Ukrainian NPL sale could presage new emerging wave
Gifford West, Managing Director of Boston-based loan sale advisor DebtX, alerted us to an upcoming sale of a $100m (€81m) commercial real estate portfolio for a major bank in the Ukraine.
As West has been forecasting for some time, new opportunities are arising in the NPL sector after the hundreds of billions of euros of transactions in the recent past, largely focused on the Northern European countries, including Germany. Markets like Ireland, which once offered a happy hunting ground for the big players, has now largely recovered with its economy back booming again.
While a fairly small universe of big funds have been feasting on the large size of the pools being sold as a result of government bailouts and the general fallout from the financial crisis, transactions are now shrinking as banks and private equity funds move to conducting targeted sales and bulk transactions. The Ukrainian sale could prove to be typical of this trend.
The Ukraine portfolio being offered includes two office buildings in central Kiev and a large regional shopping center. The Kiev office buildings are Class-A total 19,000 square meters , while the shopping center, which is operational, is 65,000 square meters and includes a partially constructed expansion. The balance of the portfolio consists of residential, land, office, and industrial properties located primarily in Kiev and Dnipro.
Indicative bids are due May 10 and final bids are due May 31. The May commercial real estate transaction will be followed by additional sales for the Ukrainian Deposit Guarantee Fund in 2018.
This deal could be the tip of the iceberg in the Ukraine, with DebtX estimating there are up to US$20bn of distressed loans in the country. DebtX itself has been operating in theUkraine in 2016 and conduted its first loan sale in the market in 2017.
According to DebtX's CEO Kingsley Greenland, “The sale of this $100 million portfolio of real estate is an important milestone for Ukraine. For the first time, international investors are being offered substantial, cash-flowing commercial real estate in a transparent sale process. We expect strong interest in these assets.”
Gifford West said that initial feedback from investors is that they like the portfolio as an entry into the Ukraine. “The portfolio is appealing due to the large assets, clear legal title, and the sellers’ commitment to a transparent process. Seasoned European distressed investors are concerned that Spain and Italy are becoming overpriced. Ukraine, while clearly having significant risks, has strong upside potential.”
Interested investors should contact either Mike Roth (mroth@debtx.com) or Mike Capozzi (mcapozzi@debtx.com) at +1-617-531-3400.