Is Vagif Aliyev in trouble?
The failed launch of Blockbuster Mall, the 5-year delay of Ocean Mall and dependence on Russian money. How does all this affect the business of the commercial real estate king Aliyev today? interested EP.
Vagif Aliyev is a real estate developer, to whom many adjectives can be applied with the prefix “most”: the biggest, the most ambitious, the most cunning. His projects – “Sail”, “Gulliver”, Lavina Mall – are known to every citizen of Kiev.
In the 1990s, an Azeri born in Turkmenistan was engaged in bartering Turkmen gas supplies to Ukraine. His partner in this case was the scandalous ex-chairman of Naftogaz Igor Bakai.
In exchange for eastern gas, Ukraine supplied computers, slate, coffee and galoshes to Turkmenistan. Thanks to this, Aliyev managed to earn a large fortune. When the period of primitive accumulation of capital ended, on his estate in Miami, he began to think about what to do next.
Heaven sent the businessman a meeting with American real estate developer Donald Trump in New York. A conversation with him at Trump Tower sealed the entrepreneur’s fate for a decade. Aliyev returned to Ukraine, took Igor Nikonov as a partner and Vladimir Krapivinand they founded the KAN company.
The first project is a large-scale reconstruction of the Bessarabian quarter in the center of Kyiv, within which the Mandarin Plaza shopping center, the Dominant business center and the Arena City entertainment center appeared.
Aliyev has not only built real estate, but also attracted world brands to the Ukrainian market. He attributes the appearance of Chanel, Tiffany, Dolce & Gabbana, H&M, Zara and IKEA to himself.
In the early 2010s, the developer set out to build at least eight major shopping centers in Kyiv that would make it the king of the commercial real estate market. The achievement of the goal was prevented by the epidemic, the great war, migration and the crisis of solvency.
Will Aliyev be forced to change plans for new economic circumstances?
In a conversation with the EP, the businessman radiates optimism. He says that in three or four months “bunker Putin will be poisoned”, the war will end, and Kiev will turn into a major European metropolis, the population of the capital will increase significantly, and the flow of tourists will increase tenfold.
Against the background of the failed launch of Blockbuster Mall, a five-year delay in the construction of Ocean Mall and rumors of dependence on funding from Russian oligarchs, market participants believe that Aliyev may not build what he planned. The businessman dismisses such forecasts and shares with the EP a strategy for overcoming the crisis.
In the early 2010s, Aliyev stopped working with Nikonov and Krapivin and concentrated on commercial real estate. Is Vagif Aliyev in trouble? SOURCE: NV
For Vagif Aliyev, it all started with Trump
Aliyev’s meeting with Trump not only inspired the first to engage in development, but also outlined guidelines in this activity. He set about building the first skyscraper in Ukraine and did it in record time.
For construction, a plot of only 0.4 hectares was chosen at the point where Mechnikova Street and Lesia Ukrainka Boulevard converge. Even the head of Mandarin Plaza LLC, Alexander Chernitsky, did not fully believe that the project could be implemented. It is this company that manages the entire development business of Aliyev.
“There was a tram stop and a slope in the place of the Sails. I went sledding there as a schoolboy. Everyone laughed: what are you going to build there? We built 33 floors in 18 months. Only in China they are building at such a pace,” says Chernitsky.
The top manager says that Aliyev is an ambitious person and his ambitions are supported by the result: “Almost always, when he voiced something fantastic, everyone thought it was impossible, but he did it. More than once we stood among the half-finished object, and he said: “We open next week.” And we opened“.
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Even before Parus was put into operation, Aliyev sold 50% of the office center to oligarch Dmitry Firtash, and spent the proceeds on the construction of business centers Gulliver and Senator, as well as a residential complex Diamond Hill.
In the early 2010s, Aliyev stopped working with Nikonov and Krapivin and concentrated on commercial real estate. According to Chernitsky, this decision was made in an evolutionary way.
Aliyev now owns Mandarin Plaza, Lavina Mall and 50% of Blockbuster Mall. According to EP estimates, Aliyev controls about 20% of retail space in Kyiv.
Chernitsky says they want to be industry leaders, but without bigotry. “We do not set ourselves the goal of owning a certain market share. Many facilities are being built in parallel, and the market structure is constantly changing,” he explains.
The war knocked down
In the Forbes ranking of the richest Ukrainians for 2021, Aliyev took 22nd place with a fortune of $460 million and second in the ranking of the largest rentiers. According to the publication, the property brought the businessman $61 million in interest income.
Is Vagif Aliyev in trouble?
After February 24, 2022, both figures decreased. The value of assets in a country where the war is going on is difficult to assess, and revenue at individual facilities has fallen by 75%.
“Now only Lavina Mall makes a profit, but even there the turnover is lower than before the war. Mandarin Plaza saw a 75% drop in revenue. I can’t give figures for Blockbuster Mall, another shareholder is engaged in operating activities there (Alexander Spector – EP)“, – says Chernitsky. .
According to him, the traffic level of the shopping and entertainment center is significantly affected by the temporary closure of the stores of Western tenants – H&M, IKEA and Inditex (Zara, Pull&Bear, Bershka, Zara Home, Stradivarius, Massimo Dutti, Oysho).
Aliyev does not plan to close or sell Mandarin Plaza, despite the fact that most of the visitors to this mall have left Kyiv. “We have no right to close,” says Chernitsky. The issue of keeping the business afloat is the main one for Aliyev. “We have not fired anyone, we pay salaries to all employees. We are almost engaged in charity,” says the developer.
According to EP sources, already during the war, Aliyev wanted to sell Mandarin Plaza for $100 million, but no buyers were found.
About friendship with Klitschko and relations with the city
Aliyev’s first, but not the last public scandal with the public occurred due to the construction of a shopping mall.office center on Bogdan Khmelnitsky street. The building threatened the security of the Teatralnaya metro station.
The resolution of the conflict was unexpected. Aliyev and project co-investor Vadim Stolar donated the building to the community to house the Museum of the History of Kyiv.
When asked if this gesture was a purchase of indulgence for a problem-free job in the future, Aliyev replies: “No.” “I have never dealt with city officials. I bought all my plots on the secondary market‘, says rentier.
Aliyev’s former business partner, Igor Nikonov, is convinced that his own deputies in the city council cannot bring any benefit to the entrepreneur.
“Having your own deputies in the Kyiv City Council is a headache, because you need to participate in political alignments. If you do not participate, you become an enemy, and attacks always begin against enemies“, – says Nikonov.
Aliyev has known the mayor of Kyiv for more than 25 years, since the time of Bakai.
The developer confirms that he is friends with Vitali Klitschko, but assures that he has never “monetized” friendship. On the contrary, recently the city authorities have equipped new parking lots near Mandarin Plaza and made one of the driveways of Bessarabskaya Square pedestrian. Aliyev did not like this very much.
“I’ve invested tens of millions of dollars in the underground car park under the Arena, and it’s empty because visitors can’t get in.b,” complains Aliyev.
He shows the ES a telephone correspondence in which the mayor sent the mobile number of the director of the department of transport infrastructure of the KSCA Ruslan Kandibor. According to Aliyev, he found a common language with the official.
March 1st page Public organization “Passengers of Kyiv” received information that the pedestrian zone near the Bessarabsky market will be liquidated.
“Played in Europe and enough … Kandibor decided to eliminate the pedestrian zone on Bessarabskaya Square in order to reopen it for car traffic and organize parking spaces along the sidewalks“, the activists said.
The pedestrian zone was created in 2021 on the advice of the World Bank. Simulations have shown that road closures will reduce traffic delays.
An ocean of problems for Vagif Aliyev
In the early 2010s, Aliyev decided to build eight malls in Kyiv. Lavina Mall on Berkovka with an area of 170,000 sq m was supposed to be the first and smallest of the megamalls.
The businessman began to buy large land plots in the capital: from Sergei Taruta – the unfinished Ice Stadium near the Hippodrome metro station, from the brothers Mikhail and Dmitry Tabachnikov – the Petrovka book market near the Pochaina metro station, in the pool of owners – plots near the Lesnaya station “.
In 2012, Aliyev’s company bought a plot near the Ocean Plaza shopping center from Vasily Khmelnitsky. Aliyev began to build the second phase of the mall, hoping to buy out Ocean Plaza in the future and combine the two malls into one complex.
Is Vagif Aliyev in trouble?
According to the project, Ocean Mall is a 5-storey building with a large digital entertainment park, cinema, parking and shops.
In 2019 Aliyev negotiated on the purchase of a mall with the daughter of the Russian oligarch Arkady Rotenberg, Lilia, who officially belonged to Ocean Plaza. According to the publication NV, the businessman offered 175 million dollars, and the seller wanted 250 million dollars. The agreement did not take place.
The Aliyev project currently under construction is called Ocean Mall. Chernitsky says it was a good idea to merge the two malls, but that they could operate separately and still be profitable.
“We could distribute customer flows, create synergy between the two malls, but even without Ocean Plaza we have our own concept. We focus on entertainment and gaming, which is almost non-existent in Ocean Plaza. We will have 70 restaurants in the food hall, we have only six of them“, – says Chernitsky.
Ocean Mall was planned to open in 2018, but in 2023 there is an unfinished building on Lybidska Square. Aliyev and Chernitsky explain the five-year delay by difficult engineering and geological conditions, the coronavirus epidemic, the war and difficult communications with activists – defenders “Dishes”.
The developer promised that Tarelka, the building of the Ukrainian Institute of Scientific and Technical Expertise and Information, would be restored and a museum of science created there. SOURCE: THE VILLAGE
“The public could not believe that we would not do anything bad with the “Plate”. We never planned to demolish it. It will be restored, and on its basis we will implement a musical or theater project“, Chernitsky convinces.
The top manager does not undertake to name the date for the commissioning of Ocean Mall, but hopes to resume construction work in the coming months.
Leading expert of the consulting company Colliers Ukraine in the retail real estate segment Igor Zabolotsky believes that there is no point in rushing to complete the construction of Ocean Mall. In his opinion, the shopping and entertainment center should be opened two or three years after the end of the war with the growth of the economy.
Russian trace
At the same time, three more objects are at different stages in the development of Aliyev. The highest level of readiness is at Lisova Mall on the eastern outskirts of Kyiv.
Between Brovarsky Avenue and Kyoto Street, the developer managed to clear the area from the spontaneous market and trees and drive piles. Work was stopped due to the ban of the State Architectural and Construction Inspectorate and numerous scandals.
On the site around the future Hippodrome Mall, according to Chernitsky, strengthening work is underway for the subway. The book market on Pochaynaya, which will be replaced by Petrivka Mallcontinues to function.
What are the reasons for the delays in the construction of shopping centers and the pause in the development of the megamall network? Three major participants in the real estate market told EP that Aliyev attracted funds from shadow investors from Russia to finance projects.
“To some extent, Aliyev was a “frontier” (acted as the nominal owner of the assets – EP) of the Russians. Those through offshore companies brought money to Ukraine and laundered at construction“, – says one of the interlocutors of the publication.
“There are rumors that Aliyev financed his projects to a large extent with Russian money. There is no evidence for this, of course.”, says the second developer.
The third interlocutor of the EP also speaks about the trace of Russian money in the “treasury” of Aliyev, which he calls “bandit”.
“As a developer, he began to progress when Ukraine, after the presidency of Viktor Yushchenko, turned its back on the Western world. At that time, 80% of international developers left the Ukrainian market and local developers began to work. Including – for Russian money“, says the interlocutor.
Chernitsky denies these rumors: “Financing has never been raised in Russia. I totally object. Recently, a respected businessman told me: “You built for bandit money from Russia.” I was very surprised to hear this from him.“.
Aliyev responded to the accusation of attracting unclean funds that this was slander. He stated that he finances his construction through bank loans and the sale of objects from the portfolio. “I have an impeccable reputation built over the years. I take loans at Raiffeisen, Alfa, and other banks‘, says Aliyev.
According to Nikonov, Aliyev is a talented entrepreneur who has no problem finding sources of funding. “I am a less risky person, he is more risky. I must admit: Vagif is much more talented than me, he finds funding better. Eastern people always do it better,” he says.
Aliyev successfully sold a lot of his own properties: Sail to Dmitry Firtash and Vadim Stolar, Arena City to Firtash, Gulliver to Viktor Polishchuk, Senator and half of Blockbuster Mall to Alexander Spektor.
“I have always used the proceeds from the sale to build facilities, this is no secret. Then I bought something, if the price suited‘, says Aliyev.
Blockbuster Mall from a bird’s eye view // Is Vagif Aliyev in trouble?
In his defense, the developer tells the story of how a well-known Ukrainian businessman invited him to become a partner in the construction of a shopping center on one of the scandalous Kyiv sites and was refused due to reputational risks.
“I could make a lot of money from this collaboration, but why would I take on its toxicity?‘, Aliyev thinks.
EP’s interlocutors in the market believe that Aliyev will have big problems with the completion of Ocean Mall, Lisova Mall, Hippodrome Mall and other facilities.
“The Russian channel for Vagif has been closed since February 2022. Six months to a year before the big war, he borrowed $50 million to complete Ocean Mall. He has no money for the construction of other malls‘ he says.
“Aliyev’s reputation has been blown, especially after the failed launch of Blockbuster Mall. Systemic financial institutions thoroughly study their partners. It is unlikely that he will find funding after the war”, — predicts the interlocutor of the EP.
Why Blockbuster Mall Opening Failed
Blockbuster Mall opened in 2019 with only one anchor tenant, Silpo, and a 70 percent retail space vacancy. According to an EP source from the commercial real estate sector, Aliyev was unable to recruit the promised tenants and ensure the full readiness of the mall.
In June 2022, Silpo closed. The interlocutor of the EP at Fozzy Group, the company that owns the brand, explains this decision by the unsuccessful location of the store. “Supermarket efficiency was low“, says the source.
Chernitsky explains the unsuccessful launch of the mall by the capriciousness of the capital’s consumer. “We did focus groups with the locals, they wanted a supermarket. Launched Silpo. When the novelty effect wore off, people wanted IKEA. Used to IKEA – wanted Zara and H&M”, he says.
The management of the mall responded to tenants’ complaints about insufficient traffic with discounts of up to 80%. Aliyev says that Lavina Mall was also not completely filled with tenants at first, but gradually the situation changed. He assures that he would also have brought Blockbuster Mall to one hundred percent occupancy, but did not have time: he took operational management Alexander Spector.
Competition between Epicenter and Geregam
The absence of a plan “B” is not in Aliyev’s style. In a conversation with EP, he explained his strategy for returning to the “big game”.
In 2021, Aliyev announced a plan to launch the Building Mall network of hardware stores. They wanted to build together with shopping centers. According to the new plan, the construction of building supermarkets will precede the construction of the malls themselves.
“We will build premises from quickly assembled structures, launch the Building Mall and they will immediately give us a cash flow. With these funds we will complete the construction of the shopping center“, – says Aliyev.
The monopoly in the construction hypermarket market is the Epicenter network of Alexander and Galina Gereg. Neither the domestic Novaya Liniya and Oldie, nor the foreign ones Leroy Merlin, OBI and Praktiker could compete with them.
Aliyev is not afraid of competition with Geregami. According to him, the land plots he owns are located in better places than those of Epicenter.
“Proximity to the metro is the basis of success. Shops and malls near metro stations will always have more customers than others. If the outlet is located 100 meters further, no one will reach it,” Aliyev is sure.
The Swedish company IKEA gave preliminary consent to the partnership to develop a network of such stores. “We told IKEA representatives that we have an idea to make a DIY format (do it yourself — EP). According to the locations that we proposed, they confirmed that they would go with us, ”said Chernitsky.
True, Aliyev will have to start the project on his own. According to Chernitsky, the Swedes will not return to Ukraine until the end of martial law. So far, IKEA continues to pay rent for a space in Blockbuster Mall.
Calm before the storm at Vagif Aliyev
Aliyev does not look like a businessman who is preparing to wind down his business. At the end of the conversation with the EP, one of the IT businessmen from the Forbes list visits his office in Parus. “I have business and real estate only in Ukraine. I live here, my children and grandchildren live here. I’m not going anywhere‘, says Aliyev.
According to Nikonov, investing in the construction of shopping centers before the end of the war is madness, but this will not stop Aliyev. “He is a talented guy, loves scope. I am sure that Vagif will find a partner and resume construction. But until the war is over, it’s not even worth talking about.“, – says Nikonov.
Aliyev’s optimism and burning eyes are transferred to his subordinates. When asked whether the planned projects will be implemented, Chernitsky replies: “If I didn’t see Aliyev’s confidence, I would say: “We’ll see”.
“He speaks so confidently that I trust him. He has a unique intuition. I came to Vagif with ideas that I got while studying at the MBA, but he persisted. I answered him that this contradicts the books, and he told me: “We will do as I say anyway.” And it worked“, – recalls the head of “Mandarin Plaza”.
Aliyev believes in Ukraine’s quick victory in the war and rapid economic growth. The capital will be especially attractive for investment. “People from the regions will always go to Kyiv, it will grow, there will always be money and work here. The main Western investments will flow here after the victory, ”the businessman is sure.
Chernitsky expects that the attendance of shopping and entertainment centers will grow by tens of percent, including due to foreign guests. “The expediency of building a mall is now higher than before the war. There will be no problem with funds. New world banks will appear,” Chernitsky is convinced.
Aliyev is going to strengthen his status as the capital’s “king of square meters” thanks to the quality and scale of the projects. “If I wanted to earn money here and now, I would build housing. For me, in business, the main thing is not profit, but “length”. My objects will live for a hundred years because they are built in the best places.‘ he says.
The developer says that the belief of some market participants that an increase in the number of shopping and entertainment centers will lead to a uniform decrease in the attendance of these establishments and high vacancy of rental space is erroneous.
“If my ten are added to the conditional one hundred malls in Kyiv, then there will be not one hundred and ten. Small shopping centers will go into oblivion. People will always go only to the centers near the metro: “Gulliver”, “Pyramid”, “Dream Town” and my“, – sums up Aliyev.
Alexander Kolesnichenko, translation Skeleton.Info
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