The Economy of Ukraine                                              A number of foreign companies decided to leave
                                                                    Ukraine and focus on their native markets with
In 1H2008 the growth of companies’ profitability                    substantially lower risks, yet with respectively lower
in real and financial sectors and, of course, the                   return on their investment.
expansion of investment processes accompanied
positive dynamics of economy growth. According                      Nominal income of the population increased by
to the State Statistics Committee of Ukraine, the                   40.1% and real income by 11.4% year on year.
total volume of foreign direct investment in Ukraine,               Nominal wages grew by 18.6 % and real wages
as at January 1, 2009 reached $35.7 bn, being 20.9%                 decreased by 3% year on year. In the Kiev region,
more than the investment volume in the beginning                    real average wages increased by 0.6%. Related to
of 2008.                                                            the dollar the average fell by 21.7% to $259.8 in 2008.

       Volume of Foreign Direct Investment in Ukraine,              According to the State Statistics Committee of
   Progressive Total from the Beginning of Investment ($m)          Ukraine, exports increased by 35.9% and imports
                                                                    by 41.1% and accounted for $67 bn and $85.5 bn
                                                                    respectively in 2008. The largest export volumes
                                                                    were directed to the Russian Federation, Turkey,
                                                                    Italy, Poland, Belarus, USA, Germany. Among top
                                                                    countries that imported goods to Ukraine there were
                                                                    the Russian Federation, Germany, Turkmenistan,
                                                                    China, Poland, Kazakhstan and Belarus.
                                                                                       Foreign Trade Figures, $ billion

                 Source: State Statistics Committee of Ukraine

The major investor countries in the Ukrainian
economy were: Cyprus ($76.8 m), Germany
($63.9 m), the Netherlands ($31.8 m), Austria
($24.5 m), Great Britain ($22.7 m).
In 2008, GDP growth was 2.1% (in the first half year
6.5%), and inflation was 22.3%. A decline in GDP
growth was caused by a sharp decline in industrial                                        Source: State Statistics Committee of Ukraine
output (minus 3%), fall in demand for Ukrainian
metallurgical and chemical production. The state                    2008 gave a 18.6% rise of the legal entities’ retail
budget for 2009 supposed GDP growth to be about                     turnover in goods, which expanded to UAH 44.9 bn.
0,4%, but International Monetary Found forecasted
this index to reach 3%.                                             Kiev region enjoyed a 19.5% rise.

             Basic Macroeconomic Indicators                                                   Key Ukraine Statistics

                                                                                                2007       2008        2009*       2010*
                                                                    Population, mln.            46.7       46.4         45.9*       45.6*
                                                                    GDP, mln. UAH              720,731    949,864      956,427*   1,117,992*
                                                                    Exchange Rate
                                                                                                5.05       5.26         7.67
                                                                    Exchange Rate
                                                                                                6.91        7.70        10.31
                                                                    NBU gold and foreign
                                                                                                32.5       31.5         24.9*       24.3*
                                                                    currency reserves, $bn.

                                                                    * consensus forecast of Ministry of Economics of Ukraine (July 2009)
                                                                                                                           Source: NBU

                                                                    On July 31, 2009 the international rating agency,
                                       * Forecast of IMF for 2010   Standard & Poor's, improved the sovereign rate
                 Source: State Statistics Committee of Ukraine
                                                                    of Ukraine from negative assessment to positive
Being the result of world global economic crisis the                and also reaffirmed the level CCC+/C for long
change of economy development tendencies in                         and short term ratings on commitments in foreign
2H2008 caused the slowdown of business activity.                    currency.

Brief Market Overview

In 2008 the Ukrainian warehouse property market           The most part of the market was occupied by
saw a few storage facilities put into operation, yet      unprofessional storage facilities of Class C and D
they are of high quality and in line with international
standards. Global economic crises influence the                Total Supply of Warehouse Premises in Kiev region, m2
plans of the developers and most of the planned for
opening logistic premises in 2009 were postponed.
The prognoses of the developers are that the
situation will be stabilized and new wave of business
activity is expected in 2010 2011.

In 2008 the average rates of rental in warehouse real
estate rose by 0,5% in Western European countries.
High level of tenants demand and deficit of
qualitative supply caused increasing of these rates
by 25% during the period in Ukraine.

The majority of modern warehouse facilities
are located in the Kiev region, however there is
an interest to develop projects in the regional
centres of Ukraine. The main consideration was
                                                          * Forecast                               Source: DEOL Partners
given to Odesa, Kharkiv, Donetsk and Lviv as the
Pan European (#3 Berlin Kiev, #5 Trieste Lviv, #9
Helsinki Alexandroupolis) and Eurasian (Europe            with a total area of about 950,000 m2; in the market
Asia,    Europe Caucasus Asia,     Gdansk Odesa)          structure they occupied up to 80%, Class A 8%,
transportation passes go through them.                    Class B 12%.

Positive issue for market development was
the acceptance of Law “On Concessions for
the Construction and Operation of Roads” by                            Distribution of Warehouses by Classes
Verkhovna Rada in January 2009.


In the beginning of 2009 there were over 250,000 m2
of professional warehouse premises under
construction and more than 3 million m2 – at the
planning phase in Kiev region. Thus unsatisfied
demand for professional storage facilities was
estimated at the level of about 700,000 m2, given
a shortfall of suitable land plots, absence of off line
communication system and because of unclear
legal status.

During 2008, 10 warehouse complexes with a
total area of 356,936 m2 were commissioned in                                                      Source: DEOL Partners
the Kiev region. An increase of stock in 2008 was
75% compared with 2007. By the end of 2009 the            In 2008, the largest Class A warehouse complex in
total area of warehouse premises of Class A and B         Ukraine is MLP Chaika of 114,000 m2 was put into
reached 726,397 m2.                                       operation.

Development companies GLD Invest Group                   Out of 150,000 m2 of warehouse facilities planned to
completed the construction of West Gate Logistic         be commissioned in 2009, 49,000 m2 were already
of 78,000 m2 and Giffels – Komodor Logisitcs Park of     pre let in 2008.
66,690 m2 respectively.

                             Warehouse Complexes Commissioned in 2008 2009

 #                  Name                     Area, m2                          Location
 1   Komodor Logistics Park (Giffels)          66,960   Kalinovka, Zhytomyr highway, 30 km from Kiev
 2   West Gate Logistic                        78,000   Zhytomyr highway, 2 km from Kiev
 3   MLP Chaika (2nd and 3rd phases)           71,000   Chaiky, Zhytomyr highway, 1 km from Kiev
 4   Kopylov Logistics Park (Ghelamco)         27,576   Kopylov, Zhytomyr highway, 25 km from Kiev
 5   Roshen                                    53,000   Yagotinskiy district
 6   Prommash Brovary                          13,800   Brovary, 134 Kutuzova St., 17 km from Kiev
 7   Metal kholding                             4,800   Kiev, 9 Lugova St.
 8   Plazma Logistics                          20,000   Borispol highway, Velyka Oleksandrivka
 9   Customs terminal                           7,800   Kiev, Sofievska Borschagivka
 10 Mirage (2nd and 3rd phases)                14,000   Gostomel, Warsaw highway, 10 and 15 km from Kiev
 11 BF storehouse                              51,500   Borispol, Kiev Kharkov highway
 12 Biokon (1st phase)                         10,000   Velyka Oleksandrivka, Borispol highway

                                                                                            Source: DEOL Partners

Demand                                                                                               MLP Chaika

In 1H2008, demand for high quality warehouse
facilities in Kiev region exceeded supply 2 3
times and amounted to 600 700 m2, demand for
unprofessional buildings was up to 2 million m2.
Pre lease agreements were signed 1 1,5 year
before building completion. By the end of 2008
total demand for high quality warehouse premises
reduced to 400,000 m2 compared with forecast
600,000 m2.

Most enquiries for space in warehouse complexes
were still submitted by logistics companies and
chain retail operators. The space of 1,000 – 3,000 m2
was of the greatest interest.

                                 INDUSTRIAL REAL ESTATE MARKET OBJECTS

           Kovel            Belarus                                                                   Chernihiv


                             13          29
                                    9                                                   36 38             17

             34                                                                       12

                                            28                                                  31
                                                                                        27           41
           19          20         21        16
                                                   26                                      22

                                                                                           18        35             24

                            11         33



                   Odesa                            Dnipropetrovsk
                                                                     Moldova                     Black Sea

                                                           Logistics complexes:    < 20,000 m2 20,000 40,000 m2   > 40,000 m2



                                                     Available logistics complexes

 1   FIM Centre                                 11 Asnova                                             21 MLP Chaika
 2   Kuehne&Nagel                               12 Omega Invest                                       22 MLP Nesterovka
 3   Komora S                                   13 Andakta                                            23 Logistics Park "Kopylov"
 4   Raben                                      14 East Gate Logistic                                 24 Roshen
 5                                              15 International Container Transport 25 Prommash Brovary
 6   Logistics Complexes UVK                    16 Asstra                                             26 Metal Holding
 7                                              17 Logistic Park East I                               27 Plazma Logistic
 8   Logistics Complex KMP                      18 Kviza (Retail Group)                               28 Customs Terminal
 9   Mirazh (1st Phase)                         19 Logistics Park "Komodor"                           29 Mirazh (2nd & 3rd Phases)
10 Logistics Complex HCM                        20 West Gate Logistic                                 30 BF Warehouse (1st Phase)
                                                                                                           Logistics Centre "Biokon"
                                                                                                           (1st Phase)

                                                     Planned logistics complexes

32 Alacor Business Park                       36 Terminal Brovary                                40 Logistics Centre
33 Logistics Centre                           37 Logistics Centre ММК                            41 FIM Service
34 Logistics Centre                           38 Universal Logistic Park
35 Kviza (Retail Group) (2nd Phase) 39 Logistics Complex Impeco

         Breakdown of Logistics Conplexes by Amount and Area Putted into Operation in 2006 2008

                                2                     4                    6                     8                  10                    12

  2008            2                      2                       2             1                           4

  2007            2                      2                  1         1        1

  2006       1         1                 2                       2                          3

             less than 10,000       10,000 -15,000        15,000 -20,000   20,000 -30,000       30,000 -40,000   40,000 -120,000   (m2)

                                                                                                                      Source: DEOL Partners

Rental Rates and Vacancies                                    Investment and Development

During 1H2008 rental rates for high quality                   The market saw two deals on the sale of logistic
warehouse facilities were not subject to changes.             complexes in 2008.
The only exception was warehouse facilities within
Kiev, where rental rates grew by 15 20% because of            Early in the year GLD Invest Group sold its logistic
large unsatisfied demand and a lack of new supply.            complex East Gate Logistic to Akron Group (Austria)
                                                              with a total area of 40,000 m2. The sum of the deal
                                                              was €35 m. In 1H2008, the investment fund Europa
The cost of lease for logistic complexes in Kiev              Emerging Europe Fund acquired Logistic Park East I
considerably unperformed many European                        (24,000 m2) developed by Aladdin Group.
countries due to shortage of high quality
warehouse facilities, high cost of building process                                                East Gate Logistic
and construction materials, and significant delays
in the launch of the planned competing projects.
In 2008, rental rates in professional warehouse
complexes (Classes A and B) were $12 24/m2/
month depending on the location (excluding VAT
and operational expenses, which differ within a
range of $1,5 2,5/m2, in unprofessional – $7 10/
m2). At the end of 2008 rental rates for professional
warehouse facilities made up $9 12/m2 (excluding
VAT). In the beginning of 2009, they were 50 65 UAH/
month (excluding VAT), the contract being signed
for one year. This figure is stated in UAH because of
the drastic foreign exchange rate fluctuations.

By the year’s end the vacancy level reached 20%.
Given the common tendencies of falling demand,
a share of vacant premises will remain considerable.
This will result in a fall in rental rates in the short and
middle term future.                                           In 2H2008, the tendency of active offering of the
                                                              warehouse property projects was commonly seen
The tendency of no pegging to the US dollar is                as the Ukrainian companies tried to focus on profile
common. The services of the logistic operators are            projects. Akron Group purchased from Eurokitty
quoted in the national currency, and they motion              Ukraine and investment company, Vicus a project
alterations to the lease agreements asking to                 of Baltic Logistic Park on a 12 ha plot adjacent to
charge the payments in the national currency. The             the Brovary Borispil highway. The area of warehouse
landlords agree to fix prices in the national currency        facilities in the complex will amount to 43,000 m2.
for high quality premises for a period of no more
than 1 calendar year, if the matter concerns either           The Ukrainian developers constitute one half of
new agreements under negotiation process or in                the projects announced to be commissioned in
the segment of low quality storage buildings.                 2009 2010. Such a large share of local developers is
                                                              driven by their access to the land banks.

Baltic Logistic Park
                                                         In the short term future, we expect keen
                                                         development of the projects of build to suit format
                                                         and smaller portion of the projects of build to lease

                                                         In the mid term future, the warehouse property
                                                         market participants may be faced with a sharp
                                                         deficit of new supply and relative rise in rental rates
                                                         following the stabilization of the economic situation.

                                                         The market will be saturated by 2012, whereupon
                                                         the competition among operators in the logistic
                                                         services market will evolve.

                                                         Because of a shift of the industrial premises into Kiev
                                                         30 km area, by 2009 the supply within the capital
                                                         will drop largely. This will trigger a growth of demand
The payback period of logistic parks is 2 3 years less   for premises far beyond the city.
than other types of commercial real estate. The key
success factors include good location, convenient        The warehouse properties of high quality will
access roads for trucks and proximity to the railway     emerge in the regions, primarily adjacent to the
branches.                                                international transport corridors.

                                                     ANNEX #3

                                              Prepared by DEOL Partners

                                         I. Available logistics complexes

#    Name of the Object                   Area, m2    Location                                          Year

                                                      Petropavlovskaya Borschagovka, E 40 Highway,
1    FIM Centre                            27,240                                                      2006
                                                      3 km from Kiev
2    Kuehne&Nagel                          18,500     Gostomel, E 373 Highway (M 07)                   2006
3    Komora S                              50,000     Kalinovka, Odessa Highway, 18 km from Kiev       2006
                                                      Velyka Dymerka, 150 Brovarskaya St.,
4    Raben                                 40,000                                                      2006
                                                      12 km from Kiev
5    Logistics Complexes UVK               46,000     Obukhov, Obukhov Highway, 30 km from Kiev        2006
6    Logistics Complex KMP                 9,000      Kalinovka, Odessa Highway                        2006
7    Mirazh(1st Phase)                     15,000     Gostomel, Varshava Highway, 12 km from Kiev      2006
8    Logistics Complex HCM                 10,000     Obukhov, Obukhov Highway, 30 km from Kiev        2006
9    Asnova                                22,000     Kalinovka, Odessa Highway, 20 km from Kiev       2006
10   Omega Invest                          15,400     Brovary, 27 Krasnova St., 15 km from Kiev        2007
11   Andakta                               5,200      Gostomel, 13 km from Kiev                        2007
12   East Gate Logistics                   40,000     Borispol, Kharkov Highway, 18 km from Kiev       2007
13   International Container Transport     8,500      Vishnevoe, Kievskaya St., 2.8 km from Kiev       2007
14   Asstra                                10,000     Kiev, Sofievskaya Borschagovka, 2 km from Kiev   2007
                                                      Krasilovka, Brovary region, 4 Dymerskiy lane,
15   Logistics Park East I                 21,525                                                      2007
                                                      18 km from Kiev
16   Kviza (Retail Group)                  10,000     Martusovka, 13 km from Kiev                      2007
17   Logistics Park Komodor                66,960     Kalinovka, Zhitomir Highway, 30 km from Kiev     2008
18   West Gate Logistics                   95,021     Zhitomir Highway, 2 km from Kiev                 2008
19   MLP Chaika                           114,000     Chaiki, Zhitomir Highway, 1 km from Kiev         2008
20   Logistics Park "Kopylov"              27,576     Kopylov, Zhitomir Highway, 25 km from Kiev       2008
21   Roshen                                60,000     Yagotinskiy region                               2008
22   Prommash Brovary                      13,800     Brovary, 134 Kutuzova St., 17 km from Kiev       2008
23   Metal Holding                         4,800      Kiev, 9 Lugovaya St.                             2008
24   Plazma Logistic                       20,000     Bolshaya Aleksandrovka, Borispol Highway         2008
25   Customs Terminal                      7,800      Kiev, Sofievskaya Borschagovka                   2008
               nd    rd
26   Mirazh (2 & 3 Phases)                 14,000     Gostomel, Varshava Highway, 10 & 15 km from Kiev 2008
27   BF Warehouse (1st Phase)              51,500     Borispol, Kharkov Highway                        2009
     Logistics Centre "Biokon"
28                                         10,000     Bolshaya Aleksandrovka, Borispol Highway         2009
     (1st Phase)
     Warehouse for fresh
29                                         8,500      Borispol, Kharkov Highway                        2009
     and frozen products

                                II. Planned logistics complexes

#    Name of the Object         Area, m2   Location                                         Year

30   Ice Terminal                 6,400    Velyka Dymerka, 12 km from Kiev                 2009
31   Brovary Logistics Centre    42,830    Brovary, 11 km from Kiev                        2009
32   Logistics Complex "ММК"     32,620    Brovary, 1 Proektnaya St., 10 km from Kiev      2009
33   Universal Logistic Park     76,189    Brovary, 61 Kutuzova St., 12 km from Kiev       2009
                                           Velyka Dymerka, 150 Brovarskaya St.,
34   Raben (4th Phase)           10,000                                                    2009
                                           12 km from Kiev
35   Logistics Complex Impeco     9,570    Gostomel, Hghiway E 373 (M 07)                  2009
36   Kviza (2nd Phase)           190,000   Martusovka, Borispol Highway, 13 km from Kiev   2010
37   Logistics Centre            154,335   Vasilkov, 400 m from Kiev Odessa Highway        2010
38   Logistics Centre            116,084   Zhitomir Highway, 30 km from Kiev               2010
39   Alacor Business Park        120,000   Obukhov Highway                                 2010
40   Logistics Centre            77,500    Vyshgorod, Kiev Ovruch Highway                  2010
                                           Bolshaya Aleksandrovka, Borispol Highway,
41   FIM Service                 165,000                                                   2011
                                           12 km from Kiev
                    Local Knowledge with International
                          Experience in Ukraine

DEOL Partners is one of the leading companies in the Ukrainian real estate market. Our vision: to be the
  most innovative and progressive real estate company, constantly on the lookout for new opportunities
and helping to open up the market’s most promising niches. As a result, our real estate projects become
                                             stand out as leaders in their particular segments.

        DEOL Partners manages the largest investment projects on the Ukrainian market and realizes
         development of commercial real estate in partnership with leading international investors and
   developers. Our latest projects include Kyiv Airport City, Mall of Ukraine, Leonardo Business Centre,
                                                           Senator Apartments and others.

       Investment Management at DEOL Partners is tailored to match the specific requirements of the
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    particular, DEOL Partners works in partnership with international investment funds Investrong, Atria
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This report is intended as general market overview and based upon information in our possession which we believe to be reliable. While every effort has been made to ensure
its accuracy, DEOL Partners takes no responsibility for any loss suffered by reason of the incorrectness of this report. The information presented in this report may not be
published in whole or in part, in any form, in any media without the prior written permission of DEOL Partners.

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