead, and then in the process of project implementation can be changed lawyers, the operator, and even refinancing. The main thing - do not stop, and look for an approach to each investor individually. To all, a strong owner in itself is more attractive for the bank, and he is the main guarantor of successful realization of the project to life.
Anton Adrianov noted that during the project implementation the owner should begin to cooperate with the bank at the stage of project development. Commenting on the impact of the contract with a major operator in the issuance of the loan to the owner, the expert pointed out that although this is not an absolute guarantee of the loan, but still has a role in this process as such a contract reduces the risks of the bank and divided them between the owner and the operator.
Andrei Pivovarsky, speaking on the topic of new models to attract funding in the hotel business, explained that such a tool as Private Placement perfectly worked before the crisis, now experts in this field are behaving much more cautiously and calculate all possible risks. On such a complecated instrument like an IPO in Ukraine is still too early to speak, since it involves the use of large amounts of capital and will work only with the appearing on the Ukrainian market of its own hotel chains.
The general partner of the event was ArtBuild Hotel Group - one of the first companies in Ukraine, specializing in the hospitality fee-development and consulting. ArtBuild Hotel Group sells hotel real estate projects in the segments 2, 3, 4 star, including small hotels in different formats. Starting from June 2011 ArtBuild Hotel Group is also the official representative in Ukraine of Best Western International - the world's largest hotel chains representing more than 4000 hotels in 90 countries.
*loan to cost;
** loan to value;
*** debt service coverage ratio
Photo report on the outcome event
