Cozy Crimean condos sell to the well-heeled at $750 per square meter
Few businesses from outside the capital region have expanded as quickly as the Consol construction company. In eight years, Consol has built itself from the ground up into one of the country’s largest residential construction firms.
When Natalia Pavlenko, Consol’s marketing manager, joined the Simferopol-based company it had 30 employees. That was in 1994, one year after it was founded by Vladimir Konstantinov, a businessman with experience in residential construction.
Today, Consol employs 5,000 people and builds homes in Russia and throughout Ukraine.
The success Consol has found has come without the state support enjoyed by many of its competitors in the construction industry.
As a start-up, the company leased the equipment and machinery it needed from a state-owned construction materials firm. Today, it not only owns most of its own equipment, it’s been buying its suppliers, including a gravel quarry and a reinforced-concrete factory.
Pavlenko says that one reason Consol has grown so quickly is that it has never been picky about work; it does whatever jobs are available. It was the subcontractor on a recent project to remodel the Simferopol railway station. It built municipal buildings, offices and even garages when it first came to Moscow.
But Consol’s core business is building residential housing. The firm’s construction sites stretch from Crimea throughout Ukraine’s six biggest cities and on to Moscow.
In Crimea, Consol is cashing in on the peninsula’s beauty, building vacation homes for urban dwellers affluent enough to escape for brief periods. The firm has in the last two years seen a massive influx of interest in its new housing on the Black Sea coast.
Pavlenko said Crimea’s resurgent popularity has brought a growing number of clients to the company after a period of uncertainty following the regional financial crisis of 1998.
“In 1998 we weren’t sure whether it was worth building on the coast at all,” said Pavlenko. “But then it started to boom, and Muscovites began buying up everything.”
Crimea’s Tourism Ministry says that 3.25 million people visited the republic during the first eight months of last year, up 20 percent from the same period in 1999.
The drive to build in Crimea has been taken over by wealthy customers from Kyiv. Pavlenko said Kyivans snap up about half of the company’s new apartments on the peninsula’s coast. The rest are purchased by Russians, other Ukrainians and by foreigners, notably the Japanese.
The company has built units in Yalta, Alushta, Partenit and Nikita. Apartments sell for up to $750 per square meter. By contrast, prices in Simferopol, just an hour’s drive from the sea, can be as low as $130 per square meter.
Pavlenko said many buyers fly to the seaside for weekends year-round to use their apartments.
Volodymyr Yasynsky, who heads Consol’s representative office in Kyiv, said his firm contracts with Kyiv design institutes to do the initial work on new projects, then uses the designs to attract funds from investors to finance the work.
All Consol apartment buildings feature parking lots, security and independent heating and water systems.
The company’s sales are providing handsome returns. Pavlenko said a square meter in the company’s building on Kyiv’s Dmytryivska street, next to Ploshcha Peremohy, for instance, sells at $420 to $550 per square meter – with buyers who pay before the project is completed getting discounts.
A two-room unit (living-room and bedroom) comes to about $40,000, Pavlenko said.
Most of the people who buy Kyiv property are businessmen, she said, and half come from outside Kyiv. Many Ukrainian firms based outside the capital locate their Kyiv representative offices in the flats; others find it cheaper to buy an apartment than to put their employees up in Kyiv’s overpriced hotels, Pavlenko said.
Despite its rapid growth, Consol still has a long way to go to catch up with industry leaders like state-owned Kyivmiskbud. Kyivmiskbud posted a profit of Hr 41 million in 1999, making it Ukraine’s 59th most profitable company. Its turnover exceeded half a billion hryvna in 1999.
Ukraine still lags behind all of its neighbors in the region in per capita residential construction. According to Business Central Europe magazine, Ukraine completed 1.4 dwellings per 1,000 people in 1998 as compared to 2.6 and 3.3 homes per 1,000 people built in Russia and Slovenia, respectively. The data suggests there is a lot of room for expansion.
That bodes well for Consol, which has seen its sales in Ukraine plummet since 1998. According to Pavlenko, the company sold 128,000 square meters of residential space last year, down from 200,000 square meters in 1998.
While she said that the Simferopol railway project diverted the company’s focus temporarily away from its residential business, the poor economy also has to take some of the blame. In the wake of the financial crisis, many Ukrainians began to find new housing out of reach, opting for cheaper used flats instead.
A brand-new two-room Consol apartment in Kyiv’s Lukyanivka district, for instance, sells for $36,000. That’s about 70 percent more than an average two-room pad in the area costs on the resale market, according to the Blagovest real estate agency.
