Ukrbud on the Verge of Bankruptcy: Investors Rally as Former Owner Faces Billion-Hryvnia Spending Claims. What Is Happening?

Everything you need to know about the crisis at one of Kyiv's largest construction corporations.

The largest player in the capital's construction market, the corporation Ukrbud Development, has suspended construction at its unfinished projects. The company has 26 such projects in its portfolio. News of the freeze on unfinished projects began to emerge back in the summer, when the company postponed commissioning deadlines for housing by a year or more. The cause of the crisis is a shortage of working capital. According to statements by Dmitry Fedotenkov, a new shareholder in the company, the funding gap amounts to roughly 2 billion hryvnias.

Ukrbud promises to resume construction in the spring and blames the company's former president Maksim Mikitas for its problems, claiming he spent the company's working capital on luxury goods and on financing political campaigns. Meanwhile, concerned investors are holding pickets outside the Presidential Office and writing collective petitions. TK Media looked into how Ukrbud ended up on the brink of survival, how the company's bankruptcy would affect the construction market, and whether the corporation's investors should expect new “Elita-Center” scandals. 

Who is Maksim Mikitas?

Maksim Mikitas is the former president of the Ukrainian State Construction Corporation Ukrbud (2010–2016), a former Kyiv City Council deputy and member of the UDAR faction (2014–2015), and a People's Deputy of the Verkhovna Rada of the 8th convocation (self-nominated), elected in majoritarian constituency 206 in Chernihiv. After being elected a People's Deputy, Mikitas left the post of Ukrbud president but retained effective control of the construction corporation.

In the 2016 early elections in constituency 206, he ran as a self-nominee. However, according to media reports, he enjoyed the support of the Presidential Administration: the presidential party BPP fielded a weak candidate against Mikitas who did not actually campaign and won 0.48% of the vote.

Maksim Mikitas is involved in numerous scandals and is a suspect in a number of criminal proceedings. On July 5, 2019, during the election campaign in constituency 206, in which Mikitas was trying to be re-elected to parliament, a conflict broke out in the premises of the village council in Liubechi between Mikitas and the head of the amalgamated community Sergei Pinchuk. During the altercation, Mikitas threatened to “put” Pinchuk in prison, then took Pinchuk's mobile phone and threw it against the wall. On September 24, State Bureau of Investigation (SBI) investigators served Mikitas with a notice of suspicion in connection with the assault on Sergei Pinchuk (Part 1, Article 296, “Hooliganism”). If the court finds Mikitas guilty, he faces a fine of 500 to 1,000 minimum wages or restriction of liberty for up to 5 years.

Another criminal case in which Mikitas is a suspect is being investigated by NABU. On May 14, 2019, NABU detectives detained former National Guard commander Yuriy Allerov and general director of Ukrbud Development Oleg Maiboroda. Allerov is suspected of an unequal exchange of real estate owned by the Interior Ministry for the residential complexes Aristokrat (central Kyiv, Konovalets Street) and Oberih (left bank of Kyiv, Boryspilska Street). The court arrested Allerov with an alternative bail of 4 million hryvnias (he left pretrial detention on May 21). At that time Mikitas was still a People's Deputy and enjoyed parliamentary immunity. 

After losing the election and losing parliamentary immunity, on October 2, 2019, NABU detectives notified Maksim Mikitas of suspicion of misappropriating property worth 81 million hryvnias and abuse of office within the same criminal case.

On October 4, the High Anti-Corruption Court released Mikitas on bail of 5.5 million hryvnias and ordered him to wear an electronic monitoring device. The former deputy was given 5 days to pay the bail, which his defense did. Prosecutors from the SAP had requested for the former deputy a preventive measure of detention with an alternative bail of 300 million hryvnias to ensure the investigation.

However, already on October 22, the Appeals Chamber of the High Anti-Corruption Court granted the prosecution's appeal and sent Mikitas to pretrial detention, increasing the bail fifteenfold to 80 million hryvnias. At the hearing, the prosecutor stated that, according to data from covert investigative actions, Maksim Mikitas considered having a witness killed. Three days later, after paying the 80 million hryvnia bail, Mikitas was released.

Other persons implicated: appraiser Alisa Grinchuk and Ukrbud Development general director Oleg Maiboroda were earlier released on bail of 1.5 and 2 million hryvnias, respectively. A month later, the electronic monitoring bracelet was removed from Maiboroda. 

Another case in which Mikitas is implicated is being investigated by the SBI and concerns the illegal allocation of land belonging to KPI for the construction of a residential complex. Another person implicated in this case is KPI rector Mikhail Zgurovsky, but no suspicion has yet been served on him.

Is Ukrbud a private or state company? 

Ukrbud Development is a private construction company that operated under the state brand of the state company Ukrbud. The owner of Ukrbud Development was Maksim Mikitas (and possibly still is), while Mikitas was also president of the state company Ukrbud until he was elected a deputy in 2016. According to information from various sources, his father, formerly chief engineer and liquidator at the Chernobyl NPP, could have lobbied for Mikitas' appointment as president of the state corporation Ukrbud. The company carried out construction projects in the exclusion zone.

The state brand helped the company advance in the market, creating an image of reliability and selling an illusion of stability. Mikitas' company's success came during the presidencies of Viktor Yanukovych and Petro Poroshenko; as late as 2010 the company did not have a single project in its portfolio. Now the company has 50 residential projects in Kyiv, 26 of which are at the construction stage, and their prospects, judging by recent events, are becoming increasingly unclear. Among the company's unfinished projects are the residential complexes Charivne Misto, Sky Avenue, Edelweiss House, Solar City, Kharkivsky, Genesis, Urban Park, Podil Grad and others. The full list of unfinished projects and their current status can be viewed via this link.

What is happening with Ukrbud now?

As of today, construction at unfinished projects has been halted, and the company is seeking financing and new investors among major players in the construction market. Journalists from Ekonomichna Pravda toured the construction sites: at most of them work has either been fully stopped or there are up to 10 builders left on site, the publication claims.

It remains unclear who owns Ukrbud today, as the company is mired in a deep corporate conflict. On September 20, Maksim Mikitas publicly announced the sale of Ukrbud, but the former deputy did not disclose the names of the new owners. 

Maksim Mikitas
former owner of Ukrbud

For some, the news of the sale of Ukrbud Development came as a surprise, but the deal was not spontaneous. I have been heading toward this decision for a long time. “...” Who are the owners? Under the terms of the deal I cannot name them; in general terms, it is a group of investors, private individuals. If they wish, they will share the details themselves. As of today the company is operating normally, construction has resumed, and management is in place. I am confident Ukrbud will continue to hold its leading positions in the market!

However, already on December 4, during an broadcast on the Pryamyi TV channel (linked to Petro Poroshenko, ed.), Mikitas stated that he remains the owner of the company and that the sale deal was illegal: allegedly what was signed was not a contract but merely a “ponyatiyka”, a “memorandum of intent”, and his signature on it was forged. He shifted responsibility for the situation in the company onto general director Oleg Maiboroda and new shareholder Dmitry Fedotenkov.

Maksim Mikitas
claims to be the current owner of Ukrbud

During the search for investors I signed certain memoranda, which the media and the public call “ponyatiyki”, and which carry no legal consequences. Moreover, my signature was forged on most of the memoranda. “...” Today I have lost control of the company. Today I have, as the owner of the company, lost all assets. These are Mr. Fedotenkov and Mr. Maiboroda [will bear responsibility for the unfinished apartments, journalist's question]. And I would also like to single out Mr. Marmysh. “...” These three people are responsible to investors for completing construction and for the funds needed to do so.

For his part, Ukrbud Development general director Oleg Maiboroda accused Maksim Mikitas of lying and of spending the company's working capital on luxury goods and political campaigns, which he said caused the financial crisis at the construction company. 

Oleg Maiboroda
General Director of Ukrbud Development

This is one of Maksim Mikitas' latest cars, a Lamborghini Urus worth $700,000. It was the first one in Ukraine. There is also an armored Maybach worth $600,000 and an Aston Martin worth $300,000. And this is the simplest example of an answer to the question “where did the money go”. The truth is not in a paid interview on the TV channel of Mikitas' former political ally. The truth is that someone wants to solve the problems of 13,000 investors, while someone else wants money here and now! I am looking for financing to complete construction, meeting with initiative groups of investors and communicating with officials. I am doing everything to fulfill obligations to people and get out of the dead end into which Mikitas led Ukrbud with his “wise” management.

According to Oleg Maiboroda, after losing the election, “Mikitas drank every day and sent thugs to the office to beat up an employee he thought had stolen from him, while not forgetting to buy himself and his accomplices new Mercedes.” Maiboroda also claims that Mikitas discussed ordering his murder and that these facts are in the materials of the NABU case.

Oleg Maiboroda
General Director of Ukrbud Development

These past couple of months have brought everything: threats from Mikitas, “showdowns” with authoritative figures, contacts with influential businessmen and politicians whom Mikitas brought into the issue. All these efforts by Mikitas led to the blocking of Ukrbud's work, which had only just begun to restore activity at construction sites, as investors did not want to keep financing in a conflict situation. But we have found a way out of this situation too. We held talks with all the major developers, and one of them agreed to take over all the projects and fulfill the obligations to complete the housing. This is “Intergal-Bud”. Everything the new developer wants is for neither the unpredictable former owner nor the authorities to put a spoke in its wheels.

The general director of Ukrbud also gave the media a consolidated estimate of Maksim Mikitas' personal expenses paid from the company's working capital. Among them: 36 million hryvnias on cars, 45 million on leisure, 27 million on collections, 75 million on “solving complex issues” and 86 million on gifts and bonuses.

On December 10, the Telegram channel “Joker”, which publishes SMS pranks with politicians and officials, published correspondence by Maksim Mikitas with an unknown subscriber, presumably Ukrbud general director Oleg Maiboroda. The Natalya mentioned in the correspondence is most likely Mikitas' wife. The correspondence does not look like a prank; it looks more like a “leak” and a hack of the messenger of the former deputy's interlocutor. Screenshots of the dialogues shed light on the lifestyle of the owner of Ukrbud: among them are payments to deputies, million-level expenses on cars and lobbying of the developer's interests in state tenders. There is no certainty about their authenticity, but there have also been no denials from Mikitas (you can view all the photos by switching the slider). 

One of the topics of conversation concerns the construction of the Shuliavsky overpass: the interlocutor asks Mikitas when they will “drop 180”. Mikitas replies that he is in contact with the mayor, and receives a recommendation in return, “his soul”. Media have reported on the mayor's ties to developer Mikitas several times. In 2017 the investigative journalism program “Skhemy” showed that Vitaly Klitschko flew to Kyiv from Naples on a charter plane together with developers Maksim Mikitas and Vadim Stolar. Later Klitschko explained that Mikitas had indeed paid for the charter, but Klitschko himself paid for his own ticket. According to the head of the Kyiv City State Administration, he had run into Mikitas by chance on the street in Naples and flew with him because it was more convenient: he allegedly had a ticket for a scheduled flight, but it had “a connection”.

New shareholder Dmitry Fedotenkov, for whose responsibility for the unfinished projects Mikitas tried to hold him accountable in an interview with Pryamyi TV, is the owner of the Tarantino Family restaurant chain. He joined Ukrbud as a shareholder in October and told Strana in an interview that one of Mikitas' expense items was financing Petro Poroshenko's presidential campaign. According to Fedotenkov, Mikitas invested funds in the reconstruction of the headquarters of the European Solidarity party on Lavrska Street, and after Poroshenko lost the election he tried to get the money back.

Dmitry Fedotenko
new shareholder of Ukrbud

Mikitas received money from state contracts, immediately withdrew it and treated expenses tied to the inflow of investor money very carelessly. He spent heavily on his personal life and whims, draining resources from the business. Cars, houses and offices, that is all nonsense. He spent that money on crazy watch collections and made huge outlays on elections. On top of that, there was an unsuccessful attempt to buy shares of Prominvestbank.

Fedotenkov is a neighbor of Maiboroda, and it was Maiboroda who brought him into Ukrbud: at least that is what both of them stated in various interviews. A number of media outlets describe Fedotenkov as a non-independent player, believing he may represent the interests of larger non-public investors.  

What are the prospects for Ukrbud and what can its investors expect?

While Ukrbud audits the withdrawn funds, negotiates with potential investors and fights with its former owner, concerned investors are staging rallies outside the Presidential Office and asking Volodymyr Zelensky to take control of the situation at the construction company. Many of them invested at least 1 million hryvnias and are now forced to fight to get housing or to get their investments back.

The company can be saved only by a major investor capable of covering the working capital shortfall and completing the projects already underway. According to statements by Maiboroda and Fedotenkov, the company ready to become such an investor is Integralbud, whose portfolio includes projects such as the residential complexes Holosiivskyi, Park Lakes and Integral City. The company's president is former People's Deputy of four convocations Volodymyr Zubyk.

Dmitry Fedotenkov
new shareholder of Ukrbud

As a major player in the construction market, they understand that if Ukrbud collapses now, the entire market will be paralyzed for at least two years, and trust in new-build housing will be lost. A developer would have to finish projects at its own expense and then sell them, otherwise no one will buy anything.

Meanwhile, the government promises to “find a solution”, “the right mechanism” and to “do everything possible to restore justice”, but it offers no concrete remedies for the problem. According to Economy Minister Tymofiy Milovanov, law enforcement agencies should become one of the mechanisms for resolving the problem. 

Law enforcement agencies and the judicial system can provide a sense of justice and answer the question of embezzlement, but only in the long term and with political will. However, the housing problem of 13,000 investors will not be solved by this, and it will not help finish construction. The construction market works on the principle of a “financial pyramid”: first a project is announced, investments are collected, the building is constructed with the proceeds, and the remaining apartments are sold. A construction company's success depends on its reputation and credit history: the better the portfolio, the greater the guarantees and the more clients. Ukrbud was one of the market-forming construction companies in the capital. If it declares bankruptcy and the “bubble” bursts, the consequences for the construction market will be serious, as they will be for the 13,000 investors who have become hostages to the “squabbles” of shareholders.

Volodymyr Koval