The heart and soul of Ulaanbaatar is made up of those glorious “40,000″ apartments. Built in the 1940’s until around 1955. They have a glorious past but as the new wealthy Mongolian middle class is looking towards new apartments with envy, those older apartments have recently fallen in disrepair due to poor maintenance and lack of loving care. They are now coming back into fashion as they are well built, have great locations, and can be easily renovated. They are also becoming popular with expat tenants for their affordability and comfort.
Ulaanbaatar is, as with every city, a living embodiment of its past. Built over the last century by a variety of rulers and despots, its architectural style is a demonstration of its situation at the time. The Ulaanbaatar as we know it today was primarily built during its communist period (1924 – 1990).
Most of the original parts of Urga (as Ulaanbaatar was then known) were demolished by Prime Minister Choibalsan in 1937 to make space for the “new” Ulaanbaatar. The initial constructions were built with Soviet assistance and Chinese labour following a style of Classicism so popular with the Soviet republics of the period. The concept for those constructions was simple; to provide a comfortable and safe living space for families ordered along a precise city plan.
With streets running in parallels and perpendicular across the city, the design of those blocks was to have commercial space entrances on the street side while the residential entrances would be located within spacious courtyards filled with playgrounds and parks. Those projects were named the 40,000 families projects (for obvious reasons). Construction of those projects started in earnest in the 1940’s and carried on through to the mid 1950’s.
Two such large scale projects were carried out during this period, while a 3rd (the 50,000 families project) got under way in the early 1950′s but was never completed. From the mid 1950’s, the urbanization policy changed dramatically under the Khrushchev and Brezhnev periods as construction shifted from comfortable, durable properties to low cost, prefabricated apartment blocks. The Ulaanbaatar construction industry is only now starting to change its mindset from low cost / low quality to better quality constructions.
The 40,000 Families project apartments are of an excellent built quality, built with thick walls, high ceilings and spacious rooms. There are usually 3 room apartments (90sqms) with a separate kitchen and a single bathroom. The buildings themselves are generally 3 to 4 floors high, with commercial spaces at the bottom and apartments on top. They are found along the main avenues of the city center of UB and are usually painted various shades of pink, yellow and orange.
What makes this such a good investment?
As traffic congestion in Ulaanbaatar is getting progressively worst and as the quality of new property constructions within the city leaves much to be desired (with a few notable exceptions).
More and more expats want to live in comfortable, well built apartments within walking distance of their work but still be in the heart of commercial and residential Ulaanbaatar, essentially around the State Department Store.
As the majority of expats living in Ulaanbaatar have a rental budget between 800USD and 1,5000USD, the old but renovated 40,000 Apartments present a perfect mix of all that they are seeking, centrally located, comfortable well built apartments. Those apartments also have the benefit of charm and charisma, something that new built properties lack. Those apartments are not only increasingly popular with expat tenants but also with expat investors.
As they are structurally sound and easy to renovate to high western standards, they provide for a quick and easy turn around as well as a sound long-term investments. The major obstacle to those apartments is consistently the staircase as they are still owned and managed by the city districts (and don’t look great). They can never the less be renovated by the landlords and there are already a few great examples of this being done well and cost-effectively. The same is true of the exterior appearance of the buildings that can be easily improved. The last 5 years have seen a growing desire from the emerging Mongolian middle class to move to “new” apartments as they are perceived to be of a better quality and more comfortable as well as more prestigious.
Those ideals have suffered recently as there has increasing discontent at the poor quality of those buildings as well as the non-existent management of the properties. Over the next few years, it is expected that those “old 40,000″ apartments will return in fashion amongst the Mongolian population. Of course the location (amongst other factors) of those apartment blocks is of the utmost importance, we believe that for an apartment to be considered worthwhile of renovation, it needs to be located in what we call the 7 courtyards, those are buildings that we chose with great care and know are popular with expats in Ulaanbaatar.
With low costs of purchase (from 45,000USD to 75,000USD) coupled with low cost of renovation (from 5,000USD to 20,000USD) as well as a relatively high rate of rental (800USD to 1,500USD), in addition to a strong expected capital appreciation over the next few years, we believe this to be an excellent investment opportunity.
| Investment Facts |
| Name of project | The 40k Renovations |
| Project Location | Ulaanbaatar City Center |
| Type of Project | Residential Apartment Renovation |
| Initial Capital Investment required | 60,000USD till 120,000USD |
| Expected length of project | 2 - 6 months renovation period. Recommended length of ownership: 3 to 5 years. |
| Expected return on investment | 10% to 25% per annum |
| Expected Payback Period | 5 to 7 years |
| Scope of project | To purchase old "40,000" apartments in premium city center locations, renovate them and offer them for rental to expat workers. |
| M.A.D. Risk Rating | 2/10 - Very Low |
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