Arkada bank office sold through corruption
That morning at 9.55 am, to the sound of sirens, the Deposit Guarantee Fund began selling the office premises of the bankrupt “Arcada” and surprisingly managed to do so. When, to whom and for how much the building was sold is the story of how along with Ukrainians who at the cost of their lives are winning for their country, there are still Ukrainians who fight just as hard for their own enrichment, writes Yulia Samayeva, ZN.
So what is wrong with the sale of the Arcada office?
The building in Olginskaya Street, in the very heart of the capital, is well-known and recognizable – a real gem of the commercial real estate market: location close to the upper exit of the underground station “Khreshchatyk”, immediate proximity to the government quarter, more than 14 thousand square metres of office space. It is clear that demand and price should be high for such a gem. But not in Ukraine.
Bank “Arcada” was declared insolvent in the summer of 2020, and its property, according to the law, ended up in the Deposit Guarantee Fund, which is authorised to sell it to compensate for the damage. But the building on Olginska Street, the bank’s main asset (about 30% of its capital), did not get into the fund immediately. On the eve of liquidation, it was removed from the bank (as collateral for a loan), transferring ownership to Oleg Nelin, who, in turn, mortgaged the building to Taras Budeynoy. They are both linked to former Yanukovych-era Ecology Minister and owner of the gas extraction company Burisma, Mykola Zlochevsky, who is currently awaiting investigation in the UAE. Nelin has been in liaison with Zlochevsky since the 2000s, both as an employee, as a manager and as part-owner in the company of Zlochevsky’s father. In short, there was everything. Budeyny is one of Burisma’s tops and a long-term assistant to the fugitive minister during his time as a deputy.
However, Zlochevsky’s first attempt to take over the main “arcade” asset turned out to be quite clumsy and surprisingly unsuccessful. One could write something about the Fund’s heroic legal battle for return of the valuable asset to the State, if not for subsequent events. So let us simply state the fact that the fund returned the asset.
Over the past two years the building on Olginskaya Street was put up for sale almost three dozen times (!) – and not a single person wanted to buy the pearl.
Frightened by the price? No, it was quite adequate to the market at that time. Rather, it was the prospect of fighting for the asset with Zlochevsky. Usually, when it comes to such uncommon objects there are no dark horses among potential buyers; moreover, those particularly odious ones deliberately tell every corner about their interest in the asset and their very serious intentions. It is almost like a duel of eyes before a boxing match, only the one who averted his eyes first does not even get in the ring.
Also, the court red tape around asset return, which lasted till October this year, was frightening. The courts are expensive and burdensome for all potential buyers except for those who can stop the trials with a phone call.
Of course, the Foundation understood this, but they stubbornly put the building up for sale even though no one entered the ring. According to the procedure, if there are no buyers and the object cannot be sold, there is only one way out – to a Dutch auction. In a normal auction, the price goes up, but at a Dutch auction, on the contrary, the price goes down.
In theory they only have to sell rubbish at a Dutch auction, but in practice it is not unheard of for the most attractive assets to end up there, and someone wants to buy them at the lowest price. This, in fact, is what happened with the building on Olginska Street, the price of which on 10 October started at one billion hryvnias and fell to 350 million within a short bidding period.
Like that, the office centre of 14 thousand sq.m. in the centre of Kyiv was purchased for 700 USD per sq.m. and a land plot of 50 cent in the capital was given as a bonus to the new buyers.
You may say that there is no market, the country is at war, investors are quiet. Yes, indeed, it is the worst possible time for investment. But why not wait for a better time? After all, even now, during the war, a square meter in the unfinished “Arcada” panel housing estate on the side of Kharkiv massif, in the absence of demand and the developer itself, still costs almost 2 thousand dollars. And now the commercial real estate in the centre, although there is no market, is not cheaper than USD 3.5 thousand per meter.
You may say that it is better this way than to burden taxpayers with this asset, because the utilities and security of such a big building will cost a pretty penny. Fair enough, except that the asset is pretty much self-sufficient. The building is not empty and is at least two thirds full of tenants. It is clear that times are hard for everyone, even for tenants in Olginska (perhaps), but at the current average rental price in the area, even with only a third of the tenants paying, the building generates 2.5 million UAH a month. It could well be enough for maintenance and waiting for better times.
You will say that it is better to put a penny into the budget than nothing. It is hard to disagree, but the choice was between a kopeck and a hryvnia, and the option “nothing” was deliberately forced upon us. Such an extraordinary object could have been not sold at all, taking into account its location and the income it generates, and the ease with which even an “inefficient state proprietor” could easily manage it. But this option was not even considered; they considered selling it, and for next to nothing.
In all, there were three companies at the last auction as buyers. The first was a firm, about whose activities Andrey Smirnov, deputy head of the president’s office, could tell a lot. The second was a no-name company that was supposed to brighten up the loneliness of the first firm at the auction. The third one is a mysterious Sistemoylinengineering, the name of which points directly to the maximum remoteness of this firm from the real estate market. Since there are no dark horses in this business, as we have already mentioned, most outside observers bet on the first firm. The good news is that it lost and, despite its best efforts, could not undo the bidding results. The bad news is that it lost not to anyone in the market, but to Zlochevsky himself.
Of course, Sistemoylinengineering is not owned directly by Zlochevsky, it is owned by Cyprus-based Diloretio Holdings, which in turn is also owned by Cyprus-based firms Cerminara Limited and Glasimo Limited (normal names probably ran out and there was an Ikea catalogue at hand). So, the ultimate beneficiary of the first company is Karina Zlochevskaya and the second is Anna Zlochevskaya. And they are hardly just full namesakes of Zlochevsky’s daughters.
Yes, the odious gas tycoon and textbook regionalist, whose people tried to give the biggest bribe in the history of Ukraine, continues to take everything he likes here and at the price which suits him. That is, in fact ridiculous money, because under normal conditions and the market, investment in this asset will pay off in less than four years, and most importantly, it will bring regular income.
It is hard to imagine the depth of the abyss of idiocy into which the Deposit Guarantee Fund divers descended when they sold something to Zlochevsky during Joe Biden’s presidency. But we will not allow ourselves to assume that the fund does not know how to use Google and do not check the ultimate beneficiaries of the buyers. The fact that according to the letter of the law and procedures there is not a single violation in this story is not reassuring, rather the opposite.
The organizers of the auctions from the Guarantee Fund, who fought so hard against Zlochevsky in the courts, did it in order to give him the asset anyway, only in a more legal way and still not to some helpers, but to the blood kin. And their desire to make him this valuable gift has not stopped even the most massive bombardment of the capital since the beginning of the war. While the inhabitants of Kiev were sitting in air-raid shelters, they were robbed. For the third time. Because before that they had been cheated by the “Arcadian” bank and the developer.
Think of that story every time someone tells you about the magic of privatization and the need to get rid of 80% of all property right now and find a kopeck for the budget and the rest of the Umerov slogans.
In fact, it’s not hard to imagine how many really valuable assets would go for next to nothing, and you won’t even be able to prove that it’s not enough because there’s no market or demand. In fact, it’s not hard to imagine what percentage of everyone’s known muzzles will be among the faces of the lucky buyers. What is really difficult is to comprehend the level of cynicism of people who loot their own country in a war no worse than the enemy.
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