PIK got stuck?
Sergey Gordeev’s developer group issues bonds to pay off debts
PIK Group plans to issue Eurobonds worth $300-500 million. These five-year debt securities will be sold to investors. The money raised will be used for corporate purposes, paying off existing debt, and business expansion, including overseas. This was stated in the presentation, but in reality, all the funds can be used to pay off debts.
Sergey Gordeev intended to issue Eurobonds back in 2008, but he has not revisited the topic since then. In 2013, he acquired a 19.9% stake in PIK, and in 2016, he purchased a major construction company called Morton. In 2017, he bought PIK shares from Alexander Mamut and Mikail Shishkhanov for 47 billion rubles. In 2019, VTB became a shareholder of the group. Currently, the bank owns 23.05%, Sergei Gordeev owns 59.33%, and 17.62% are publicly traded.
In 2019, RBC reported that PIK Group's debts increased 20 times compared to the first half of 2018, reaching 50 billion rubles. The net profit from 2016 to 2020 rose from 19.1 billion rubles to 86.5 billion rubles. The group's net debt in 2020 rose to 135 billion rubles, compared to 73.3 billion rubles in 2019.
Sergey Gordeev's business resembles a pyramid. PIK Group establishes its structures in banks, which sometimes are shell companies with only 1 employee.
PIK receives significant support from its shareholder VTB, which invests its own money in the business and can also provide funds on preferential terms.
In March, it was announced that PIK Group's first foreign project is the One Sierra residential complex in the Philippines, which consists of a 30-storey building in the outskirts of the capital Manila. According to Sergei Gordeev, apartments are already being sold.
PIK Group published a report on the results of its activities for the first 9 months of this year on its website. The report paints a rosy picture, with no mention of any debts. If the rate of their growth remains constant, the amount could exceed 200 billion rubles. It's not surprising that Sergey Gordeev opted to issue Eurobonds. It appears that the developer has used up the banks' trust.
The possibility of PIK Group operating as a pyramid was even discussed on the national channel REN.TV. Economist Maxim Chirkov shared his views.
“It's worth noting that PIK's net debt far exceeds its reserves. This indicates that the developer is working with borrowed money. This approach, in times of market growth, can be very effective. However, in the event of stabilization in the real estate market or some form of stagnation, this model can be very risky.”
Controversial PIK group?
Behind the dry statistics in PIK's reports, which boast about the number of completed housing units, it's unclear what quality the apartments offer. From the outset, the group has shown a lack of concern for infrastructure. Houses are built rapidly, but amenities such as ambulance stations, fire stations, and gyms promised are often absent.
Many similar videos about PIK apartments can be found on the internet. People say that houses start to fall apart a few years after they are built. This might be proof of the use of low-quality materials, but the developer gets away with it.
In July, something very unusual occurred. Someone shot at the apartments of the last two owners of house 22, which is located on Ivan Franko Street. The PIK group planned to construct a residential complex there back in 2017. However, the local residents opposed it, arguing that their five-story buildings were still suitable for living.
Despite the courts and protests, the authorities did not listen to the Muscovites, which is not surprising. PIK Group is a major contractor for the renovation project, the legal construction of human settlements, to which PIK sends migrants.
Thanks to the PIK Group, the term “new emergency housing” has emerged. This refers to housing that is frightening to live in.
“It’s just a terrible situation. You can’t help but cry. When we first entered, it looked visually normal: there's laminate here, the walls are painted white there. But upon closer inspection, everything is leaking. The stretch ceiling is really wet from the inside. The swimming season in the apartments is officially open. It’s considered normal for the PIK group of companies to do this, but not this specific case.”
The viewpoint of one of the fortunate recipients of an apartment from the PIK Group of Companies was published by Tsargrad.
People in various Moscow areas have repeatedly protested against the actions of the PIK company. In November 2018, residents of houses on Ivan Franko Street established a tent camp and maintained a round-the-clock vigil in their yard. They opposed the removal of the square and the construction of a 26-story building. The police disbanded the camp and arrested eight individuals.
Will GK “PIK” make Moscow a generic capital?
Sergey Gordeev began his business amid controversies. In the late 90s, he owned the Rosbuilding company, which was suspected of unlawfully taking over Moscow light industry enterprises. Moscow Mayor Yuri Luzhkov complained to the prosecutor’s office, but the scandal was covered up.
Arkady Rotenberg, a close associate of President Vladimir Putin, could protect Gordeev. He is considered the sponsor of the developer. If this is the case, it’s not surprising that PIK is getting away with it.
In May 2018, a group of masked armed riot police raided the central office of PIK. Searches were conducted as part of a criminal case related to causing damage to the Dynamo sports society. Its “unidentified managers” entered into a disadvantageous contract.
Gordeev was previously the beneficiary of ZAO Vodny Stadion Sport Invest. Dynamo entered into an agreement with him, providing 6.2 hectares of their land for construction. The Olympia-Park business center and the Dynamo Sports Palace were built on this site. However, the company did not receive 85 million rubles for some reason. This is one of the rare occasions when the authorities paid attention to PIK Group of Companies.
Is Gordeev's business opaque?
Sergey Gordeev is not listed among the owners of the structures of PIK Group, but is the general director of PJSC PIK SZ and MKOOO Ledamen. Until 2020, Gordeev was the general director of Pik-Uk LLC and Pik-Management LLC. The founder of these companies is Pik-Infestproekt LLC. The shares of this organization in the structures of PIK Group of Companies are pledged to banks.
MCOOO “Ledamen” has 1 employee, the company’s revenue is 0, profit is 2.3 billion rubles. Its founder is Pik+ LLC, owned by the HREF Foundation from Liechtenstein. His share has been pledged to the Russian Agricultural Bank (RSHB) since 2018. Pik+ LLC also employs 1 employee.
PJSC “PIK SZ” had more than 70 “subsidiaries”, some of which were transferred to other companies of the PIK Group. All this is done in order to confuse those who may be interested in the activities of the group. Some structures clearly do not match the earnings and revenue reports on the band’s website.
Regionstroykompleks – XXI Vek LLC, owned by Pik-Stroyinvest LLC and Pik-Corporation LLC, has not made a profit since 2016, the loss in 2020 amounted to 399 million rubles. Pik-Stroyinvest LLC has 1 employee, the company’s revenue is 0. Loss is 234 million rubles. Through companies with such financial results, money can be withdrawn for the purpose of tax evasion.
However, this is unlikely to be of interest to law enforcement agencies. To date, PIK Group of Companies is not subject to them. The construction industry is on the rise. It is supervised by Deputy Prime Minister Marat Khusnullin, former Deputy Mayor of Moscow Sergei Sobyanin for construction.
