Citi invests $140m in Ukrainian developer

In a deal arranged by Renaissance Capital, shopping mall developer Karavan Real Estate will become the first Ukrainian company to receive investment from Citi’s private equity funds.

Citi Property Investors, along with Citi Venture Capital International, has agreed to invest up to $140 million (€97 million) into Karavan Real Estate, a Ukrainian shopping and entertainment mall developer.

Karavan is developing its own network of shopping and entertainment centers under the Karavan trade mark, and is one of the largest companies in the commercial real estate sector in Ukraine. The company opened the first shopping and entertainment centre in Ukraine in Kyiv, followed by a similar centre in Kharkiv, in 2006.  The company plans to open more than 15 trade and entertainment centres throughout Ukraine by 2010.

According to the agreement Citi will first invest $100 million into Karavan initially, and if the company meets certain expectations they will receive an additional $40 million later in 2008. 

Karavan is the first Ukrainian company to receive investment from Citi’s private equity funds. Sunil Nair, Citi Venture Capital’s managing director for Central and Eastern Europe, the Middle East and Africa, said the funds are planning to look for future opportunities in the Ukraine. He added that the current investment will be used to expand the scope of Karavan’s operations.

The exclusive arranger of the offering was the Renaissance Capital investment group, an investment bank with asset and wealth management, merchant banking and consumer finance companies focusing on Russia, Ukraine and Kazakhstan. In November Jeppe de Boer, the founder of Goldman Sachs’ European real estate advisory business, left that firm to join Renaissance as its head of investment banking real estate, saying that, “the centre of gravity in European real estate capital markets [is making] a fundamental shift to the east.”

Citi Venture Capital International’s managed private equity funds total over $7 billion in investments and committed capital, while Citi Property Investments has over $12 billion of assets under management.

The bank said last week it had entered into an agreement with middle-market buyout shop Metalmark Capital, the former Morgan Stanley buyout team, to add the firm to its alternative investing platform. The firms have not disclosed details of the arrangement, which has been described only as a “strategic relationship” by Metalmark.