As CEO of the Seven Hills Group of Companies in Ukraine, Ari Schwartz has overseen to development of Kyiv’s prestige 1280-apartment Park Avenue residential complex for the past nine years. The project, which is now entering the final stage, has continued to expand in both size and scope despite often challenging market conditions, reflecting consistently strong levels of demand in the Ukrainian capital for high-end residential real estate. Mr. Schwartz spoke to Business Ukraine magazine about the challenges of meeting rising expectations among his Kyiv clientele, and why he remains convinced Ukraine is an attractive market for international developers as long as they are prepared to commit for the long-term.
How has the luxury segment of the Kyiv real estate market developed since you entered the market almost a decade ago?
I do not think there is a genuine luxury property market yet in Ukraine, but new and better projects are appearing in Kyiv on an almost daily basis. There is still a tendency among some developers to construct ordinary buildings before adding lots of additional marble then calling it luxury property. This is not my understanding of luxury real estate.
Until the crisis of 2008, high-end developers could sell whatever they built. People would buy apartments regardless of the specifications, and only then try to modify them to their personal tastes. This was never our approach. We try to meet each client’s specific needs and tailor the property to their requirements. The product should be convenient for the client, not for the developer. We regard all our clients are VIPs and try to let them know that they are very important to us.
I do not actually like my colleagues to refer to our properties as luxury apartments. They are standard apartments – the standard is high for the Kyiv market, but it is not luxury property in the global understanding of the term. The standard we offer in Ukraine is actually no higher than the quality we offer to customers in France or Hungary or any of the other markets where we are present. There is no reason for Ukrainian clients to accept a lower standard that their counterparts elsewhere in Europe.
How have customer expectations changed since you entered the Ukrainian real estate market?
Any babushka will tell you that now is a bad time to sell real estate and a good time to buy. It is a buyers’ market and clients are getting smarter. They are demanding better quality in every aspect of the property. I would say that clients today are twice as demanding as they were before 2008. In those days, there was excess demand and developers knew that they could offload everything they produced. Clients today are looking to maximize what they get for their investment. Kyiv clients have generally travelled extensively and have seen a lot of the world. They want the same quality in their own lives, whether it is a matter of good lifts or bigger windows or better interior design. Expectations are becoming higher and higher, which puts pressure on us to make sure our customers are satisfied. When we first tried to include larger windows in our apartment designs, we were told that the centralized Kyiv heating systems would not be sufficient to heat apartments with such big windows. To solve the problem, we installed a state-of-the-art boiler system of our own which is now a showcase feature regularly visited by Kyiv City Administration officials. There was no other option for us, because the kind of people we seek to attract are no longer prepared to accept apartments without such features. I welcome this trend towards a more informed Kyiv public, because it creates genuine competition and forces other developers to meet the high standards we have set for ourselves.
Has the Kyiv real estate market bottomed out yet or do you anticipate further drops?
We are no longer at the bottom – from our perspective, the market had already bottomed out in 2014. We are now definitely on an upward trend. Immediately after the revolution in early 2014, there was a noticeable jump in demand. We are still moving up and the market is growing.
How have the past two years of political and economic instability affected your business?
We previously imported a large proportion of our construction materials from around the world, but over the past two years, I have taken the decision to buy as much as we can inside Ukraine in order to support the local economy and keep the money inside Ukraine. Wherever we have been able to find world class products, we have switched to Ukrainian suppliers. As an initial step, we paid for experts from an Israeli company that produced doors for Park Avenue to visit Lviv. They worked with a Lviv manufacturer to produce high-quality doors that met our standards. After this initial success, we began switching to local Ukrainian suppliers whenever possible.
What would your message be to any international developers looking to enter the Ukrainian real estate market?
There is no easy or fast money to be made in Ukraine. But if you want to make money in the long term and are ready to integrate yourself into the local culture, this is the place to be. This is definitely one of the best countries in the region for foreigners to invest in and do business in. We have had so many opportunities to leave the Ukrainian market but we never lost faith. There have been times when we have lost money in the short term, but we are making money in the long term. You can achieve short term profits in places like New York and Paris, but if you want to succeed in Ukraine, you need to be ready to commit to the country for a longer period.
About the interviewee: Ari Schwartz is the CEO of Seven Hills Group of Companies