A full-scale war became a serious challenge for Arricano: part of the shopping mall temporarily did not work, the teams acted in conditions of constant risks, and the operational processes had to be quickly rebuilt. The company focused on security, support of tenants and preservation of financial stability, expanding the powers of local teams and strengthening interaction with local businesses. Despite personnel, infrastructure and economic difficulties, Arricano was able to ensure the stable operation of its projects and adapt to the new reality.

About how the company goes through this period and what decisions have become key, Property Times spoke with Anna Chubotina, CEO of Arricano.

PT: How did the war affect Arricano's activities and your key business processes?

A.C.: The first months of the great war were the most difficult. Some of our shopping malls were under threat, did not work for some time, then gradually resumed their work, starting with tenants who offered the population essential goods. We thank our partners and colleagues who took the risks of working during the war, including in the frontline cities, which are now Zaporizhzhia and Kryvyi Rih. Thanks to the dedicated work of our teams in the field, we quickly rebuilt operational processes, focused on security and communications, supporting tenants in resuming their activities in our projects, and helping the military and communities of our shopping malls.

The war taught us speed and flexibility. It helped us a lot that some of the business processes were automated, so remote management and reporting were established in a matter of hours. At the beginning of the war, our office employees partially worked in a remote format. Now the employees of the central office, with some exceptions, work in a hybrid format, which, in my opinion, is more effective than remote. Part of the working time we come together, which contributes to strengthening interpersonal ties, building trust, creativity, synergy, and quick decision-making. As for the shopping mall, here, technical specialists, cleaning, security, administration — everyone is always on the ground.

PT: How did you adapt the management of the shopping mall network in wartime?

A.C..: The main change is that we have significantly expanded the powers of teams in the field. This allows you to quickly respond to the context and, accordingly, make decisions, taking into account the dynamically changing operational situation. Not all details and nuances can be objectively assessed from the central office. For example, if the anxiety is all day and the staff is emotionally and physically exhausted, the director of the shopping center can independently make a decision and offer the tenants to close on such a day earlier, notifying visitors about changes in the work of the shopping mall.

PT: How has the company's strategy for working with tenants in conditions of war changed?

A.C.: We are consistent in our principles of building mutually beneficial transparent cooperation and trust. Since the beginning of the war, we have increased marketing support for our tenants. We also more carefully assess the effectiveness of their work in order to be able to quickly respond to requests for discounts and marketing activities. There were cases when colleagues in the shopping mall helped tenants with the search for personnel, because now it is one of the key problems on the ground. Upon request, we can recommend project or contracting companies with which we have successful experience of cooperation. This is especially true now, when, due to lack of personnel, it is very difficult to find repair teams, especially in frontline cities.

PT: What challenges do your tenants now face and how does the company help them in this situation?

A.C.: What is more often a challenge for large network companies to improve efficiency is now a matter of survival for small businesses. In our regional projects, a significant part of private entrepreneurs, who find it very difficult, because financial stability is low. We support such tenants, where it is really justified, with discounts, marketing communications, advise on the design of storefronts, signboards, product offerings, etc. Also, the issue of personnel shortage is very acute for everyone. In our regional cities, tenants constantly face difficulties in finding personnel.

PT: Did you have to change your financial strategy, taking into account the current risks?

A.C.: Until 2022, we planned to invest in new projects, but after the outbreak of the war, the priority changed. The main goal is to maintain financial stability, minimize losses and ensure business continuity. We continue to work in cost optimization mode, considering them from the angle of expediency and efficiency. All non-priority expenses are reduced or deferred to future periods. We negotiate with our banks to restructure loans if we understand that there is a risk of default due to events that we cannot influence. For example, in 2024, damage to the Sun Gallery shopping mall and a significant decrease in rental income for this project and the need for funds to restore it increased the pressure on the financial stability of the company. It helped us that all counterparties met our deadlines for fulfilling obligations. Financial flexibility allows us to quickly adjust plans in response to crisis events and reduce their impact on the company's revenue.

PT: To what extent do the sanctions imposed on individual shareholders or related entities affect the company?

A.C.: We work in the usual format. Shopping malls receive guests, tenants work effectively on the ground. The Arricano team continues to ensure the uninterrupted operation of the shopping mall, to support tenants and to fulfill all obligations to partners, the state and employees. But, of course, when it became known about this decision of the President in June this year, it was a shock for the whole team. This does not facilitate our work, adds psychological pressure, which is increased by uncertainty during the war. But business in Ukraine, unfortunately, has been working not thanks to, but despite. Therefore, we continue to do our job with dedication and hope that Arricano's shareholders will be able to restore justice to themselves. Currently, lawyers are analyzing the legal grounds for imposing sanctions and preparing the necessary procedural documents for their appeal in the prescribed manner. 

PT: How does the international owner of Arricano assess your work in Ukraine in conditions of war?

A.C.: This year I take part in the work of the working group Risk and Resilience of the European Council of Shopping Places (ECSP) and see how my European colleagues react to how effectively we manage our shopping malls despite war risks. For many foreigners, this looks like a miracle. But we know that behind this miracle there is a lot of work and dedication of each of our team. In general, the Arricano shareholders have always had a high assessment of the team's effectiveness, and especially with the beginning of a full-scale invasion.

PT: Arricano is one of the few development companies in Ukraine whose shares were traded on an international exchange. How did the war affect your public status?

A.C.: At the beginning of the full-scale war, the shareholders decided to leave the exchange, because staying on it required significant budgets, did not give access to attracting financing due to military risks, and these funds were needed to support the team and assets in Ukraine.

PT: Do you consider the possibility of additional listings or other tools to raise capital after the victory?

A.C.: Until the summer of this year, the shareholders of Arricano considered various options for raising capital and investing in the Ukrainian economy. I can assume that the issue of new investments in business in Ukraine is definitely not on time. I think it depends on whether the company's shareholders can achieve justice in the legal field.

PT: What projects does the company rely on in the near future?

A.C.: Our focus is now on ensuring the smooth operation of existing projects and the financial stability of the company. Back at the beginning of the year, we had thoughts about the resumption of active construction work on the Lukianivka shopping mall project, but now this issue is not on time.

PT: At what stage is the project on Lukianivka and how is the restoration of the adjacent historical buildings progressing?

A.C.: The construction of the Lukianivka shopping mall has been suspended, but some work on the site is underway. During one of the August enemy attacks on Kyiv, the building of the shopping mall was partially damaged. Fortunately, no one was hurt. Provided that financing is attracted to the construction, we plan to return to the active phase of the project. According to our estimates, the project can be completed in 1.5 years.

PT: How important is it for you to combine the commercial function of the shopping mall with the restoration of the urban environment?

A.C.: Indeed, it is important for our team that the shopping mall not only performs a commercial function, but also organically combines with the urban environment, creating a new quality of space.
We view revitalization as a complex redevelopment process:
•    of territories — through the development of public spaces;
•    of buildings — through the restoration of architectural monuments;
•    of the infrastructure — through the renovation of transport and pedestrian areas.
In fact, the project of the Lukianivka shopping mall is the first complex in Ukraine, which includes two architectural monuments at once — the building of the Lukianivka city railway park and the former power plant. Our goal is not only to restore their authentic appearance, but also to harmoniously integrate new volumes into the historical environment.
PT: Do you see prospects for the development of new formats of shopping malls in Ukraine?

A.C.: In Ukraine, the redevelopment of shopping malls, which are updated to maintain competitiveness, continues, as well as the interest in retail parks and district centers, especially in smaller cities of central and western Ukraine, increases.
The main trends in development are the creation of multifunctional hybrid spaces where retail, gastronomy, culture and leisure are combined, the share of public areas is growing, and online and offline experiences are integrated into leisure. In general, the market is transforming from traditional shopping to a format that offers people experiences and impressions, forming a certain lifestyle and stimulating the cost of goods and services.

PT: What international practices of shopping mall management do you plan to apply in Ukraine in the near future?

A.C.: We upgraded the visitor accounting system in the Rayon shopping mall and partially in our other shopping malls, where linear meters were replaced by 3D meters to improve the accuracy and efficiency of flow analysis. We plan to complete the update by the end of next year.

We installed an upgraded BMS (Building Management System) — an integrated software and hardware complex that allows you to centrally monitor and manage the engineering systems of the building from a single interface. The goal is to ensure efficient, safe and comfortable operation of the building, optimize energy consumption and improve the quality of services.

We launched a consolidated visitor accounting system in a single Power BI dashboard, which allows:
•    promptly analyze attendance in the context of the facility as a whole and zonally;
•    identify dynamics and trends, compare indicators by periods and locations;
•    make management decisions based on transparent and comparable data;
•    increase the effectiveness of marketing activities and operational processes.

Under favorable conditions, we plan to return to updating the platform for communications with tenants and service companies serving the shopping mall. We also want to integrate the tenant sales collection system. We have already done several iterations and, unfortunately, remained dissatisfied with the products we worked with.

PT: Is Arricano considering the possibility of launching new projects in the regions of Ukraine?

A.C.: The focus of the Ukrainian company is on the development of working shopping centers and the completion of the construction of the Lukianivka shopping mall. The shareholders have always had development plans in regional cities of Ukraine. I think they will be ready to return to the implementation of these plans only if they restore justice to themselves and their business in Ukraine. At the moment, the launch of new projects is definitely not on time.

PT: Do you plan to revise the format of the shopping mall towards greater multifunctionality (offices, coworking spaces, housing)?

A.C.: We are constantly strengthening the tenant pool, taking into account the trends in commercial real estate and demand for a particular category. Today, in our existing shopping malls, we are expanding the representation of the sports category, F&B, of course, we attract high-quality fashion operators. There is currently no such need to revise the format, this is confirmed by the fullness of facilities and demand. We continue to monitor the market, competitors, transformations in the requests of our target audience to be one step ahead.

PT: How do you think the Ukrainian commercial real estate market will change after the war?

A.C.: A gradual recovery in demand is expected from international and local retailers, who are now waiting for the situation to stabilize. There is a growing interest in multifunctional formats, where office, shopping, entertainment and residential functions are combined in one project.
Energy efficiency, sustainable solutions, safety and quality of infrastructure will play an important role. At the same time, the development of commercial real estate in specific regions will largely depend on economic and demographic factors: on the revival of industry, the return of the population, as well as on how programs for the restoration of critical infrastructure and the development of small and medium-sized businesses will be supported at the state level.