Developing ambitions
XXI Century Investments (XXI CI), one of Ukraine's leading real-estate investment, development and property management companies, has decided the Warsaw Stock Exchange is a prime location for listing. The company is now preparing for its debut, which is scheduled for the "near future," though a specific date has not yet been set.
XXI CI has been listed on the London Stock Exchange's AIM market since December 2005, when it floated 35.7 percent of its shares and raised $139 (zł.377) million. It recently sold $175 (zł.474.7) million from a three-year eurobond issue, which was successfully placed with investors in the Far East, Europe, Scandinavia and the UK. Now it plans to draw funds from the WSE.
Dimitri Vasylev, XXI CI's PR director, said the company's presence on the Warsaw floor will allow it to increase its liquidity. "It will provide access to a new investor base which is not available to an AIM-listed company. We have been talking to large Polish institutional investors since last year and see keen interest in XX CI on their part," he said.
The WSE's merits
Michał Sztabler, an analyst from DM PKO BP, said that there might be a couple of reasons why XXI CI wants to enter the Warsaw floor apart from raising more capital.
"Earlier it was the Viennese Stock Exchange that attracted developers. Now the position of the market [best suited for] developers has been taken by the Warsaw Stock Exchange," Sztabler said. "There is a lot of capital waiting for investments and many investors are able to estimate the value of companies from the construction sector since they are familiar with it. That may be another reason," he added.
Also important, Vasylev said, are Polish investors' positive opinion of real-estate companies in general and the attention they pay to the Ukrainian market in particular.
"Our mid-term strategy is to position ourselves as one of the leading real-estate companies in the CEE region, and listing on an important local stock exchange furthers this strategy. We have received positive feedback on this idea from our existing shareholders from the UK, continental Europe and other countries," said Vasylev.
Asset growth
XXI CI is now having the value of its portfolio assessed by Jones Lang Lasalle and it expects the market value of all its projects will amount to around $1.5 (zł.4.07) billion. If the final value of Jones Lang Lasalle's estimate indeed reaches this figure, it would mark an increase of about 170-percent compared to the end of June 2006, when XXI CI's assets were valued at $520 (zł.1,411) million.
"We take pride in the success of our investments, as well as in our developing activity over the last six months ... Our strategy of possessing a diversified portfolio in different segments of business, as well as investing across Ukraine, has not only brought about an increase in the value of the portfolio but has also enabled us to acquire attractive projects around the capital city," said Lev Partskhaladze, president of XXI CI.
About 75 percent of the expected growth since June 2006 is a result of 25 assets and projects in Kiev, Lviv and Poltava, which entered the company's portfolio in 2006. The remaining 25 percent of the growth has come from nine new construction projects launched in H1 2007.
XXI CI's portfolio continues to expand - over the last five years it has grown eightfold. It now consists of 57 developments: 15 retail projects (785,000 sqm); 13 office projects (984,000 sqm); eight hotel projects (275,000 sqm); five warehouse projects (566,000 sqm); and 16 residential projects (2,271,000 sqm). It is the rapid pace of this expansion which has led XXI CI to enhance its financing strategy both by seeking access to different capital markets and by employing a variety of financing instruments.
Powerful portfolio
By 2010, XXI CI plans to develop and operate a national chain of 44 Kvadrat shopping centers in "hypermarket-gallery format" - uniform format complexes anchored by a hypermarket - with a total space of around two million sqm. In addition, within the next three years the company wants to develop and operate 30 class-A and B+ buildings with about 1.5 million sqm. The company sees prospects in the sector because rents are growing 10-20 percent annually on average, and vacancy rates are as low as three percent.
Partskhaladze noted that Kiev will need up to 5,000 new hotel rooms by 2012 because of the Euro 2012 soccer championships, while other Ukrainian cities will need at least 30,000 new hotel rooms. Therefore the company plans to develop and operate a chain of hotels throughout Ukraine with an international hotel operator. This will include eight four- and five-star hotels and 12 three-star hotels. XXI CI is also working on a number of upscale residential properties in urban and suburban communities in Ukraine's major regional cities.
DM PKO BP's Sztabler remarked that the Ukrainian market has good prospects, but is also slightly overheated.
"Average apartment prices in Kiev amount to some E2,000 (zł.7,551) per sqm, which far exceeds people's buying power. If we look at the residential market, it could be a bit risky for investors. The situation looks different if we are talking about commercial developments. The demand for modern shopping centers is huge and it is expected to remain so for a longer while now," said Sztabler.
In the meantime, the company's 2006 revenues were nearly four times higher than in 2005 and exceeded $12.5 (zł.33.9) million. At the same time, net profit in 2006 doubled compared to 2005. Partskhaladze hopes H1 results will be even better, but the company plans to reveal its results once the value of its portfolio has been confirmed.
