Waiting for the Good Times

By Michael Willard

By accident more than design, Mohammad Zahoor is a steel man. He knows steel, and has never trusted outside advisors. He did his own homework, and that made him a near-billionaire.

During the two years after selling his steel holdings in Donetsk, however, he trusted consultants as he pumped some of his wealth into new ventures in areas where he had little experience. The advisors were well-intentioned, but their advice cost Zahoor millions of dollars.

The Pakistani-born British citizen is on a new learning curve now, in his post-steel days. The betting is that he will succeed in his media and real estate forays, but he admits to some disappointment: A good return on his new investments will require time - and a favorable economy.

I met with the 55-year-old Zahoor on a Saturday morning in his well-appointed Istil Group office above a Maserati dealership on Shevchenko Boulevard. He was casually dressed and recovering from jet lag, having just returned from one of his many trips abroad.

I have followed Zahoor's career for years, and consider him Ukraine's most successful expat - primarily because he is an entrepreneur, rather than a hired hand. In the past, my company, Willard, has done work for him, though not recently. 

When Zahoor sold his Donetsk steel company, he invested primarily in media and real estate. "I sold (steel) at the right time and invested at the wrong time," said Zahoor, who primarily invested in satellite television, hoping to form another Sky or Canal Plus network.

He also invested in real estate, including $35 million in the landmark Leipzig Hotel site.  The Leipzig opened its doors in 1900, but has been shuttered for years. However, it is one of Kyiv's most visible and majestic buildings.

Zahoor lined up EBRD co-financing for the new hotel, but still feels it is optimistic to think the facility will make a 2012 target opening date. He is looking at various international hotel chains to manage it.
With his investment in direct-to-home television (Poverkhnost Group), Zahoor said he had the right strategy but the wrong Ukrainian management. His losses were substantial.  His real estate ventures were market-priced - but the market took a tumble in 2009.

"We did analysis. We did due diligence," said Zahoor of the satellite venture. "But unfortunately, I was wrong. It was mainly human error, and quite stubborn and bad management on the Ukrainian side. We ended up giving the company back to them."

However, as is characteristic of an entrepreneur, Zahoor is optimistic about the future. "We will make up our losses over a longer period and with a smaller investment in direct-to-home television," he said.

Zahoor has had some success in television programming with his Istil Studios, and believes this is an area that will grow and pay off over time. The studio currently produces several popular television programs.

Perhaps Zahoor's smallest investment - the English-language Kyiv Post newspaper - is his most visible, particularly to the expat community. He seemed to light up when talking about the newspaper and efforts to make it more interesting and readable. It has been published that he paid $1.1 million for the publication.

When Zahoor bought the Post it was in decline. It seemed that its best years were behind it. It was physically difficult to read due to poor paper quality, and the news reporting seemed but a shadow of its former self. Zahoor added quality paper, and gave additional reportorial resources to chief editor Brian Bonner.

Still, he said, "I am a hands-off publisher." Zahoor said he has only once written an article for the newspaper and that was to urge a Jewish group opposing his purchase of the Kinopanorama cinema to meet with him and discuss the issue.

"Every person owes something to the community. I believe I owe something to the expat community that has been supportive of me," Zahoor said, explaining why he bought the newspaper. "Whenever we had problems, the expat community has been there for us."

Zahoor said the newspaper was "not something that is there to make money. It is there to bring news that is not biased so that the public can understand better the atmosphere in which they live and work. It's there to help people make educated decisions."

The newspaper has been fearless at times in attacking the current government, yet Zahoor says there has been no backlash. "If someone suppresses the Kyiv Post, everyone would immediately know. [Those in power] understand that - the people reading the Kyiv Post include foreign diplomats."

Zahoor suggested that the newspaper actually is helpful to the government because authorities can point to its straight talk and deny that there is censorship in Ukraine. "So, we have never been approached by anyone to stop writing on a topic," he said.

The path Zahoor took to Ukraine began when he was just 19 and won a scholarship sponsored by the Pakistani government to study the steel industry and its inner-workings. More than 60,000 young people applied, but Zahoor was one of only 43 chosen.

Though he had not been interested in steel, he saw there was opportunity. Pakistan was building its steel capacity at the time. When he concluded his education in Donetsk, he had a five-year commitment to work at Pakistan Steel, where he became a rising star.

Then the Soviet Union invaded Afghanistan, and that led to a series of problems, since Pakistan supported the United States in condemning the invasion. Having married a Russian, Zahoor said he was told he would go no further up the career ladder at Pakistan Steel. He was only 29 years old at the time.

After securing a job with a Pakistani company that primarily worked trading in textiles, Zahoor packed his bags and left for Moscow. He got the company interested in trading in steel and other commodities.

He was back in the steel business. For the next few years, he traded in steel, working with a partner from Thailand. When the Donetsk mill came up for privatization - and it owed Zahoor $19 million at the time - he competed and won the tender.

"Most people thought I was throwing good money after bad," said Zahoor.
Instead, he targeted areas of the mill that could be profitable, and separated those which he felt would not succeed. In the process, he paid off the steel plant's $50 million debt.

In 2008, he looked at the steel market - particularly in China - and felt it was time to sell. "China had built steel mills and used a lot of steel in preparation for the 2008 Olympics. When the games were over, I felt they would have overcapacity and would begin exporting, driving the price down."

Almost immediately after he sold the business, the steel market took a nosedive. Zahoor walked away with a fortune estimated at between $500 million and $1 billion.  That gave him the opportunity to begin his new career in real estate, media and entertainment.

Zahoor is married to Natalya Shmarenkova, better known as the singer and actress Kamaliya, who in 2008 won the Mrs. World title.

So, I asked him: "Being a billionaire, having a beautiful wife and being able to travel and go to exotic locales anytime you wish, do you ever ask yourself, is this all there is?"

"It gives me comfort that I have somewhere to go and sit when I go to pension," he laughed. "When I was young, I worked 20 hours a day. I still work 20 hours a day."  That, one might conclude, is how to become a billionaire.