People in the know: From Russia With Love

Your company has two abbreviations - Russian and Latin. They sound the same, are there distinctions in the structure of activity of the company in Russia and abroad?

Originally our company begun activity in America as a restorer - in English the abbreviation is deciphered as restoration interiors. Our main activity was the design and restoration of monuments of architecture.

You started in the US, and then came to Russia. Has business dealing in America helped you or, on the contrary, does it sometimes hinder you?

It seems to me, that experience of American life and especially business dealing in the US has certainly helped me and played a role in the formation of the business skills and business culture that I personally have, and that all our company, which today numbers 300 people, has. It is democracy in relations, understanding business parameters and sound ambitions and the achievement of success by healthy competitive struggle. I think that America is the country of business, the country of boundless opportunities where everything is focused on success by sensible competition. It is really those principles, which we preach in the company, and we choose partners, which propagandize and profess such business culture.

Nevertheless you have not refused the idea to work in Russia...

The first of our projects was realized in Sergiev Posad - it is the construction of a town market. Of course, there is a huge difference between such projects as restoring private residences near Central Park in New York and the construction of a town market in Sergiev Posad. But we have put maximum effort into this project. For example, all navigation systems have been executed with the use of the creativity of Russian artists - a merchant household scene adapted for the modern consumer. The market has the town's first escalator. The sanitary-engineering conditions we offer visitors of the market surpass all expectations. Even if people don't need to buy anything they come to have a rest, look at the market. The second premises, which we are building in Sergiev Posad, is a shopping-entertainment and business center that will open in the summer. It was from this that the idea to create a chain of shopping-entertainment and business centers in Russia was born. As the developer, we set ourselves the task of constructing a chain of business centers and shopping and entertainment centers. Now we are negotiating the sale of these chains to a large institutional investor. That the premises are included in a package, adds certain additional costs to the offer. This offer is for those who want to diversify their portfolio and who are interested in being present on the Russian real estate market.

Do your shopping centers already have a name?

Yes, in my opinion, a very successful one - Schactlivaya 7ya (Happy Family). All cities with a coverage zone of 400 000-500 000 people in which we realize our commercial projects, in some part are merchant. Life is basically concentrated on trade: either we go to buy something, or we try to sell something. We wanted our shopping and entertainment centers to become a magnet for city dwellers, so that there was something there for the whole family. In turn, we have made the best efforts to make the place interesting and pleasant for people, and never bored there. According to our plans a roundabout will be obligatory located on the first floor, similar to that which was the collection of cartoon films The Happy Roundabout. This roundabout will become the attribute of our Schactlivaya 7ya shopping centers.

There is an obligatory set of standards: a world class supermarket, a multi-screen cinema complex, some anchor tenants, a food court, children's shop, home appliances shop, shops for women and men, cosmetics and books shops - in general, shops and boutiques which can satisfy the consumer demand of any city dweller. In addition we are guided by very high standards of culture life and civilization, therefore, even though the inhabitants of the cities in which we work, have a standard of living a little below the capital, we make the highest demands on the set of tenants, and the quality of service of the center. Therefore our partner in running the centers will be Sawatzky a company with a world name, and in selecting tenants Colliers International and Knight Frank are being used. The first shopping center will open in July in Sergiev Posad, then other complexes in Klin and Serpukhov will also open.

Thus, from a boutique company, oriented to exclusive projects, we have become a much bigger company. Our outlook has not changed, our strategy has extended, but our core business principles remain the same.

What share of the company's own funds are used?

We have a multiplane structure for financing projects. We work with credit institutions, entered the share investment fund market in December 2006 having offered our first bonded loan, and at the end of year we will offer a second. We still do not distribute profit among the shareholders - all funds are invested in new projects.

Will your company only work on the commercial real estate market?

No, we currently have a rather diversified portfolio. As I already said, we have long-playing projects connected with investments in commercial real estate (these are shopping centers and business centers). But we also have a retail business, which is connected with the construction of cottage settlements. Such diversification helps the company to maintain a constant positive balance. We have four cottage settlements, and two more are being designed. The distinctive feature of these settlements is that they are so-called green developments, we are guided by ecologically pure constructions from ecologically pure materials and the creation of ecologically pure habitation for our clients.

There is the opinion that that the term "ecologically pure" is connected with a substantial increase in the sale price. Is it possible to avoid extra expenses for ecological cleanliness?

Actually, this opinion is rather widespread. Some people simply panic when they hear "ecologically pure habitation." I should assure you, that it is categorically not so. The extra charge for ecological cleanliness is only health. In any process, in any technology there is common sense and sensible calculations. Building wooden houses from timber or cylindrical logs, we know, are ecologically pure materials. Using stone extracted from an area 350 km from the site, you do not spend huge funds and you do not use a lot of gasoline on transportation. The secondary use of water saves water resources. An increase in the glass surface helps prolong light and saves electricity. By actively plants or by simply not cutting them down you promote air clarity. And if each developer adheres to primary norms of preserving the environment, it will already contribute its share to the development of harmless construction. Although, of course, it is possible to go further - to use solar batteries for the production of energy, to make geothermal wells for the extraction of heat and cooling from the depths of the earth's crust (this, as a matter of fact, we are engaged in New York). For example, in the construction of cottage settlements it is not necessary to use asphalt.

How?

It is possible to use stone blocks, natural stone, and pebbles, and then in hot weather it is not necessary to inhale bitumen.

Do you have any ideas for large-scale projects that you have not discussed yet? We will soon begin the Eco (Double Eco) project about which I have already spoken - ecologically pure habitation. It is cottage settlement on a 100-hectare area in the Istrinsky area, 30 km from Moscow, where only ecologically pure materials will be used. It will comprise small accessible houses for the average sector of the market - a working family with two children which by means of a mortgage will have a country house measuring 180-300 sq.m for constant residing, a real alternative to purchasing a small apartment in Moscow. For the same money the family will live in a safe place, breathe fresh air, use the richest infrastructure of the Istrinsky area, play sports, go to the cinema and clubs. Near the settlement there are schools and kindergartens. Working parents therefore don't spend an hour stood in Moscow traffic jams, but drive freely along Novorizhskoye shosse.

Who developed the architectural concept of the project?

StudioAlhadeff, a western architectural bureau that will allow all our requirements to be realized.

Now doesn't seem the best time on the market to for building low-level housing and cottages....

Are you talking about stagnation? We will position and advertise our project a little differently: would you prefer 70 sq.m in a microdistrict of Moscow or 250 sq.m outside the city where you have a school, a kindergarten, fresh air, a lawn, an opportunity to leave a shop and go to a fitness-club. Influencing consumer demand is also our problem. We help our buyers to make a choice.

With what principles does your company choose areas for work? Many investors go, as a rule, to those areas where it is easier to work.

All our sites have been bought on the secondary market. Where we saw a greater economic gain at observance of those or other principles accepted at us in the company chose, certainly. We do not have cottage settlements on Rublevo-Uspenskoye shosse or 7 km [from the MKAD] across New Riga. We took from the market what was possible, and where the economic formula worked. I should say that all our settlements have absolutely remarkable characteristics, with everyone different from the other, just like people.

You spoke about your acquaintance with well known foreign architects. Could you involve them in work in Russia or would they not accept our conditions?

I had very good experience of contact with well-known architects in New York, such as companies HKL and HOK, one of which restored Beirut after bombing, and the second reconstructed Williamsburg as one of the main historical sights of the 18th century. When I came to Russia and I saw the products being offered on the market and I said that I would only work with foreigners. There were enough reasons: important economies on construction, absolutely remarkable finished design, easy designs, and an absolutely other level of construction, architecture and engineering. Unfortunately, there are obstacles with which we have collided. After 1.5 years, I have receded, and it has become necessary to work with Russian architects. Now we have got used to them and have more of a mutual understanding. Today we work with both western and Russian architects.

Is it difficult to work in several countries and how do you build your work in other countries?

First of all there is a project that might be interesting. Under the project there may be an executor - a person who can be trusted and who shares your business ethics and your ambitions regarding business.

In what other sectors of the real estate market would you like to try?

I several times tried to address the hotel business. Now, for example, in America everyone is buying hotels. Five years ago hotels were reconstructed from apartment buildings. And again everybody is currently hunting for hotels. With the correct management and correct economic model any business can be effective, including a hotel.

Some words about the most interesting reconstruction projects of private residences...

In New York we had an absolutely remarkable project - the restoration of a private residence on 64th street on east side. This is one of the best places in New York, opposite the Avenue Plaza hotel in which the editorial offices of the New York Observer had been located for 30 years. The paper occupied a private residence with an area of around 3,000 sq.m, and originally the building had been constructed for one family to live in. When I came into the building and saw "crying" stucco molding, fine works on wood which had for many years been neglected, I instantly understood that we could do something here. And though I was sure that all the previous visitors had simply jumped aside and escaped (it was impossible to make out the beauty of the interiors for the piles of newspapers and computer wires), we quickly bought the private residence and have invited designers to take part in a design show. After 11 months the building was very successfully sold.

Did the value of the building change after it had been restored?

It trebled. Practically with minimal investment because when we did the design show the involved designers restored objects using their own funds.

A very interesting model. We still don't have anything like that.

We just don't have as many designers who are willing to pay $30 to acquaint themselves with creativity.

Some words about your design experience...

I enter into a premise and I precisely know, what is needed to be done. I know exactly what it will be after I have touched it. As I started to work as a designer I was able to appreciate each centimeter of space so that it worked for the blessing of the inhabitants. The most important problem is getting rid of corridors and wasted space, we need open space. It is the first thing, i.e. we rescue each centimeter of the area, and transform it into a storage place. Secondly, your design should unequivocally adhere to the place where the premises is, to the architectural forms of this or that building in which you create. And thirdly - you and your life style should be reflected as necessary in the project.

If you do the project for the market, there are certain assumptions and requirements which need to be observed so that the premises is as attractive as possible. Today white walls and light floors are fashionable, tomorrow beige colors and dark floors, today it is Versailles parquet, tomorrow - stone... You simply have to constantly balance on the edge of the market, but always be a little ahead of it, understanding that urgency is the key to success. Fortunately, in New York I managed to achieve recognition for the projects. For this I get paid a little more. The brand, in this question, has great importance.

Where were you trained?

To tell the truth, it is simply a hobby, which has grown into a trade. I have not been trained anywhere and have simply read many books and magazines, I look on the parties much, I visit exhibitions, I am friends with a lot of architects and designers who share novelties, pleasures, trends.

Who are your professional idols?

My favorite architect is Frank Gary. And in the field of design I have some favorite designers whom I would not call idols. I very much like Zaha Hadid and if we're talking about interior design then Francois Katro - a coeval and colleague of Iva San Loren. I can thumb through a huge quantity of magazines and if Francois Katro's design is in there I will see it.

How much you could overcome the reprehensible attitude of some foreigners towards Russians? Sometimes it still takes place.

For me it was easy enough in the business world. It is much easier for me to work in the West, to find and establish a partner, client relations, than here. As a matter of fact I probably left Russia 20 years ago. If some people consider Russians as inferior and say: " Oh, you're Russian," I am sorry. It means that they are not partners and acquaintances with whom it would be desirable to spend time with and do business with. In the last few years rich people have begun to chase after Russians, which has aggravated the situation even more. You should never underestimate the other side, therefore it is always better to think about which "message" you want to show the world, and aspire to it, not taking into account that somewhere it may be passed on to a fool. All people in our company and all our clients are taken seriously, this is our credo.