Arkada bank office sold due to corruption
On that morning at 9.55 am, with the sound of sirens, the Deposit Guarantee Fund started selling the office space of the bankrupt “Arcada” and surprisingly succeeded. The story of when, to whom, and for how much the building was sold is about how, in addition to Ukrainians who are bravely fighting for their country at great personal risk, there are also Ukrainians who are equally determined to enrich themselves, writes Yulia Samayeva, ZN.
So what is problematic about the sale of the Arcada office?
The building on Olginskaya Street, in the heart of the capital, is well-known and easily recognizable – a valuable asset in the commercial real estate market: it's situated close to the upper exit of the underground station “Khreshchatyk”, in immediate proximity to the government quarter, and offers more than 14 thousand square meters of office space. It is evident that the demand and price for such a valuable asset should be high. However, this is not the case in Ukraine.
Bank “Arcada” was declared insolvent in the summer of 2020, and its property, as per the law, ended up in the Deposit Guarantee Fund, which has the authority to sell it to cover the losses. However, the building on Olginska Street, the bank’s main asset (representing about 30% of its capital), did not immediately enter the fund. Prior to the liquidation, it was removed from the bank (as collateral for a loan), transferring ownership to Oleg Nelin, who subsequently mortgaged the building to Taras Budeynoy. Both Nelin and Budeynoy are associated with former Yanukovych-era Ecology Minister and owner of the gas extraction company Burisma, Mykola Zlochevsky, who is currently under investigation in the UAE. Nelin has been connected with Zlochevsky since the 2000s, serving as an employee, manager, and part-owner in Zlochevsky’s father’s company. In short, there were numerous connections. Budeyny is one of Burisma’s top officials and a long-time assistant to the fugitive minister during his time as a deputy.
However, Zlochevsky's initial attempt to take over the main “arcade” asset turned out to be rather clumsy and surprisingly unsuccessful. One could have written about the Fund’s heroic legal battle to return the valuable asset to the State, if not for subsequent events. So let us simply state the fact that the fund did reclaim 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.
Was it because of the price? No, it was quite reasonable for the market at that time. Instead, it was the prospect of a struggle for the asset with Zlochevsky. Usually, when it comes to such unique properties, there are no surprise contenders among potential buyers; moreover, those particularly disagreeable ones openly share their interest in the asset and their very serious intentions. It's almost like a staring contest before a boxing match, except the one who looks away first doesn't even step into the ring.
Additionally, the legal complications regarding the asset's return, which persisted until October of this year, were daunting. The courts are costly and burdensome for all potential buyers except for those who can halt the proceedings with a phone call.
The Foundation understood this, but they persistently put the building up for sale even though no one expressed interest. According to the procedure, if there are no buyers and the property cannot be sold, the only recourse is a Dutch auction. In a typical auction, the price rises, but in a Dutch auction, the price falls instead.
They are supposed to sell unwanted items at a Dutch auction, but in reality, even the most attractive assets can end up there, and someone may want to buy them at a very low price. This is what happened with a building on Olginska Street, which started at one billion hryvnias on 10 October and dropped to 350 million during a short bidding period.
The office center of 14 thousand sq.m. in Kyiv was bought 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 might think there's no market because the country is at war and investors are quiet. Yes, it's the worst time for investment. But why not wait for a better time? Even now, during the war, a square meter in the unfinished “Arcada” housing estate on the side of Kharkiv massif costs almost 2 thousand dollars. And now the commercial real estate in the center, although there is no market, is not cheaper than USD 3.5 thousand per meter.
You might argue it's better not to burden taxpayers with this asset, as the maintenance will be costly. But the asset is pretty self-sufficient. The building is at least two thirds full of tenants and generates 2.5 million UAH a month, which could be enough for maintenance and waiting for better times.
You might say it's better to put some money into the budget than nothing. However, the choice was between a small amount and a large amount, and the option “nothing” was deliberately forced upon us. Such an extraordinary asset could have not been sold at all, given its location and income, and the ease with which even an “inefficient state proprietor” could manage it. But this option was not even considered; they considered selling it for next to nothing.
In total, 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 accompany the first firm at the auction. The third is a mysterious Sistemoylinengineering, the name of which suggests its distance from the real estate market. Most outside observers bet on the first firm, but it lost to Zlochevsky himself.
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. The ultimate beneficiaries of these companies are Karina Zlochevskaya and Anna Zlochevskaya, likely not just 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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