Money Growing: Expensive, Unprofitable, Prestigious

In the first two cases (the planetarium and dolphinarium) they have not managed to overcome problems yet, but in the third case difficulties have been easy enough to overcome thanks to the concept of the western model: the level of entertainment raises the profitability of the project, and so the appeal to an investor. Sergey Lyadov, press secretary of investment development company City - XXI Century, notes in connection to this that the “the construction of a unique premises may be attractive for investments if in the future its commercial operation is provided for. If it is intended mainly to perform social-public functions, financing the project with private finds is extremely problematic.”

Not only stars

The first planetarium in the USSR, opened in Moscow in 1929, was constructed in just one year. The cultural-educational center has survived a war, and was closed only once for two months. The planetarium continued to work until 1994 when it became clear that the building which had never undergone any major renovations since opening, needed complex restoration. This is still in process.

In 1994 the estimated cost of renovations was $9.6 million (data from the planetarium.ru website). In 1997, a creative workshop of the State Unitary Enterprise MNIIP Mosproekt-4, under the leadership of Alexander Anisimov and Olga Semenova, started work on creating the complex reconstruction, restoration and re-equipment project of the Moscow planetarium. The main idea of the project, which belonged to Anisimov, who holds a PhD in architecture, winner of a State Award of the USSR, and honored architect of the Russian Federation, was to raise the planetarium building by 6 meters.

“It was a hopeless situation,” says Anisimov. “We needed to make a museum, an attractions hall, a cafe, an astronomy area and, in addition, a whole array of technical premises (ventilating chambers, etc.), in the end when everything was counted up, it turned out that the prospective area exceeded the planetarium by 4 times. And as it is a monument of architecture, it was impossible to affect the composition of the building and we therefore decided to hide the "additional options" under the building, to 2.5 lower floors, and to raise the level of the ground.”

In carrying out the work Anisimov relied on his personal experience (in the 1960s he created the competitive Museum of Astronauts project which has a planetarium, in Kaluga), and also foreign experience. "In 2002, a small planetarium in New York was completed; an old building was taken down and a new one constructed, and it cost $250 million. In Chicago a planetarium from the 1930s was reconstructed. This cost $50 million,” says the architect. However, abroad such premises are supported by the Government.

Anisimov's project, incidentally, was recognized as the best for the period of 1995-1997. Reconstruction began in 2002. The prospective cost was $35 million. By 2004 the most complex part – raising the building above the level of the ground - was completed. "Now the planetarium stands on its original ramp, as a result the building has only benefited: it has become visible from the city, the astronomy area is raised on the horizon,” the architect says. Then the restoration of the building itself started. "In 1929 they built quickly - in a year, but not using the highest quality materials, the country then was rather poor, therefore already in 1994 the building was unfit for use: walls were frozen through, the dome and stained-glass windows were made simply of metal and consequently rusted. It was necessary to change a lot,” Anisimov continues. Other things were also constructed that were not in 1929, for example a ladder from the lobby into a socle. Something absolutely new is also planned: the top level of the building and an area in front of Barrikadnaya metro station will be connected with a suspended glass bridge, its design is already almost completed.

Almost all the work connected directly with the construction of the Planetarium, is coming to an end. However at this point financing has unexpectedly stopped. By that time, from the capital spending sights of $35 million only $18 million had been spent. And although there is only painting and decorating work left, it still demands considerable investment. Anisimov notices: "We cannot build just anyhow because the planetarium has to become a large science-educational center.” Like it was in the last century: 1 million people visited it in one year, which is the largest figure in the world. The architect has written a letter to the Mayor of Moscow Yuri Luzhkov with a request to renew financing, and a reply has come from the mayor’s assistant Vladimir Resin: new investors are being looked for. But who exactly the authorities have addressed for investment, the Department of Construction, the Department of Economic Policy, and the Moscow department of property were at a loss to inform.

Lyadov says that in such cases an investor with serious experience is necessary, because drawing up a business plan for such a premises is a non-trivial task: "It is extremely difficult to predict the volume of demand for these premises. Of course, there are foreign analogies. But their adaptation for Russian conditions has their own features. And without experience the investor inevitably has high risks.”

So for now, as there are no investors, reconstruction of the planetarium has stopped again.

Money and dolphins

Utrishsky delphinarium was a subdivision of the Institute of Svertsov in the beginning, but since 1999 has been an independent limited liability company and has already opened branches in rented pools in several cities of Russia, including Moscow and St. Petersburg. But its only specialized building is in Sochi. Soon this situation should change.

Dolphins were brought to Moscow at the start of the 1990s. Premises were rented at the Palace of Aquatics; its pool is one of the oldest in the city being a pre-war, Stalin construction.

It didn’t seem right for the dolphins as its format was exclusively for sports: the shape, the functional arrangement, the volume of water. "But we had to rent it,” says Vladimir Petrushin, director of the Moscow delphinarium. “Firstly, there was sea water, and secondly, the pool was deep enough (5.6 meters), there are not many in Moscow. But it still took three years to perfect the technology of keeping the animals in artificial water. Huge money was invested in reconstructing the pool, but it was of course impossible to adapt it completely for the needs of the delphinarium. For example, to change its shape from square to round was not possible. There were also other inconveniences: the constant necessity to spend money on the rent and repair of borrowed premises.

Having worked in such a way for about 10 years, the management of the company decided that it would be more favorable, including financially, to construct its own building in Moscow. And they had experience available to them: in 1998 a delphinarium in Sochi had started operating. It took about three years to build and Utrishsky delphinarium itself was involved in its financing: credit was received, the place was chosen, and everything was agreed with the city administration. "The procedure was normal,” recollects Petrushin. “Although it was difficult because Sochi is a resort city.” But in comparison with the Moscow project it had advantages: in the technical plan there was the advantage of the presence of natural seawater, and in the financial plan there were the advantages of the price of the land and the possibility of getting credit. With the change in time and place, the cost of the project has sharply increased.

"In Moscow land is expensive. Once this site cost $1.7 million, now it is already 4 times that. And o there is not only land, but also construction to think about. Of course, we would like to take out a credit line, but for this purpose it is necessary to put down a significant deposit and where would we get a deposit of $50 million? Although we hope that the government will compromise, and will probably reduce the price of the land. In fact, we are carrying out a social project. In our delphinarium, besides a pool for performances there will be a large dolphin-therapeutic center (in 2001 in St. Petersburg Utrishsky delphinarium organized the first dolphin-therapeutic center in Russia for sick children to be in contact with dolphins and later this practice was introduced in other branches of the delphinarium, including in Moscow. Vedomosti). We will treat children from deprived families free of charge - this is our principle. We will cover costs from our income: children from other countries will pay for treatment and the profit from ticket sales for shows will be used," says Petrushin.

It is quite obvious the project has complete support (but not financial) from the Moscow government. This is noted by both the director of the Moscow delphinarium, and Dmitry Antonov, head of the department of town-planning regulation for the East Administrative District of Moscow, where it is planned to construct the delphinarium.

"A site has been found near Kuskovsky Park and Raduga ponds at Vykhino metro station, it is not occupied,” says Antonov. It is an attractive location and the transport availability is quite good – everything has successfully developed.

The premises was given to the delphinarium when there was no procedure for a tender. There was a corresponding governmental order of Moscow, and on the basis of this administrative document, the development of the initial-permittance and design documentation has started. The design documentation, notes Antonov, is high quality and professional. The project of the Moscow delphinarium belongs to GiproNII Russian Academy of Science.

"The certificate of permission to use the land is currently under process and once this is issued the design documentation will be completed and will need to be approved in a statutory order (this takes 2-3 months), and after that builders should start their work.”

“I think this will happen in the second quarter of 2008,” the representative of the district continues. However the question of financing still remains open. Petrushin says that they have some ideas: "There are several investors ready to sponsor us. We are choosing, we are negotiating. It would be more convenient, of course, to take out credit. Then, first of all, we would be the only shareholders so it would be much easier to work. Secondly, we don’t like the fact that the participation of rich foreign investors would cause the price of the land to increase as this always happens. But it would be a huge credit, and it is necessary to think about the consequences. In other words, it is only a question of time and bargaining with investors and banks.”

According to Valekha Rzaev, director of external communications at Forum Properties, "such technically complex projects for us are not outstanding by world measures. Americans and the Japanese possess enormous experience of constructing and operating such premises that bring stable profit, having transformed them into tourist attractions. However financing did not come from developers or municipal structures.”

For example, Rzaev tells, delphinariums in the US were developed within the limits of research in the field of defense and national safety and were based on the study of biotechnologies. Research includes universities and research centers studying the behavior of sea animals and people’s influence on them. But they were able to get double the benefit from the investments by using the research laboratory simultaneously as a popular scientific premises with elements of show business that are attractive to the tourist industry.

"The main income is not from the sale of tickets, but from the accompanying infrastructure, the sale of cards, T-shirts, films, mugs, badges, toys and other souvenirs imitating sea life and its inhabitants, etc. Therefore such premises as a delphinarium should be included in the marketing context of an entertainment zone with cafes and restaurants so that their functioning is profitable for the proprietor," argues Rzaev.

An ocean on a hill

In the meantime on the reserve territory of Victory Park (Poklonnaya Gora) the first stage of realization of another non-standard project, however, much more successful in terms of attracting finance, has come to an end. Russian company with English roots Marin Gardens is engaged in the construction of the Oceanarium educational-entertainment complex. The company has been created specially to manage and invest funds in the Moscow project, however in connection with the project’s expansion it has been compelled to look for a co-investor. Investment-industrial group Eurasia has become a co-investor, and two years ago it acquired a blocking stake in Marin Gardens.

Preparation of the initial-permittance documentation has been carried out quickly. The land plot was received without a tender. "We initially asked for Poklonnaya Gora because this is a place with a large number of visitors - 1.5 million people per year,” says Maria Kirillova, director for the management of marketing and public relations at Marin Gardens. “But after getting on site problems causing a delay in construction have begun.”

First of all, the 4-hecatre area was used as a dumping ground during the construction of the memorial complex and was covered with building dust and household waste. To eliminate the gas-geochemical dangers, a deep foundation ditch was made as the piled up soil had to be completely removed. The recultivation process of the site is complex and long and only just coming to an end.

Secondly, investors did not fully define the concept of the complex. Initially they were supposed to build only an oceanarium, i.е. a huge aquarium with fishes and sea animals. But then, on the wave of campaigning for the expansion of the hotel business in Moscow, a sanction to construct a so-called “hotel on site” was received.

Later entertainment and shopping premises, business centers and also underground parking were added to these two components.

As a result, 26,000 sq.m from the total 170,000 sq.m will be used for an aquarium with a depth of 12.6 meters. The volume of water in the main tank will total almost 10 million liters. The tourist route will stretch 800 meters. For this, acrylic tunnels with the effect of being on the seabed will be used. Going through them it will be possible to familiarize yourself with the flora and fauna of lake Baikal, and the southern and northern seas and oceans.

The 3-4* hotel will have 250 rooms and be managed by well-known international hotel operator Holiday Inn. The shopping component will be small, and the business center will measure 10,000-15,000 sq.m and will include class B offices and banquet and conference halls. The underground car park will have 2,200 spaces. The entertainment complex will be divided into two parts: an adult area where more attention will be paid to sports (24 bowling alleys, etc.), and a children’s area with an educational program. It plans to cooperate with a European company that is engaged in the organization of "weekend educational complexes" where a child can plunge into the atmosphere of any profession by means of educational games.

Marin Gardens sees the uniqueness of the project in its social direction.

Kirillova says that in "the world there are not even two oceanariums the same. Everyone pursues different purposes. There are exclusively state premises which are under construction for some event. For example, the oceanarium in Portugal, in Lisbon, has been constructed especially for the world Expo. A lot of money has been spent on the interior - in this sense the project was also a designer’s. There are projects that pay greater attention to live organisms. The oceanarium in Atlanta, US, is simply a huge aquarium. It cost $200 million. If we compare it to our complex, this figure is smaller, but if we compare it to just the oceanarium component, then it is certainly more.”

In fact the aquarium will not cost so much. With the expansion of the Moscow Oceanarium complex investments have increased approximately 10 times: investments were announced at $40 million in the beginning, and now they are up to $419 million. In Kirillova's opinion, the project should break even within 5-8 years. "More investments are being made in the project, and we, of course, hope that it will become commercial,” she says.

Not everything is so difficult

Irina Zharova-Rait, president of Sesegar Investment Group, thinks that the situation developing with the planetarium, delphinarium and oceanarium is absolutely natural: "Investors are not in a hurry to invest money in premises in which it is difficult to earn money on. With the planetarium and delphinarium nobody has made such a goal. Making a return is extremely doubtful. With low profitability, additional financing is necessary. The sale of tickets is not a pure business." In the case of the Oceanarium, in the opinion of experts, there is a little more. It will be a multipurpose complex in addition to an oceanarium including offices, and a shopping and entertainment zone. According to Zharova-Rait, the recovery of outlay of such premises takes 8-10 years.

"There is unique world experience, helping to avoid risks in operating such technically complex premises. Our partners, Irish developers from RedQuarts International, have come to the conclusion that for such an enterprise to be effective, you should not only own it, but also operate it. In that case your interest in attracting visitors is maximized,” says Zharova-Rait. “For example, the Center Parcs projects have been successful for more than 20 years already and stand out by their invariable efficiency because besides a traditional aqua park within the complex there are rentable residential apartments. "As soon as there is the opportunity to make money on a premises, integrating it, as in the case of the oceanarium, into a multifunctional complex, investments will immediately increase,” the expert summarizes.

Other experts name the maintenance of quality management in terms of the construction and operation of a premises as an additional complexity. "First of all competent management is necessary, i.e. a good management company," approves the press-service of SU-155.

In the opinion of Leonid Volokh, director of the management of real estate at CB Richard Ellis / Noble Gibbons, all these premises are not so complex from the point of view of maintenance services. All the complexity and uniqueness consists in the professional care of animals, and the organization of colorful shows and presentations, educational programs, etc.

"Modern shopping centers, hotels and skyscrapers with multipurpose systems and automated control of engineering systems and equipment, high-speed lifts, and complex equipment are technically complex. Such premises as a delphinarium only seem complex due to their originality and uniqueness. Actually, the main problem is choosing and attracting a managing company at the early stage of realization of the project that is capable of organizing the management and operation of the premises to a high professional level. Unfortunately, this is often left till the end,” the expert summarizes.