Page 24 - bne_December 2017_20171204

24 I Cover story bne December 2017
CEO Sergey Gordeev I Photos © PIK Group
The PIK of Russian real estate
Ben Aris in Moscow
The Russian economy is becoming normal. Inflation has fallen from the double digits typical of an emerging market and is currently 2.7%, a normal country level. Unemploy-
ment is also at record lows of 5%, and incomes, while still well below potential, are on a par with many poorer European Union (EU) countries: per capita income is currently $22,540 per year.
The one exception is interest rates, which are still a high 8.25%, despite
a string of cuts this year by the Central Bank of Russia (CBR). However, even this will fall to 4-5%, perhaps as soon as next year, almost a normal country’s cost of capital.
All this combines to give a rosy outlook for Russian real estate.
PIK group emerged last year as the real estate sector’s standout company.
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The acquisition of rival Morton for RUB11.7bn ($189mn) in 2016 left PIK as by far the largest and fastest growing Russian real estate company. In late 2016, it had a portfolio of 12.5mn square metres (sq m) of property. In the
estate in January-June, a 90.4% increase y/y. Still, the company posted a net loss of RUB2.5bn, compared with a net profit of RUB1.7bn in January-June of 2016, but that is a function of the fact that a project can take two years to complete,
“PIK group emerged last year as the real estate sector’s standout company”
same year, its revenue was RUB60bn ($0.9bn). This year, the developer expects total cash collections of between RUB190bn and RUB200bn.
In the first half of this year PIK’s revenues more than doubled, up 119% to RUB41.5bn (€716mn), while its closest competitor, LSR, saw a 30% decline. PIK sold 771,000 sq m of real
CEO Sergey Gordeev told bne IntelliNews in an exclusive interview, and doesn't reflect the state of the company since
it took over Morton.
“[The loss] is because of the way real estate business is. These results reflect the state of the company two years ago as we book the revenues when we deliver to the customer not when we get the money