“Dnipro Hotel is the start of a major Ukrainian project.” Alexander Kokhanovskyy reveals details of the deal
The question – Who is the new owner of the Dnipro Hotel? – has been discussed since the very moment that the property was sold on July 15 for UAH 1.1 billion. AIN.UA’s publisher was the first to get an exclusive interview from the winning bidder. The latter turned out to be Alexander Kokhanovskyy, the founder of the country’s most successful esports organization, Natus Vincere, the former co-owner of ESForce, and the founder of DreamTeam startup.
In his interview, Kokhanovskyy tells AIN.UA why he switched to property development, how esports are connected to the purchase of the hotel, and why gaming is completely different from gambling and bookmaking.
Why Dnipro? What do Kokhanovskyy and the hotel business have in common?
Dnipro Hotel is one of the key infrastructure projects for the development of esports in Ukraine. Our goal is to make Kyiv the world’s esports mecca and bring Ukraine closer to the level of South Korea and the USA.
In five years, we plan to change the country’s esports industry. We have started to develop the infrastructure with the Dnipro Hotel. And before long, we will get down to delivering the project to create a multifunctional esports arena in the center of Kyiv, which will be one of its kind in Ukraine. It is our core project, which will allow us to hold international-level events, and not only esports ones but also musical and sporting events. The next step is to open twenty cutting-edge gaming centers in Ukraine’s major cities. On top of it, as part of our strategy, we will set up an Esports Academy, launch the Ukrainian Championship, the Ukrainian Cup, as well as school and university student leagues. In addition, we will not leave education behind – esports departments will be launched in leading Ukrainian universities.
The detailed strategy for developing esports in Ukraine will be presented in early September 2020, as part of the presentation of the Ukrainian Professional Esports Association, which will bring together key market players known all over the world.
Frankly speaking, we were not going to build or purchase a hotel. But when it was announced that the Dnipro Hotel was up for auction, we saw that the object is unique, and it suits our ecosystem ideally. So, now we plan to set up the first-ever Esports Ready Hotel. It will feature unique esporting elements, such as training areas, an esports stage, special suites for professional players, as well as the world’s best players’ lounge.
What is your connection to Smartland?
Smartland is one of the partners of the project. The company has vast experience in real estate management, and this is what they are responsible for.
How much of your money do you invest in this project, and who are your partners? What is the funding model of the deal?
Understandably, this project required additional funding. But for me, it was not the first experience of attracting that much investment into my startups. I am the mastermind and managing partner of the deal. And our project was supported by Ukrainian investors and serial entrepreneurs. In part, we also leverage borrowed funds. The main principle here is total transparency regarding the origin of the funds, our partners’ trust, and openness towards the regulator. Therefore, at present, I have no doubts that the transaction will be completed.
Why did you not announce your participation earlier?
You will probably call it a superstition: I decided not to show my hand until the transmission of the protocol to the SPFU. However, the situation in the media space has pushed me to public visibility.
How will you comment on the assumptions about the bidding winner’s “Russian traces”?
This investment pool has nothing to do either with “Russian traces,” or with anyone bearing a relation to Russia. I am repeating myself, I could also easily raise money in American funds for my leverage and management, and it would just take a little longer. But I am glad that I succeeded in finding fellow-thinkers in Ukraine, among the people and companies that I call serial entrepreneurs from the IT industry.
And what about the gambling business? Is your purchase connected to its legalization?
The law was passed just one day before the auction; to be honest, we had not thought about it at all. But, since many people write about it, I would like to explain this to you in a bit more detail. Esports is a new kind of sport, which has its own various disciplines, players, teams, tournaments, and sponsors. This is in no way related to online casinos or bookmaking. Just people having no clue about it can confuse those two things.
Who will be responsible for the renovation of the hotel? Have you had negotiations with someone? What is the estimated cost of the renovation?
Yes, we are negotiating with a top foreign architectural firm. As for the cost and timeframe: we will try to get it done in about 18 months to 2 years and will invest around $20 million.
Considering the amount of investment and the renovation costs, this is a great deal of money. How do you plan to make a profit?
It is important for me to keep the hotel, and not only for five years, as required by the privatization conditions. I want to make the Dnipro Hotel a symbol of the modern approach to privatization and the development of new industries. The very privatization of such level will be demonstrative for investors from over the world, and I am sure, it will become a magnet for new deals of the kind.
Speaking about profits, we consider the Dnipro Hotel as part of the ecosystem that we build. Owing to this property and the esports arena in the city center, we can make exclusive offers to tournament operators and game developers, which will choose Kyiv as a place for major international esports events. We will also create an ideal training environment for teams. And, most importantly, that, in the heart of the city! Our training facilities will be used by professional teams from the US, Europe, Asia, and the CIS. Therefore, we view the Dnipro Hotel as a strategic object providing us with unique competitive advantages and boosting the profit margins of many of our businesses.
How do you like the auction organization system?
Very much on the ball. It may be too early to tell, but I think we made a big step towards a modern and open privatization procedure. I have strong hopes that this will continue.
Have you done due diligence on the property? And what influenced the closed bid that you made?
Yes, our team had investigated the property. This being said, we were pleasantly impressed by the preparation carried out by the SPFU. Some reputable international companies were involved in the process. Baker McKenzie and DELTA Ukraine were responsible for auditing. That is why it was much easier to make a decision.
As for the bid… Buying up state property on the cheap means robbing the country and fellow citizens. I understand that this investment will not pay off soon. But I want to break the Ukrainian stereotype “after us, the deluge” and to show that business must not be concerned with instant enrichment alone. Shangri-La and Four Seasons hotels are synonymous with success. Along the same line, we dream to make the Dnipro Hotel synonymous with quality and a source of pride for Ukrainians.
Were you at the Dnipro Hotel before the auction?
Yes, of course, we visited the site. We were shown the real state of the hotel, without hiding anything. We got answers to all the questions we asked. This is a huge plus for the organizers of the auction.
Will you participate in other privatization processes?
Of course, if it would be appropriate for our ecosystem. I am sure that our plans to develop eSports as the main sport of our century will surprise you to the upside.
How does NAVI relate to this project?
NA’VI as a brand and a team has invested an incredible amount of effort in the establishment and development of Ukrainian esports and makes Ukraine famous in the international arena. Now we are building an ecosystem that will unleash Ukraine’s potential in the esports market, and NA’VI will contribute to the implementation of this strategy. For example, NA’VI has already created the Academy of Esports, which will help us to scale the project to the national level, to bring up new players, managers, and coaches.