A month ago, a scandal broke out in Kyiv - the city authorities decided to rapidly rent out the basement and first floor of the Zhitny Market building in Podol.
The auction announcement was published by the Department of Municipal Property of the Kyiv City State Administration on the Prozorro.Sales platform on March 18. Officials set aside the minimum 5 days allowed by law to receive proposals.
Historians call the Zhitny Market the oldest still operating market in the capital. It existed on this site back in the days of Kievan Rus, and the modern building was erected in 1980. However, it is now in a state of disrepair. In the summer of 2022, the State Emergency Service even banned its operation in court due to significant violations of fire safety.
Local residents and community activists are seeking to restore the structure and preserve the market there. They fear that another shopping and entertainment center or high-rise may grow there instead. The suspiciously quick auction only fueled those fears. Under public pressure, Kyiv Mayor Vitaliy Klitschko ordered to extend the deadline for accepting proposals and postpone it to April 15. But the requirements for the future tenant have not changed.
The devil is in the numbers
At first glance, the draft lease agreement looks encouraging - the future tenant of the basement and first floor is obliged at his own expense to carry out major repairs of the entire market building, eliminate fire safety violations, and reimburse the land tax and property maintenance costs to the balance holder. The city authorities plan to conclude the agreement for 15 years, the starting rental price per month is almost 2.5 million UAH per month.
But the founder and executive director of the investment company Inzhur, Andrey Zhurzhiy, is confident that not a single real investor, without guarantees from the local authorities about the privatization of the object, will even go to the auction, because such conditions will bring him nothing but losses.
“Given the deplorable state of the market, which a court decision prohibits from exploiting, reconstruction will cost the tenant approximately $700 per square meter or about UAH 304 million at today’s exchange rate. In just 15 years, the tenant, taking into account reconstruction, rental payments including VAT, and land tax compensation, is required to pay almost UAH 867 million or $22.3 million.
After completion of the reconstruction, which will last approximately two years, the total area that can be subleased will be approximately 4847 m2 (the area of the first and second floors minus 25% for common areas and the basement, which you will not rent out to anyone). And the tenant will rent it out not for 15, but for 13 years,” explains Zhurzhiy. “Therefore, in order to just return the listed investments, the tenant must rent out one square meter for $30 a month. If we are talking about a market and not an elite shopping center, then I don’t understand who will pay such rent.”
Everything looks as if the auction conditions were specially written out for “their” predetermined winner. Which will not pay unprofitable payments to the capital budget, and after a major overhaul of the market, it will simply privatize it without competition. The Law “On the Privatization of State and Communal Property” allows him to do this - after all, if within three years the tenant makes integral improvements to the property in the amount of at least 25% of its value, then he receives the right to buy it back at the valuation price.
The residual book value of the first floor and basement of the Zhitny Market, according to the accompanying documents for the auction, is now about UAH 250 million. And their full reconstruction, according to Zhurzhiy, will cost more than 300 million UAH. That is, after the future tenant invests the first 62 million in capital repairs, he will have the opportunity to buy the building.
At the same time, a third-party company is unlikely to be able to pull off this trick. Even if she takes the risk of submitting to an auction and wins it, then in the future the owner of the building may simply not sign her the necessary permits for reconstruction and estimates.
Potential winner from the second floor
Such opaque conditions can be “tailored” to Tangerin LLC, in whose interests it is to concentrate the entire facility, since the company already rents the second floor of the Zhitny Market. However, this can only be called a rental conditionally, because Tangerine has not paid a penny for it for more than a year and a half.
The auction for the rental of the second floor was held by the Department of Municipal Property of Kyiv shortly before the full-scale invasion - in February 2022. Then the auction was held between Tangerin LLC, Arteli and Tavata. These companies turned out to be interconnected and the Antimonopoly Committee is now investigating a case of possible collusion.
Arteli LLC offered the best price, but in the end the contract was not signed. Therefore, in May 2022, an agreement was concluded with the next participant - Tangerine LLC. The company paid a deposit for two months' rent, but then stopped paying.
The Zhitny Market utility company, which owns the premises, tried to recover the money through the court. But Tangerine recalled that in the summer of 2022, the State Emergency Service banned the use of the building due to violation of fire safety rules. As a consequence, due to the fact that the balance holder committed these violations and did not eliminate them on time, the company allegedly does not have the opportunity to use the leased property. Accordingly, you shouldn’t have to pay for it either.
“SHOCKERS” of scandalous developments
In 2022, the media linked Tangerine with the Tarantino family restaurant chain owned by businessman Dmitry Fedotenkov. But in September last year, the owner of the company changed - non-public Kiev resident Valery Arakcheev became the director and founder. True, in the GetContact service [a mobile application that allows you to check how a phone number is recorded in other people’s contacts], his phone number is signed quite eloquently - “Deputy Assistant”, “Valera from Ishchenko”, “Ishchenko’s Assistant”.
Valery Arakcheev has indeed had working ties with former MP Valery Ishchenko for decades. Today, in addition to Tangerine, he is the director of E-group LLC of Tatyana Evstratova, the sister of the ex-deputy. In the past, Arakcheev was also the head of several other companies that belonged to Ishchenko or members of his family.
Valery Ishchenko is a longtime ally of the current mayor of the capital. In 2008, he was elected as a deputy of the Kyiv City Council from the Vitaliy Klitschko Bloc, and in 2012 he entered parliament on the list of another Klitschko political project - the UDAR party. In 2014, Ishchenko again became a people’s deputy, but this time from the Petro Poroshenko Bloc.
Journalists have repeatedly linked Ishchenko's surname with various scandalous metropolitan developments. For example, in 2002, he and Andrey Strannikov founded Telbin IVA LLC [in 2007-2012, the head of Telbin IVA LLC was the aforementioned Valery Arakcheev].
Soon the company received a lease for land under a park in the Bereznyaki microdistrict. In 2013, when Ishchenko and Strannikov became deputies of the Supreme and Kyiv City Councils, respectively, the company tried to build a supermarket on this site. But local residents then managed to defend the green zone.
Journalists from Slidstva.Info call the Oasis shopping center, which grew right above the Heroes of Dnepra metro station, a more successful, but no less scandalous project of the Ishchenko family. Architects claim that this construction in the future could lead to the collapse of the metro tunnel and loss of life. The customer for the construction and the owner of the finished shopping center is the company Elikon LTD, owned by Anna Vergeles, the mother of the ex-deputy.
It’s interesting that the most popular tags for Valery Arakcheev’s number in GetContact are “Oasis” and “Customer of the Heroes of the Dnieper shopping center.” Apparently, it was he who represented Elikon LTD at meetings with construction contractors.
The name of Arakcheev also appeared in another scam involving municipal property, the beneficiaries of which were the family of the mayor of the capital, Vitaliy Klitschko. It was also described at one time by Slidstvo.Info. At the end of 2013, Alternativa LLC, whose director and founder at that time was Valery Arakcheev, leased the “Author’s House” on the street. Bogdan Khmelnitsky in the center of Kyiv. The premises were handed over to the company without a competition on the promise to build a library or museum there. But instead, the kitchen of the neighboring 11 Mirrors hotel was located in the historical building. Its owner is called the famous boxer and brother of the mayor Vladimir Klitschko.
After Klitschko Sr. became mayor, the company’s lease agreement was first extended, and in the summer of 2019, the “Author’s House” was put up for privatization. The auction was held between Alternativa LLC and Vit-Plus. The first one at that time was transferred to lawyer Sergei Boyarchukov, who had business ties with the Klitschko brothers’ entourage. And the beneficiary of Vit-Plus, which ultimately won the auction, is Vladimir Klitschko personally.
We tried to find out from Valery Arakcheev whether Tangerine is going to participate in the auction for the lease of the Zhitny Market next Monday and whether he represents the interests of ex-People's Deputy Ishchenko in this company. But he refused to communicate with us by phone, and also ignored our messages in the messenger. It was not possible to contact Valery Ishchenko himself.
