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Commercial Due Diligence Property Investment Minsk Belarus Navigator Consulting

Real Estate Investment Due Diligence

Navigator Consulting was commissioned by an international construction firm to assess the commercial due diligence of a major commercial property development investment in the centre of Minsk, Belarus.

The building was designed with 19 stories above-ground and three below-ground, and combined office and retail space.

Minsk is currently under-served by high quality office space. There is only one building classified as a western-standard Category A building; seven buildings provide 53,137 m2 NLA of modern Category A and B office space, which is low compared to other European capitals. The stock of modern retail space is approximately 62,000 m2, which also trails other capitals in the region.

Navigator Consulting provided the following analytical outputs:

  • A detailed inventory of A, B and C commercial property in Minsk, including (a) current space available, (b) space under construction, and (c) planned projects. This was compiled in an interactive MS Excel model that permitted future changes.

  • A supply-demand model. The supply model was based on the real estate inventory; the demand model was based on two statistical models: a historical demand model; and a labour force model. Comparative benchmarking (space/capita, cost/m2) with Warsaw, Moscow and Kiev added further insight into the model.

  • A detailed profit/loss model of the investment based on three exit strategies: (a) early sale; (b) medium sale, and (c) long-term rental and management. This model took into account real estate taxation, sales and rental income, construction and operating costs for the building.

  • A Scenario Plan for economic development in Belarus to 2013. This was linked to four different cases for real estate supply and demand, and linked to the Excel model.

  • A detailed assessment of taxes and incentives as applied to the investment model. This involved the development of an interactive tax model that was included in the Excel PL forecast.

  • A detailed review of the planning building, its utility, facilities and pricing.

Interviews were held with a  range of financial and property development institutions, including:

  • Belagroprombank

  • BelCTN Developer

  • Colliers International

  • European Bank for Reconstruction and Development (EBRD)

  • Fransa Bank Belarus

  • Golden Taller Bank

  • Hypercom Development

  • International Finance Corporation (IFC)

  • Mikhail Kostyukov

  • Masterskaya Construction Magazine

  • Priorbank

  • Star PM Developer

  • Tvoya Stolitsa Realtors

  • US Embassy

  • Victoria Plaza Development

  • Viva Invest Developer


The due diligence project was successfully completed in August 2008. The report content included the following elements:

Executive Summary


Scope of Work

  • Description of Project Objectives

  • Work Programme and Research Activities


Macroeconomic Development of Belarus

  • Political System and Stability

  • Historic GDP growth and forecasts

  • Inflation, PPI, CPI

  • Currency Exchange Movements

  • Structure of GDP: Agriculture, Industry, Services

  • Interest Rates

  • Unemployment

  • Industrial Production

  • Foreign Direct Investment

  • Government Debt

  • 5-Year Economic Forecasts


The Market for Commercial Real Estate in Minsk

  • Supply of Commercial Real Estate

  • Demand for Commercial Real Estate

  • Standards for Real Estate (A-B-C)

  • Private Sector Projects Announced or Under Construction

  • Government Projects Announced: Airport development, Hi-tech sector, etc.

  • Average Prices per Square Meter: Construction Costs

  • 5-year Model for Commercial Real Estate Supply and Demand

  • Role of Foreign Investors


Commercial Real Estate Operations

  • Activities of Realtors: Staffing, Commissions, Sales

  • Purchasing Off-Plan

  • Purchase Contracts and Agreements

  • Rental Contracts and Agreements

  • Hedging against Currency Risks

  • Eviction Processes for Non-Paying Tenants


Construction Operations

  • Activities of Major Contractors

  • Availability of Key Equipment

  • Imports and Availability of Materials & Finishings

  • Imports and Availability of Labour


Banking and Financial Operations

  • Activities of Commercial and Investment Banks

  • Activities of International Financial Institutions (IFIs): EBRD, IFC, MIGA

  • Availability of Mortgage and Lease Finance and Interest Rates


Tax & Financial Strategy

  • Recapitulation of Main Taxes

  • Tax model as applied to Project

  • Taxes and the PL Model


Investment Process

  • Corporate Legal Forms

  • Investing from an “Offshore” Base

  • Laws and Attitudes towards Foreign Investors, including expected changes

  • Licensing Process


Risk Analysis

  • Risks from Governmental Actors

  • Risks from the Municipality

  • Risks from Technical and Construction Operations

  • Risks from Commercial Operations

  • Risks from Currency Operations: Convertability, Repatriation, etc.

  • Risks from Non-transparent Sources

  • Risks from Acts of War, Natural Disasters, etc.

  • Project Risks (delay in destroying and moving existing building, imports, etc.)


Three Investment Scenarios

  • Best Case

  • Base Case

  • Worse Case


Project Investment Strategy

  • Offshore Base

  • Local Partners

  • Contracting Process

  • Sales Process

  • Quality Standards

  • Government Relations


Annex I: Profiles of Major Projects

Annex II: Service Provider Assessment

International Construction Firm

Date of Engagement:
May - July 2008

Countries of Operation:
Belarus, Greece

Business Function:
Investment Advisory Services, Marketing

Business Sector:

Industry & Manufacturing, Real Estate

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