The Bilshovyk machinery plant makes developers drool and it’s about to be sold. However, the property may be more trouble than it’s worth.
The State Property Fund will put the plant up for auction at a starting price of $51 million on Oct. 27. The plant now barely operates and is $25 million in debt.
Yet some believe the market price, in a fair sale, could easily be triple the starting price. Standing on 35 hectares at the crossroads of busy transport arteries leading to Kyiv’s main street Kreshchatyk, the real estate looks promising.
The 650,000–750,000 square meter area can be used to build residential property, offices, hotels, hospitals or a fitness center, according to Olexander Nosachenko, CEO of Colliers real estate consultancy.
But as the date of the auction approaches, tensions are running high. Potential buyers dream of valuable land, but the plot seems to deter investors rather than attract them.
The State Property Fund reported that more than 15 potential investors showed interest in this asset, but experts believe the actual number is less than five.
See also: Sergii Leshchenko’s column — “In sales of state assets, a long history of scams”
Those who gave up on the auction all have one great fear: being stuck in courtrooms for many years, struggling with the “poison pills” injected into the asset several years ago.
“Nobody knows what they are buying and with whom they are going into war,” said Brian Best, head of the investment banking department at Dragon Capital. “It’s not worth it.”
The scheme
In 2019, five workshops on the property, taking up 6,300 square meters, were illegally sold to some private companies and leased out until 2035.
Those companies are linked to tycoon and former politician Vasyl Khmelnytsky and his business partner Andriy Ivanov, Liga reported.
The workshops are not in one place but scattered throughout the territory, making it impossible to build contiguously.
Khmelnytsky did not reply to the Kyiv Post’s request for comment by publication time.
The Supreme Court ruled in February that the sale of these workshops was illegal.
A lower court then ruled to return these workshops to state control. But on Oct. 12, the Court of Appeals overturned this ruling. This scared off potential buyers, making it almost impossible to sell the plant at its actual market price.
“I don’t know of a single investor who could easily spend such an amount of money and get unresolved issues,” Nosachenko said. He predicts that the price will not exceed $65 million, perhaps half what the property is worth.
Oleksiy Feliv, a managing partner at the law firm Integrites agreed: “It’s a distressed asset, which will be sold at a lower price.”
On Oct. 20, just a week before the auction, the Court of Appeals reversed its decision, claiming that “new circumstances” have arisen. Oct. 20 also happened to have been the last day for potential buyers to apply to participate.
This decision means too little, too late, experts said.
“This fundamentally does not change anything,” said Nosachenko. For the auction to work, the fund first has to clean up the legal part of the issue, go through appeals and cassation and secure a final legal victory. Only after that can the auction be held.”
Nosachenko added that he was surprised how the “country’s top officials did not pay any attention to this process,” knowing Bilshovyk’s strategic location in Kyiv.
Dmytro Sennychenko, head of the State Property Fund, does not see any serious legal issues with the Bilshovyk plant as the Supreme Court already decided the case, and the auction will take place on time.
“We are saying to all potential private investors that there is nothing to be afraid of,” Sennychenko said. “The one who wins the auction will calmly bring these court cases to their logical conclusion.”
However, the state ownership registry shows that those problematic workshops do not officially belong to the fund, according to Feliv.
“It raises questions from potential buyers,” he said. Feliv believes the fund has two options: to sell the property as fast as possible at a low price or sell it later at a higher one. “They need to weigh this decision,” he said.
‘Ticket to war’
Industry experts concurred: only one market player can benefit from this manufactured chaos — a Khmelnytsky-Ivanov duet.
A source close to the deal, who asked not to be named to avoid retaliation, told the Kyiv Post that, in reality, there is not a single real participant in the upcoming auction.
“They either are companies related directly to Khmelnytsky and Ivanov or have close business relations with them,” the source said.
Big Kyiv developers, including IntergalBud, Saga development, or DIM, refused to comment on the Bilshovyk privatization. Another big Kyiv market player, KAN development, was even “not even interested in the plant due to its location.”
Kyiv Post owner Adnan Kivan, whose construction company KADORR was among potential investors planning to pour into the project up to $740 million after the auction, also decided to step out of the auction.
“We can’t buy and then spend years in courts. This will be a ticket to a war,” he said. “The state must clean this object before putting it into the auction. Otherwise, it’s not an auction, but rather a dishonest business. It is very bad. It is not fair.”
