At 36 Khreshchatyk Street, a solution was found for the completion of 18 residential complexes (RC), which were previously constructed under the leadership of the now-bankrupt state company "Ukrbud." Last week, the Kyiv City Council approved the recapitalization of PJSC "HC "Kyivmiskbud," which is implementing these projects, with funds from the city budget amounting to 2.56 billion hryvnias.
Additionally, a request was sent to the Cabinet of Ministers to allocate another 2.28 billion hryvnias from the state treasury. This is unlikely to happen during wartime, which will allow "Kyivmiskbud" to soon explain the lack of progress and request several billion from the city’s coffers again. In principle, this whole story "smells bad." Although "Kyivmiskbud" is 80% owned by Kyiv residents, it does not report its activities in detail even to the Kyiv City Council deputies, effectively operating in a closed mode. As a result, it is very likely that any additional funding, as often happens, will be "eaten away" by corruption. Also, the complaints of the city authorities about the Cabinet of Ministers instructing this PJSC in 2020 to complete Ukrbud’s residential complexes without the city’s leadership consent seem strange. The Kyiv authorities probably could not have included the "silent consent" at the time, which now risks becoming another "scheme."
As it turned out, last week the city authorities made two decisions aimed at resolving issues with the completion of residential complexes by "Holding Company (HC) "Kyivmiskbud" formerly owned by the bankrupt "Ukrbud."
Thus, on October 31, the Kyiv City Council supported the draft resolutions “On Stabilizing the Financial Position of PJSC "HC "Kyivmiskbud" by Increasing the Authorized Capital” (No. 08/231-1635/PR dated October 30, 2024) and “Regarding the Appeal of the Kyiv City Council to the Cabinet of Ministers of Ukraine concerning Compensation to PJSC "HC "Kyivmiskbud" for the Total Planned Loss Related to the Completion of Construction Projects of the Ukrainian State Construction Corporation "Ukrbud" (No. 08/231-947/PR dated July 1, 2024).
The first document was submitted by the city council’s budget, socio-economic development, and investment activities commission, and the second by the mayor Vitaliy Klychko. In the session hall, 77 and 72 deputies, respectively, voted to approve these draft resolutions.
What It’s About
Recall that in June 2020, the Cabinet of Ministers of Ukraine assigned the task of completing 18 complexes to PJSC "HC "Kyivmiskbud" which were previously constructed under the "flag" of the state corporation "Ukrbud." This was because the latter had already become insolvent by that time, work on all these objects was frozen, and around a dozen and a half thousand families faced the risk of not receiving their homes. Investors in these residential complexes named various abuses by the people organizing these projects, including embezzlement of funds, as the main reason for this situation.
Meanwhile, it was already understood at that time that the state had little involvement in these projects: in most cases, the housing was actually built by private companies that used the state corporation "Ukrbud" brand under unclear circumstances and were directly or indirectly owned by Maksym Mykytas, the former head of this developer (2010-2016), the factual owner of the almost similarly named private LLC "Ukrbud Development," which constructed most of these residential complexes, and a former MP (2016-2019).
However, completing these projects for various reasons did not come to be for "Kyivmiskbud" either. In recent years, the company has repeatedly complained that initially, the work was hindered by the coronavirus quarantine, and then by the full-scale war: due to the economic crisis, people started buying fewer apartments, there was less labor on the market, it became harder to import construction materials, and so on.
However, the main reason cited by both this developer’s management and the city’s higher "leadership figures" was that the Cabinet of Ministers, by transferring these residential complexes to "Kyivmiskbud," did not agree on its decision with the Kyiv City Council, although it is the main shareholder of this PJSC (80% is in municipal ownership), and did not underpin it with "money." At the same time, "Kyivmiskbud" complained that the construction financing funds were allegedly depleted – LLC "FC "Zhytlo-Capital," which "collected money" for the construction of the "Ukrbud" residential complexes, was in no hurry to transfer funds to the new developer. That is, supposedly, "there was almost no money, and no one understood in which winter jacket to look for such a stash."
Due to this, there were repeated calls from different sides that "the state should pay for this feast." However, over the course of four years, "Kyivmiskbud" supposedly addressed the Cabinet on this matter but received a response along the lines of "there’s no money, figure it out yourself."
Finally, the municipal developer, together with city hall officials and city council deputies, found "working" solutions to the problems. The decision on stabilizing the financial status of "Kyivmiskbud" from 32.10.2024 codifies that this PJSC must carry out an additional share issue (i.e., issue of shares. – Ed) worth up to 2.56 billion hryvnias, which will subsequently be purchased by the city community. This will increase the company’s authorized capital by the abovementioned amount, which should be spent on completing 18 "Ukrbud residential complexes." As for the appeal to the Cabinet of Ministers, the city authorities asked the government to compensate "Kyivmiskbud" 2.28 billion hryvnias from the state budget for the completion of these buildings. Thus, the total "cost" of these two decisions, i.e., the total amount of money this PJSC can receive, is 4.84 billion hryvnias. But the prospect of funding from the state budget, of course, remains ghostly.
According to Kyiv’s leadership, the need for an additional 4.84 billion hryvnias to complete the "Ukrbud residential complexes" was calculated by the audit company "Ernst & Young" during its assessment of "Kyivmiskbud" as a baseline scenario.
It should be noted that there weren’t many willing to undertake the completion of the "Ukrbud" residential complexes at the time, but there was still an alternative to "Kyivmiskbud." A number of private developers, either openly or quietly, expressed their readiness to finish these works, evidently tempted by the hypothetical possibility of acquiring state funding, which could potentially be partially misappropriated or redirected to build their own complexes.
Nevertheless, the choice fell to "Kyivmiskbud." At a "semi-official" level, this was explained by the relative "reliability" of this developer – its projects were launched into operation "with a squeal" and scandals, but they were still completed. Moreover, it seemed that the state was also trying to lower societal dissatisfaction by using the same scheme that the beneficiaries of the "Ukrbud" projects used: at first, people took their money supposedly to a state company because it wasn’t "a private firm that could deceive," and now a municipal developer "with a name and history" was taking on these works. This, in a way, was a guarantee that investors would eventually receive keys to their apartments, as the city authorities seemed to "vouch" for it.
At the same time, among experts, journalists, and representatives of politics at various levels, there was no unanimous opinion regarding "Kyivmiskbud’s" capability to implement so many new projects. One of the main reasons was that hardly anyone had up-to-date information about the state of affairs on "Ukrbud" objects, as well as about "Kyivmiskbud’s" financial and business activities, as both this company and the Kyiv City State Administration had carefully concealed such information for years. This was usually explained by stating that the city administration, supposedly, could not interfere in its work since, after all, 20% of this PJSC’s shares are privately owned, which allowed this company to be positioned almost like a private, rather than a municipal company "when needed."
Nevertheless, it had long been known that this joint-stock company did not build anything on its own: among the business entities subordinate to it, there is currently no company capable of independently performing construction work. Moreover, some experts pointed out that this PJSC does not even have a single piece of equipment for carrying out construction. In fact, over the last ten-plus years, the holding company has been acting as a developer: although banners with the "Kyivmiskbud" logo are "glued" to the construction fences of residential complexes, private general contractors handle everything from pouring the foundation to finishing works in the apartments and receive the lion’s share of the financing and profits from housing sales.
It should be noted that no official reports on "Kyivmiskbud’s" activities and information about its material and financial situation can be found in the public domain. Therefore, occasionally learning about what this 80% municipal developer lives by and how it operates can only be done from the words of representatives of the capital’s leadership. Before voting on the draft resolutions intended to "launch" work on the "Ukrbud" objects, the mission of disclosing some data on this matter was undertaken by the secretary of the Kyiv City Council Volodymyr Bondarenko.
According to him, one of the reasons for "Kyivmiskbud’s" current inability to work on the "Ukrbud" residential complexes was that the State Mortgage Institution refused to purchase apartments in these complexes for a total amount of 2.1 billion hryvnias in March 2020.
He also revealed that as of April 2024, the amount of debt under property rights purchase agreements and preliminary real estate sale agreements in "Kyivmiskbud" complexes was estimated at 181.7 million hryvnias, but only 4 million hryvnias was debt for which the payment deadline had already passed. LLC "FC "Zhytlo-Capital," which "collected money" for the construction of "Ukrbud" residential complexes, also owns debt to the developer. According to Bondarenko, this refers to 351 million hryvnias, but only 21 million hryvnias of these "debts" had already been due to "Kyivmiskbud."
Bondarenko also stated that "Kyivmiskbud" has a schedule for the use of funds that can go to its authorized capital, but it is indicative. At the same time, they say, the developer plans to attract 1.26 billion hryvnias through the sale of real estate objects. So, in 2025, "Kyivmiskbud" plans to complete the construction of 6 housing complexes, and 4 more complexes should be completed by the 3rd quarter of 2026.
In turn, the Chairman of the Board - President of PJSC "HC Kyivmiskbud" Vasyl Oliynyk promised that the developer will publish the budget cards of each object so that the public can analyze their construction estimates.
At the same time, Oliynyk confirmed that only six of the more than three dozen companies that are part of the holding "Kyivmiskbud" are currently engaged in at least some economic activity and only three such companies are profitable. What exactly they do, the head of PJSC did not specify, but it can be assumed that private companies pay them, including for the opportunity to "develop the land", because "Kyivmiskbud" complexes are mostly built on communal plots.
All this discussion occurred on one wavelength: city council leadership, most deputies, and the head of "Kyivmiskbud" asked for funds from other people’s representatives, and almost no one disputed this. Only a few deputies made some remarks.
For instance, representatives of the "Servant of the People" faction pointed out that the "Ernst & Young" company had not actually audited "Kyivmiskbud’s" activities - it was supposedly just market research. Apparently, this was a hint that these calculations might be very "rough," as audits are conducted according to strict methodologies.
These representatives also demanded that the allocated funds be used solely for the completion of "Ukrbud" residential complexes and not for new projects of "Kyivmiskbud." In response, Vitaliy Klychko announced a protocol order to fulfill this requirement. However, who it was addressed to (either "Kyivmiskbud" or the structural divisions of the city hall that would "recapitalize" the developer by purchasing shares), the city head did not specify.
There were also separate opinions that the problems of individual investor-apartment buyers should not be resolved with the funds of all the city’s taxpayers, but the city leadership and most of the Kyiv City Council, in general, did not pay much attention to this.
What Conclusions Can Be Made
The city government is currently greatly lamenting that it wasn’t consulted on whether "Kyivmiskbud" can fulfill obligations for projects new to it. However, there are justified doubts about whether the state has the right to assign someone to complete something with a single "stroke of the pen," especially when it concerns a structure that is practically managed by local authorities. Neither the city authorities nor "Kyivmiskbud" even tried to challenge such a decision. The Supervisory Board of this PJSC is always chaired by Vitaliy Klitschko’s deputies in the KCSA - currently, it is Vladyslav Andronov. Some resistance to the "criminal order of the government" could apparently have occurred, but nothing of the sort existed.
Thus, all this resembles at least a "tacit agreement," or at most - a new scheme. That is, both in the "Kyivmiskbud" office and at 36 Khreshchatyk Street, it appears there was an intention to "immerse" into this project. Apparently, the expectation was either for further financing for the construction of these residential complexes from the state budget, money from funds to finance "Ukrbud" objects, or... funding from the city budget. It can be assumed that this was planned to improve both the financial condition of "Kyivmiskbud" and the financial condition of the officials who manage and control it.
At the same time, the most crucial problem remains "where the money went." Currently, there is silence on this matter, although "Kyivmiskbud" previously directly blamed the abovementioned LLC "FC "Zhytlo-Capital." For example, in August 2020, the management of PJSC indicated that 2.1 billion hryvnias were lacking for the completion of "Ukrbud" objects and that this occurred precisely because funds from the Construction Financing Fund were "transferred and redirected to other companies or individuals."
There were also claims from "Kyivmiskbud" regarding the delay in the transfer of these funds by LLC "FC "Zhytlo-Capital." In the midst of all this, in 2023, the specified LLC was deprived of its license for activities related to property management for funding construction objects and/or real estate operations for a period. However, on October 31, 2024, during the discussion on allocating funds to "Kyivmiskbud," LLC "FC "Zhytlo-Capital" was only fleetingly mentioned in the Kyiv City Council session hall.
Moreover, there remains an "intrigue" regarding whether the Cabinet will provide funds to complete these projects. As noted above, the state previously resisted, and considering the significant amount during wartime, there is no reason to believe the situation will change. This could well result in the leadership of "Kyivmiskbud" not being significantly criticized for the lack of substantial results in the completion of "Ukrbud" RCs. And in the possibility of attempting another budget tranche from Kyiv in some time.
Regarding the 2.56 billion hryvnias from the city budget, which the Kyiv City Council has already decided to "recapitalize its 80% municipal developer," the real use of these funds can only be controlled by a very limited circle of individuals. Future demands for detailed reporting on this issue to the city council can easily be deemed an illegal attempt to "interfere in the business activities of "Kyivmiskbud."
Consequently, it cannot currently be claimed that the "Ukrbud" RCs will definitely be completed. It can probably only be stated that the Kyiv community will suffer, for whom they have already decided to begin solving the "deceived investors" problems at their expense.
"Kyivmiskbud" and Corruption
Recall that PJSC "HC "Kyivmiskbud" and its leadership’s activities have repeatedly been at the center of journalists’ and law enforcement agencies’ attention. Especially in recent years, much information about irregularities in its operations has surfaced in the public domain. And in many ways, the revealed data impacted this developer’s fate.
Thus, in August 2023, investors in "ex-Ukrbud" complexes undertaken for completion by "Kyivmiskbud" (including residential complex "Otrada") approached the National Anti-Corruption Bureau (NABU) filing a claim regarding the embezzlement of funds by holding company officials during the completion of several residential complexes. In particular, citizens complained to NABU detectives that as of December 2021, the readiness of the last object was only 50-60%, although by that time it should have been completed. They also opined that "given the long-term lack of appropriate response measures from KCSA officials and Kyiv City Council deputies, there are reasons to believe that they (officials and deputies - Ed) may be involved in [these] alleged crimes."
However, none of the potential offenders have been brought to criminal responsibility, and the same residential complex “Otrada” has not yet been put into operation.
Earlier, on May 13, 2023, the media outlet “Bihus.Info” in its material “Presidential Suite” published data showing that “Kyivmiskbud” paid billions of hryvnias to companies close to Ihor Kushnir – the then Chairman of the Board and President of the company (headed it since April 2012). According to journalists’ information, four companies – “Ukrbud Invest”, “Gorbud”, “Jaguar”, and “Construction and Industrial Company Jaguar” – received over 3 billion hryvnias from the municipal developer for construction works in 2020-2021. Among other things, “Bihus.Info” discovered that Kushnir’s relatives and entourage built luxurious cottages on land in Kozyn, which the Kyiv City Council had once allocated for “Kyivmiskbud”. Incidentally, this became known precisely at the moment when “Kyivmiskbud” and the city leadership were loudly demanding that the Cabinet of Ministers allocate funds for the completion of the “Ukrbud” residential complexes.
Subsequently, in July 2023, journalists from the same media outlet found that Ihor Kushnir’s wife’s company acquired a French firm in 2019-2020, which owns a luxury villa on the Côte d’Azur with an estimated value of 20 million euros. Furthermore, “Bihus.Info” reported that Kushnir and his wife climbed Mount Everest in May of the same year, having left the country due to health reasons – the third group of disability. As a result, on July 6, 2023, the Mayor of Kyiv, Vitaliy Klychko, announced the suspension of Ihor Kushnir from his duties as the head of “Kyivmiskbud”.
However, Kushnir was finally “removed” only at the end of December 2023. At that time, the temporary duties of the head of “Kyivmiskbud” were assigned to Eduard Shevchuk. The Kyiv City State Administration instructed him to develop a strategic plan for stabilizing the financial and economic state of the company, as well as to establish relations with investors. However, it seems he did not achieve significant success, as in February 2024, the company received a new head – the aforementioned Vasyl Oliynyk – former head of LLC “Spetsbud-Monolit”.
Ivan Kulyk KyivVlada