People in the Know: Under Water and Earth

The problems KRT encountered while working on the Golden Island project in the Zamoskvorechye District of Moscow have given rise to rumors that the company was facing a predicament. That is not the case, Gusev insists. KRT, he says, still plays an important role in the project to develop Bolotny Island into the so-called Golden Island of Moscow, addressing problems of both a financial and geological nature.

-KRT-Megapolis, which is a part of KRT Group, was harshly criticized by the Moscow mayor and stripped of the right to coordinate construction work within the Golden Island project “given the company’s non-constructive approach towards interaction with city hall and investors”. What is your role in the project today?

KRT has been and remains a full-fledged and active member of the work group in charge of coordinating and responding immediately to problems arising in the course of the implementation of the Golden Island program initiated by our company and adopted by the government of Moscow.

On the basis of the Moscow government decree, I belong to the work group set up under the coordination board for the development of the Golden Ring tourist and recreation zone. Golden Island is a part of that zone. The data accrued by our company and the work we have already accomplished are used in tackling most issues.

On Nov. 11 the public town-planning council under the mayor of Moscow examined three concepts for the development of the pedestrian zone stretching from the Cathedral of Christ the Savior to Yakimanskaya Embankment and the areas adjacent to it, and approved the variant proposed by out design bureau, KRT-Project. That happened after the company Moskapstroi was named the chief coordinator for design and construction. The plan proposed by KRT differs greatly from the plan adopted earlier.

That is an important part of the project. We will see the emergence of a unique new location. An 11-meter high pedestrian overpass will lead from the cathedral across the Moscow River and the island where the Krasny Oktyabr confectionery plant is situated, then across Vodootvodny Canal towards a shopping mall on Yakimanskaya Embankment (a project by KRT. – Vedomosti).

What is good for us is that KRT has stopped carrying out work related to the program at its own expense, bearing costs that grew daily while the procedures for their reimbursement had never been determined. In the same way, the sources for financing the development of the transport and engineering infrastructure, estimated to be worth $550 million, have never been determined either.

-But why then has KRT, being the author of the program, failed to retain its key role?

Considering the scale of the Golden Island project and the composition of the participants (they are the Sberbank, Rosneft, Guta and Dekra groups), no private developer, and KRT is no exception, had sufficient connections and influence (so-called ‘administrative resources’) to tackle all the technical issues.

This will always be true for any area where projects are implemented on such an enormous scale. The example of the Moscow-City business center proves that.

That is why we can only welcome the move by city hall to involve the city-run organizations, such as the Moscow Department for Town-planning, Development and Reconstruction, the Moscow Committee for Architecture and Moskapstroi. Their arrival has brought hope that a number of problems can be solved, especially those relating to work financed from the city budget.

The role of the key coordinator of the project was important for us, primarily, at the early stages of preparation, preliminary design work and the development of the plan as such. At that stage a uniform approach was vital. We accomplished our task at that stage fully.

-But uniformity plays a no less important role at further stages of the project as well, doesn’t it?

Of course it does, and it is vitally necessary. Just imagine that there are four major developers and landlords on the island, each having sufficient administrative and political resources, which enables each of them to seek more benefits for himself alone, ignoring the interests of the others. That is why certain things began to happen that were damaging to the program.

For example, the project for the development of what could have become Europe’s longest underground pedestrian passage had to be abandoned after one of the participants refused to allow construction of underground facilities on his territory. Another construction firm had built a sewage pipe with a diameter two times smaller than envisaged in the plan.

For quite a while, Guta Group, the owner of Krasny Oktyabr, together with the former executives of [Moscow energy company] Mosenergo quite successfully opposed the plans to build up the Spit of the island in the area of the pedestrian overpass closer to the Cathedral.

Guta insisted the new construction would spoil the view from the windows of the residential estate to be raised on the territory of Krasny Oktyabr. Mosenergo’s former executives refused to discuss any construction of piers for the overpass and would not cooperate on the issue of moving and revamping obsolete energy facilities scattered around the area, and refused to issue specifications for the reconstruction of Sofiiskaya Embankment.

We cannot allow each developer to build his section of communication lines as he pleases. There should be a single coordinator in charge of laying all the networks, coordinating the design and construction. There should be a single schedule. That is an enormous task, which, unfortunately, is not being addressed now; no work is being carried out to ensure the geological and technical safety of the underground section.

In a bid to save on costs the developers are trying to abandon plans which could bring profit in the future, after all the properties have been built. Our calculations show that the cost of property on the island could grow approximately 1.6 times should the comprehensive program for its development, all underground facilities included, be implemented in full.

Unfortunately, it has been decided that the underwater car park to be built in the area should stretch all along Vodootvodny Canal. We can only hail such an idea, but its implementation would mean that the plans to develop the unique Water World complex across the street from Repin Boulevard would have to be abandoned.

The Water World was to be linked to the second building of the Tretyakov Art Gallery, the shopping arcade beneath Repin Boulevard and a multifunctional complex between the Bolshoi Kamenny and Maly Kamenny bridges with underground passages.

-The Golden Island project was conceived years ago. Are there any tangible results as yet?

I first encountered problems with the development of Bolotny Island 16 years ago when I held the post of a deputy head of the Oktyabrsky District.

As to what has already been accomplished, that would, of course, be the program itself, based on the plan for socio-economic and town-planning development for the Yakimanka area that was penned by us at the request of the prefecture of the Central Administrative Area (Okrug) and approved by the Moscow government in 1994.

While we were working on the town-planning program for the Golden Island our main task was to ensure transport accessibility and to develop pedestrian links, with an emphasis placed on the development of tourist, recreation and hotel facilities matching international standards and convenient parking facilities.

Should the plan be fulfilled without being radically amended, the area will have the largest pedestrian zone in the city, designed by the best architects from Moscow and abroad, with street-level and underground facilities, catering for hundreds of thousands of visitors of all ages at any one time.

There is little doubt that the renewed development of the Kalinin metro link and the Kadashevskaya metro station, launched and then almost immediately suspended years ago, is down to our achievements.

Also, we have prepared a detailed comprehensive plan for the development of engineering systems for the residential areas 357-361; the decision has been taken to transform Sofiiskaya Embankment into a pedestrian zone and to develop an extra route that will run parallel to the embankment, over the waters of the Moskva River.

Moskapstroi performs its role as a technical coordinator very well, but development is not their field. That is why we are continuing to work on the pedestrian zone, trying to ensure that the ideology of the program remains unchanged.

-What is your interest?

KRT has invested in the development of a large area on the island. The future of our projects hinges on the future of the program as a whole.

For example, we are planning to construct a unique micro-district featuring a prime residential estate, Eolis, a 5-star hotel, recreation zones and corresponding public amenities on the territory of the Kremlin Constellation zone (area 359, near the Kremlin).

Architect Manolo Nunez, the man behind famous projects in France, Spain and Belgium, has been invited to design properties for the Kremlin Constellation.

An interesting solution has been proposed for the 150,000-square-meter Eolis estate where the courtyard is to lie 7.5 meters below street level, which makes it possible to build a closed-in space with an artificial pool and a garden.

-A courtyard seven meters deep? But will the residents have any natural light there? And what will those facing the street see from their windows – a wall?

They will, indeed, see the sky. When you enter the courtyard it won’t feel as though you are below street level. Facing the street there will be modern or reconstructed historic buildings with their own entrances, with cafes and restaurants. The estate is conceived as a work of art designed by one of the world’s leading couturiers. The design of the interiors and public areas will be unique. It will be expensive, but this is not the place for penny-pinching.

The project is estimated to be worth $270 million. That is the amount that will have to be spent before the apartments start being sold. At the moment we are considering a plan to hold a permanent auction allowing anonymous bidding, to sell properties there. The price for such a unique development has yet to be set.

-Given the highly complicated geological situation in the area, the abundance of planned underground facilities is amazing. How does that tell on the cost of the project?

The situation on the island is definitely complicated. The island itself is sinking by several millimeters each year. The layer of debris, waste and the other results of human activities in the areas 357-361 is as high as 8 meters, beneath which there is a layer of lacustrine and marsh sediments measuring up to 4 meters.

Most properties in the area are in dire need of repairs. Besides, beneath the territory of the areas 357 to 359 lies the eroded subterranean river-bed of the Moscow River.

Virtually the whole district is inundated; in some areas subterranean waters are highly polluted by sewage or their temperature runs as high as 28 to 35 degrees Celsius, which considerably exceeds normal levels and highlights the poor state of the heating facilities.

In such conditions, subterranean water levels tend to rise and recede as a result of the construction of underground facilities, which leads to flooding. That, too, tells on any old or new construction.

That is why the main requirement that underground development has to meet is the safe compatibility of existing properties with newly erected buildings. In this area it is more expedient to go not just two but seven stories deep, remove the polluted soil and erect concrete structures to stabilize it.

While in other areas the development of underground facilities could prove detrimental to the project in terms of costs, for the Golden Island it is a blessing, given the enormous value of every square meter that will be built here. Their price will be incomparably higher than the cost of construction.

But such works require close monitoring of safety measures to prevent accidents such as the one that happened during construction of the Tsaryov Sad complex on Sofiiskaya Embankment where half of the 4-storied house next to the building site collapsed.

-How would you comment on KRT’s debt to Tokobank and the seizure of the company’s property on Bolotny Island?

KRT Group is a union of over 40 legal entities. One of the firms, which is a part of the group, secured a $14.5 million loan from Tokobank in 1997. The debt was to be paid back in late 1998 – early 1999. The company had had no misgivings whatsoever about the repayment or accrued interest

However, faced with temporary difficulties arising partially from circumstances beyond our control, i.e. the August 1998 crisis, we had to ask the bank to reschedule the repayment. Unfortunately, the parties failed to come to terms, first and foremost, because Tokobank itself had gone bankrupt.

In the summer of 1999, one of the firms (Adriatika Service, represented by MFK Bank. – Vedomosti) who took part in the seizure and subsequent bankruptcy of Tokobank purchased the right to claim the debt for $200,000. (Now Adriatika Service is demanding repayment of the $15 million debt from KRT. – Vedomosti).

The parties then signed an amicable accord endorsed by the court and executed in full by KRT. In line with the terms of the agreement the group ceded its title to the Kopernik project, situated next to the President Hotel. However, the other party then revised its stance and withdrew from the deal, and has been staging raids in numerous attempts to take over the group’s assets ever since.

A number of criminal cases were launched at our request. But I would rather not get ahead of events. Those cases may end up being probed jointly by the Interior Ministry’s branch of the Central Federal District. We assume that we will not allow any hostile parties encroach upon our interests, whatever methods they use.

-Was any of your property impounded?

In the official registers, there is no indication that any of our property is under arrest. The criminal charges were dropped and the Interior Ministry is currently carrying out a final check. That is why many questions remain unanswered.

-Have relations between the developers and city hall changed over the past decade?

They have changed a lot. The participants have changed, as well as the political and economic environment.

In the early 1990s the notion of a “developer” was only being formed; many sought success in that field. To establish a dialogue with the city administration the developers of the first wave often forged all sorts of alliances and unions.

These days, there are just a handful of major developers who maintain contact with the city authorities and have gained their trust through professionalism. They represent the second wave, so to speak.

But lately the Moscow property market has been attracting major companies on a national scale, those who have made fortunes on raw materials and privatization.

It is quite likely that we will soon see a further expansion of the financial giants of the third wave, with acquisitions and unfriendly takeovers of professional developers, especially after the incumbent mayor’s term in office expires. We have to be prepared for that.

-Are you prepared?

We are already past the first and the second stage, and I hope we will survive. But many development firms active in Moscow these days may change hands… Although… You can have all the money in the world but it is useless if you lack professionals, who are few and far between on the market and their number is growing very slowly.

-You began your career as a city official. Then, you became a developer. What lies ahead? A top manager in Deripaska’s group?

Not so extreme! The prospects could be of a political or scientific nature. In its time, a certain company which is now one of the five leading nationwide companies in Russia, sought to swallow up KRT in an attempt to establish a monopoly in Moscow. It took me a couple of months to realize that I risked losing not only real estate property but also my job, because they would have been able to fire me at any moment. I am an independent person and prefer to be guided by my own principles, not by someone else’s orders.

-Is the Golden Island KRT’s largest project?

Our largest project is the construction work in the districts of North and South Butovo. The project is being implemented under the aegis of the Agriculture Ministry. In particular, we plan to build a shopping center on a road junction above the Moscow outer ring road (MKAD), linking Butovo and Yasenevo.

We also plan the development of a 350,000-square-meter residential community, Butovo Kremlin, featuring a golf course, restaurants, country-houses, etc.

Another interesting project, Tropical Islands, envisages the development of a leisure and entertainment complex measuring 650,000sqm and featuring palm trees, seawater, genuine beaches and tribal villages. A major technology park is also planned.

-You entered the out-of-town property market by launching the Drugiye Berega (Other Shores) project. Is that your first project in that sector?

Yes, it is the first one. We were involved in the development of prime properties in the city center and missed a certain stage in the development of countryside real estate when it was still possible to shape the rules of the game on that market, which other developers then went on to do. Mass production began. At first there were plain brickwork developments, and then developments of a higher quality appeared. But most of the countryside properties can hardly be viewed as prime developments.

-Could it be that you’ve arrived a bit too late? All the land in the areas around Moscow have already been built up.

We are not trying to catch up with anyone or copy what has already been done. Today we are working on a completely new product in Ozerna, in the Ruza District, featuring a private nature reserve with wild animals, but also a casino and a golf club. This will not be the kind of place where you can drive to work from every day, but a place where you come to rest emotionally.

-How did you secure the building plot?

The project was conceived by KRT in the early 2000s. In those days the Defense Ministry addressed KRT with a request to assist in the closure of a military base in the Ruza District of the Moscow Region and the resettling of military officers and their families.

The authorities from the district and the Moscow Region, as well as the Defense Ministry’s units were facing a legal impasse because no one was willing to maintain the facility, while the servicemen and their families were the ones to suffer.

We came up with our plan of action and submitted it to the district authority and the defense officials. As a result, the servicemen were provided with modern and comfortable accommodation, the district adopted a comprehensive plan for the development of the area while KRT was able to launch the Other Shores project – one of the most interesting and promising countryside development projects, according to experts.

We have already completed the construction of houses for the military servicemen. A children’s summer camp and a yacht club were commissioned over a year ago. Construction of the entire complex is expected to take three years.

-How will the countryside property market develop in near future?

On the whole, the out-of-town property market is developing in the same way as that of Moscow. Investors, together with the regional authorities, determine the development policy of new sites. The investors are the same lot from Moscow.

The approaches towards the leisure and recreation industry require rethinking. Many old resorts are no longer capable of coping with large crowds on weekends. But the government of the region has adopted a clear-cut plan of action for developing recreational facilities. With the rules of conduct on the market set and the tasks defined the investment climate is becoming more favorable.

Construction of the new outer ring road – TsKAD – will give a strong impulse to further development in the region. Many abandoned sites may get a new lease of life and attract investors.

In about five years from now the region will change beyond recognition. New resorts and tourist centers will mushroom across the countryside. The availability of vacant hotel rooms will not be enough to excel. We believe that each property, especially in the sphere of recreation, has to be special. The time will soon come when foreign tourists, too, will willingly visit the Moscow countryside. We are counting on that with the development of Other Shores.

KRT Group, established in 1991, is a union of over 40 domestic and foreign firms. JSC KRT employs 270 people. KRT was awarded a gold medal for high quality business practices and the prize for the best prime residential estate in 2003 by the Moscow government. KRT is the author of the programs for the development of Yakimanka and the Golden Island.

The Golden Island program was adopted by the Moscow city hall in 2003. The project envisages the development of over 1 million square meters of prime office, retail, hotel and residential properties along the Bersenevskaya, Sofiiskaya and Bolotnaya Embankments. The project is estimated to be worth $2.7 billion.