Arthur Lupashko, CEO of Ribas Hotels Group
I put into heading the most popular questions addressed to our experts during negotiations and by means of feedback on our website and decided to make my story in the form of “the businessman problem - solution to the problem”.
Before moving on to the main subject of conversation I propose to find out why it is necessary to pay great attention to the hotel business as a type of a real estate.
Is it worth your attention?
Real estate market size including all its types in Ukraine is still less than it is in Eastern and Central Europe. The indicator of the supply of retail space in our country is lower than it is in Europe on average. The shortage of this type of real estate leads to increase in the cost of its rent and purchase.
As for hotel segment, hotel room stock in Kiev if calculating a rate is approximately 4 persons per 1,000 persons and it is one of the lowest numbers among european capitals. In neighboring Bucharest, Romania, and Sofia, Bulgaria, this figure is almost 6 hotel per the same number of inhabitants. Praha, Czech Republic, is far ahead of us having 28 rooms per 1,000 citizen.
Financial analysts predict 10,4% growth in corporate tourism as a part of GDP of our country this year besides number of tourists intending to have a vacation will grow by 7,1 %. Inbound tourists and domestic tourists will give our economy 9,8% and 6,3% more profit, respectively, than last year.
One more convincing argument is the fact that trend of 2018 which was to popularize the group tourism is still actual this year. It will strengthen in the short term and soon reach a significant figure of 49,5% in the structure of outbound tourist flow. I am sure that now it is time to implement development projects like construction or reconstruction of low-liquid areas for business purposes.
Let’s talk about the most common mistakes when buying or selling real estate and how to avoid them.
History: in-depth look
Problem: Facility history needs an in-depth look. There are various illegal schemes and a serious analysis is required to expose them. It is rather difficult both to do it and to find a specialist for this.
Solution: You should focus on two very important aspects: learning all stages of interaction with an object of agreement, its legal support and execution (this task is often assigned to several specialists). So my company experience let me say that the most effective way is to create your own team supporting all the stages of buying and selling, from verification of primary documentation to last handshake.
When working on such a contract it is important that lawyers or legal office have already dealt with HoReCa facilities. This question is not only closely related to real estate object but also to land use rights, construction, permits, coordination and documents about further operation. The expert has to understand specifics of this field of activity.
If subject of a contract is a land plot you should get all documents before decision of its allocation by city council or by court or by means of a contract of sale.
Сaution is never too much
Problem: Building could be illegally renovated without including the fact in outgoing documents before sale.
Solution: if you plan to buy a building put into operation be more careful. The fact there is no problems with land plot registration doesn’t mean that troubles are not hidden in the object. Our specialists always make a request for the required list of documents (construction declaration, putting the object into operation, ownership, building plan and technical passport). Representative of the management company must ensure that all is legal, the object does not appear in court cases and is not a pledge property in a bank or a receipt for property was not issued for private persons.
Moreover, the expert of the company responsible for object sale without fail checks compliance of the information specified in the technical passport with the actual state, and there is no exceptions. Even when operating we take this passport and check its data with what is in premise or building. It is necessary to understand that the notary will indicate in the contract that the buyer has inspected the premises and has no complaints. This standart phrase means full compliance with technical passport. However, if a wall falls later on you will have a problem with making a claim to the seller, in fact it’s almost impossible. To do it, you will have to establish in court through construction expertise that interference with building structure was made before signing the contract and caused the fall.
Safety markers
Problem: ОOne and the same building can be bought/sold for much more /cheaper (underline whatever applicable).
Solution: Hotel management companies as a rule work with reliable notaries or registrars. On time or even earlier such companies will choose optimal organizational and legal form, minimize taxes, negotiate with a seller representative. It is possible due to receiving reliable information and paying attention to weak spots. For example, our team has a lot of markers used by specialists to check an object. Let’s suggest that according to documents building was twice resold during one year. In this case all the operation is under special control.
For example, working on one potential facility our specialist negotiated with a seller’s lawyer. As a result he saved more than 1 million hryvnias for the company because most of additional expenses for notary, taxes and paperwork was paid by the seller. Certainly he was awarded with a percentage of the money saved. We are aware that less motivated employee would easily agree with opposite party conditions.
Avoid red lines for objects and ... businesses
Problem: Why should I pay a managing company? No one understands this matter better than me and no one will protect my interests.
Solution: If you are brave enough to do business on your own you should realise all the stages beginning with construction of a building. For that you have to consider both legal and construction aspects. It often happens that future construction is legal but there are some technical circumstances stopping building permits (for example, if a land plot is located in the area of so called red line near roads, ports. seaside etc.). Don’t forget to contact 2 notaries. Sometimes a broker takes part in the process trying to get “his” specialist involved to have additional income or hide some of nuances from a buyer.
Costs of re-registration is an equally important question. As a rule it is 2 percent of the contract amount and each party pays оne percent. Add notary and taxes. Taxes is a matter of agreement and each party can pay its share. In that case a seller has additional expenses. At the same time these expenses could be taken into account when discussing final price. Standard practice is to split costs in half but as I said it occurs when a seller compromises to have a deal.
How much is experience?..
Problem: Lawyers made their part of work. But an object may have plenty of hidden technical aspects to understand. Have foundation and load-bearing structure been well laid? Will the roof withstand the blow of winter? Are engineering networks connected correctly; is the object protected from problems with electricity and water supply, sewerage, ventilation and other basic amenities markers?
Solution: Our way in these matters started with instructive experience. We cooperated with the owner who had bought a hotel and got in touch with us to have its activity optimized. When technical works began on the installation of a tubular electric heater and other structures some previous flaws appeared. If the owner checked all that at the stage of purchase he could save enough money and shift some of renovation and restoration expenses to the seller.
Therefore, this experience is to be purchased too. Now we use it at our other facilities not only conducting audit according to basic technical markers but comprehensive examination of premise or building which is necessary for successful business. For example, as a result of such examination we replaced all the windows of an object to protect it from the pressure of winds in the cold season and recommended to reinforce two floors with columns.
For example, in rocky terrain building is more expensive because expensive equipment for laying a foundation is needed. In the same time an audit is necessary for facilities near the sea because of unstable soils which may put an end to the planned systems of sewerage or basement or parking. Besides an owner who has built house or summer house for his family often considers he would easily cope with the implementation of hotel project. As for our experience in the vast majority of such cases neither renovation nor furniture nor finishing works don’t meet the requirements of hotel facilities.
We saved similar constructions more than once. Our architectural team specialises in НоReCa facilities and for this reason optimizes buildings or plots to make each square metre to work for increasing incomes.
One more irresistible advantage of Ribas Hotels Group is an opportunity to work with large volumes and numerous contractors. As a result we can get very nice discounts by suppliers . For example, building a hotel in Bukovel now we ordered Italian plumbing as our contractor offered a very good bonus thus interrupting the offer from Poland. If the owner bought everything the hotel needs on his own he couldn’t count on such discounts because he wouldn’t be able to buy such a volume of products as we have ordered.
General solution
As you see all of the above problems have general solution namely professional audit at the very beginning of work, business experience and large base of reliable contractors.
You can entrust implementing all the stages to specialists who have already worked with such objects and thus you will avoid many troubles, or go your own way. In this case, the article will help you. If you choose the first option write down our contacts or call us without delay: +38 (048) 706 47 36.
