Money Growing: We’ll Wait Until Monday

In the 1990s together with the collapse of the old economic system pioneer camps quickly began to disappear - under market conditions they became extremely unprofitable to manage, and enterprises wanted to get rid of them. And so what’s going on today with this?

Former luxury

“Many of us are nostalgic when we hear the words "pioneer camp": new friends, different clubs, sports competitions, bathing in a small river or the sea, songs with a guitar in the evening at a bonfire, first love – all these light moments of a carefree life at camp many remember their whole life," says Sergei Tsyvin, head of the Vernadsky Prospekt branch of Inkom Nedvizhimist. According to the company’s data, the total territory of former pioneer camps is huge – hundreds of thousands of hectares. "It was considered prestigious to send children to the south, in the regions of Sochi, Anapa, Novorossisk, etc. For kilometers the coast of the Black sea has been built up with the camps of various enterprises and departments,” continues Tsyvin. “Unfortunately, with the disintegration of the Soviet system it was the end for the majority of pioneer camps - the management of ruined enterprises were forced to think about survival, rather than maintaining the former level of children's holidays."

The process of bankruptcy of enterprises, which began in at the start of the 1990s, continues and to this day the sale of pioneer camps/territories also continues accordingly. According to Rospotrebhadzor, during the last summer season in the whole country there were 47,535 children's camp establishments operating. This was 800 less than in 2006 and that year there were hundreds less than in 2005, etc. Nevertheless, despite of all the existing problems, children's camps continue to exist. According to Tatyana Golikova, Minister of Health and Social Development of the Russian Federation, in the last year about 11 million children rested and were treated at children’s health camps. This year, according to her, 16 million billion rubles has been allocated from the budget for children's. At the same time the minister is paying attention to the constantly reducing number of pioneer camps and has expressed her support for them: "It is necessary to keep as many bases, which are still suitable for rest open, as possible."

"Of the original pioneer camps that existed during Soviet time, no more than 10-15 per cent have survived,” says Natalia Vetlugina, head of the analytical service at Novy Gorod, commenting on the situation. “The others have been reoriented. To operate such premises is an expensive business. Today even department of the president is getting rid of some property. Simply because it makes no returns. If we talk about rest houses for adults the situation is simpler, as in fact they function all year round. And pioneer camps in their pure state or a kindergarten, as a rule, are seasonal, and are intended only for the warm period, and for the rest of the time the complexes stand idle. They receive no income, and it is necessary to protect and contain them."

"After the collapse of the USSR, pioneer camps fell on heavy times. A share of the premises were reoriented, and in their place cottage settlements were developed. And as many camps and kindergartens were located in immediate proximity to rivers and reservoirs, demand for such land was huge and, as a consequence, the price for these sites was high,” says Andrei Korolyov, president of Smart Property.

"The remaining share of camps and kindergartens remained state enterprises and were transferred to the management of specially created Federal State Unitary Enterprise. But as there was practically no financing and perhaps because of the slowness of officials many former camps and kindergartens remain “former.” Still now, such “ghosts” remain around Moscow. And as pioneer camps occupy the best places in the Moscow suburbs they still remain attractive lots for developers, who are ready to buy them from the state for commercial projects. Such projects may be for the construction of a lodge complex, hotels, SPA complex or simply a cottage settlement," continues the expert.

For the summer not to end

In a number of regions, including the Moscow region, the authorities try if not to stop the process of the abolition of children’s camps then to slow it. According to Lyudmila Shvetsova, first deputy to the Moscow mayor and head of the social sphere, last year 300,000 Moscow school children stayed at pioneer camps. According to her, the Moscow government spent 1.5 billion rubles on children’s camps last summer season.

The official considers it is necessary to transfer pioneer camps to the state and those near Moscow to the Moscow government or trade unions.

About a hundred pioneer camps operate in the Moscow region. The Moscow authorities have already obtained several children’s camps. Moscow has even bought land on the Black Sea coast in Bulgaria. According to Shvetsova, for many years children of deprived families and orphaned children have visited this camp.

Now a construction project of a large camp complex called Artek where 2,000 children can go in the summer and 1,000 children can go in the winter is being developed on this site.

In the spring of this year, with the cancelling of certain economic sanctions in relation to Abkhazia, the Moscow authorities have declared the start of construction in this yet to be recognized subtropical republic of a rest camp. "This year Moscow Mayor Yuri Luzhkov plans to start building a Moscow sanatorium in Pitsunda, informs Georgy Muradov, head of the department of external economic and international communications of Moscow. Even earlier, in 2004, Luzhkov declared that he intends to restore the Moskva sanatorium in Gagri and open a camp for Moscow children in Abkhazia. In the Moscow region there are currently more than 400 children’s camps operating.

A significant share of the children's health camps belong to trade unions, ministries, government departments and large enterprises. Children’s camps that belong to enterprises that have funds for its maintenance and operation, are in a good condition and offer children quality holidays. Almost 70 per cent of children’s camps in the Moscow region fall under this category. They include, for example, Orlyonok (Ministry of Emergency Situations of the Russian Federation), Yantar (MGTU of the Bank of Russia in Moscow), Kosmonavt (State Drugs Department Russia), Beryozka (Federal Agency of Taxes and Tax Collection), Meteor (Administrative office of the president of the Russian Federation), Sputnik (FSB), Ozyorny, (AKhK VNUUmetmash), Leninskiye Iskry (Moscow Oil Refinery), Chaika (Federal state unitary enterprise "Moscow Machine Building production plant Salyut), N.D. Gulayev (General headquarters of the Air Forces), Universitetsky (Moscow State University), Beryozka (Domostroitelny Kombinat 2), Zarya (MOF Parizhskaya Kommuna).

Tickets to government department and trade union camps are distributed freely through tourist agencies. The price of a ticket per trip (21 days) ranges from 21,000-40,000 rubles and more depending on the services and activities offered. For example at the Y.A. Gagarin children's health camp (Ministry of Foreign Affairs of the Russian Federation) a ticket for 21 days in the second period costs 41,000 rubles (including travel). The price includes - a dining room with 500 places, a concert hall, football, basketball, volleyball, and tennis courts, stables, etc. In the camp there are more than 20 creative activity clubs and 16 sports clubs. Variety performances, quizzes, intellectual games, discos and campfires, etc are all held in the camp.

The Leningrad experience

We should also not forget about the preservation of children’s camps in the St. Petersburg region. The governor of the Leningrad region Valery Serdyukov has given an order to buy privately owned constructions on the territory of children’s camps to prevent this land being transferred to developers. Now commercial structures are vigorously buying up, at times half demolished constructions in the territory of camps, and then registering the land under the constructions under their ownership, the governor complains. A list of premises, which the authorities are going to take control of, is currently being drawn up.

Business representatives think such an approach is advisable as there will be no ambiguity as there is now. "All former camps that belong to industrial enterprises, which have had no problems with documents, have already been sold,” explains Alexei Begunov, general director of the Agency of Development and Research in Real Estate in St. Petersburg. “The only ones left are those that didn’t have documents at all or those that are state property, the sale of which are inadvisable on political grounds. If the camp is state property construction on its territory is only possible under certain conditions."

If the Leningrad region will manage to take the remaining camps under its control each premises will have only one owner who has all the necessary documents. This means that the decaying children's camps will become much more attractive to developers, experts consider. "About 90 per cent of old camps currently do not function,” says Igor Luchkov, head of the department of valuation and analytical research at Becar Commercial Property SPb. “Meanwhile demand for land on their premises exceeds supply."

Tasty territories

"In the Moscow region at the start of the 1990s, children’s camps occupied 25-30 per cent of the tourist premises market,” says Oleg Razin, deputy general director of Vesco Consulting. “Various holiday camps and boarding houses occupied the largest share. Today approximately 60-70 per cent of Soviet pioneer camps have been converted into holiday resorts, health and sports camps or have been reoriented into cottage settlements. Only approximately 3 per cent of such premises have been restored and work carried out on updating them."

Elena Ristavaara, director of consulting at Colliers International, in turn, notes that former Soviet holiday camps, including children’s camps, were non-uniform in structure: "There were departmental and trade-union health resorts, and accordingly, the level of their infrastructure and the quality of constructions depended on the financial potential of the owner. When the former system collapsed the managing of departmental structures received limited funds, and money ceased to be allocated for the maintenance and operation of adults and children's camps. And not every organization could enter the commercial market – they had no such experience and there were no qualified personnel. Therefore it is no wonder that the quantity of pioneer camps and other similar premises around large cities constantly decreased, and the number of new projects were insignificant."

"As strangely as it sounds, the financial crisis in 1998 positively stimulated adults and children’s holiday camps. The sharp growth of the dollar exchange rate in relation to the ruble developed tourist streams: Russians and their children began to o abroad much less and more often took holidays in Russia. In 1999-2000 the popularity of the Moscow region and the Krasnodar region began to grow, and tourism in the Caucasus and in the Leningrad region became more active. Growth of demand was reflected in investment activity. In 2000-2001 the first reconstruction projects on the basis of children’s camps and rest houses in the Moscow region were realized: Usadba with 30 rooms (2001), Geliopark Country with 152 rooms (2001-2002), Lada Holiday (11 cottages), Vyatichi, etc," Ristavaara continues.

But in general, the expert considers that rapid development in the recreational segment in the Moscow region was not observed. This is explained by seasonal demand for children's camps, the intense competition for land where these constructions stood, for the construction more profitable kinds of real estate, and the high price of the land. All this negatively affected the speed that new children’s camps were put into operation.

Anastasiya Krotova, leading expert of the cottage real estate department at Paul’s Yard, says that today demand for camps is low - 3-5 premises a year. This, by her estimation, is small in comparison to 2001-2003 when the active buying up of camps was being conducted.

The majority of former Soviet pioneer camps today are in a bad condition, Razin approves. Some camps have been bought by private investors for subsequent resale, either partially or entirely. Vesco Consulting currently has a number of such offers.

And what are you doing here?

Ristavaara pays attention to the fact that the majority of projects realized in the cottage real estate segment recently have been directly or indirectly connected with territories of former pioneer camps. She explains this by the fact that the locations for such premises were chosen very carefully. Besides a large territory, there are reservoirs, woodland, good access to roads and, importantly, communications: electricity, gas and water. Besides, if former pioneer camps are changed into commercial holiday resorts by developers then there is no need to solve the issues of land status, construction permissions, etc. Still recently it was possible to buy these sites for a low price. Now the majority of camp territories have already been put into the free market and sold.

Basically, Tsyvin says, now on the territories of former pioneer camps commercial health organisations have been constructed: sanatoriums, tourist bases, sports clubs, and also cottage settlements and hotels. As a rule, the better the condition the pioneer camps, the closer the purpose of the new premises will be to the old purpose of the building. For example, if the territory of a pioneer camp has residential buildings, or first aid bases, or a dining room, or storages rooms, that have been perfectly kept, then it’s much easier to create a commercial health resort rather than demolish everything for something new. And on the contrary: if practically nothing remains of the original constructions, it will be economically much more effective to realize an organized cottage settlement or a multipurpose sports complex on its place.

"Both previously and now the territories of former pioneer camps are rather attractive to investors, and this is understandable,” Razin argues. “Although their infrastructure quite often is in a pitiable condition, it exists and to reconstruct it takes much less investment than to lay new communications. It is also important that the premises have good transport accessibility; there is no need to lay new roads. In the last few years, in connection with the limited volume of supply in areas in the Moscow region closest to the city, investors have started to develop pioneer camps far from the center. For example, a pioneer camp located 100 km from Moscow on Dmitrovskoye shosse is being developed.

In view of the high rates of growth of the price of land, the buying of land of former pioneer camps, even without additional investments, is a very reliable and profitable investment, approves Tsyvin.

According to Maria Litinetskaya, executive director at Blackwood, a lot of territories of former pioneer camps are being developed in picturesque places along Kievskoye, Novorizhskoye, Dmitrovskoye shosse and others. Krotova also names land plots on the 31st km and 55th of Novorizhskoye shosse as promising and very suitable for future cottage housing estates.

It is difficult to say how many camps have been developed are currently being developed and for what purpose. Tsyvin emphasizes that it is currently difficult to give an accurate estimation on supply and demand in the segment of former children’s camps as many large investors and developers do not promote the purchase of such land.

Profits and risks

Experts agree that the territories of old pioneer camps are attractive to investors, but warn of possible problems. There are not many camps that have territories large enough for the construction of a settlement (from 10 hectares), Tsyvin considers.

And in Korolyov's opinion, proprietors realise that these assets are in demand and can be sold for a high price. As a result such premises are crazily overpriced. It turns out that it’s not profitable to build commercial children’s resorts on the territory of former pioneer camps. High quality boarding houses or SPA hotels will make returns much quicker.

Vetlugina, in turn, reminds us of the risks regarding such specific real estate as pioneer camps: "the unclear legal status of such objects makes their purchase extremely unsecure. To understand who actually owns the objects and on what basis and who might claim to own it is practically impossible. And very often the state body that owns the camp goes the way of least resistance: it divides the territory into summer residences for its employees. Rather recently one government ministry did this, transforming a pioneer camp into dachas in Ruzsky."

To construct cottages on the land of former pioneer camps it is necessary to transfer the land into a different category of purpose, adds Krotova. If an investor considers the pioneer camp as a future base for corporate holidays it is possible to avoid the long procedure of renewing the registration of the land, and in fact in this case its recreational functions will be kept. But if it is a question of constructing a cottage settlement, the registration of the land will have to be renewed for individual housing construction. The given process is not only long, but also expensive.

Litinetskaya agrees: "The main problem of developing these territories is that the majority of them are categorised as land for recreational purposes. Often, changing the purpose of the land is a serious problem demanding significant time and financial expenses, and in some cases it is impossible, which imposes restrictions on the type and format of the constructed development."

Tsyvin also notes the time it takes and the complexity of changing the category of land of former pioneer camps. Many territories, for example water-protected zones of rivers and other reservoirs, also have a special economic procedures.

The problem of registering the ownership of such land is also difficult, continues Litinetskaya. Quite often these territories are registered only for long-term rent. In this case the construction of a small town or recreational object, and not a cottage settlement is possible. In some cases the problem might be the reconstruction of old buildings located on the territory of the former camp, the demolition of which would entail obligatory additional expenses, for example when building a residential settlement. "But old buildings can be reconstructed and can continue to be maintained as new, for example Artus Spa Hotel on Dmitrovskoye shosse or the Yakhnty resort on Shchyolkovskoye shosse,” the expert gives as examples. The cost of land of pioneer camps with communications she estimates at $5,000 per sotka, depending on the landscape, geography and specific parameters of the site. In buying a social purpose premises, the buyer should do as it would with any other real estate premises, it should inspect the legal history of all previous transactions on the given object, the correctness of its privatization and should estimate its expenses on future development and maintenance. Only having weighed up all the risks and expenses, having consulted with professional market participants should a decision be made on a purchase, recommends Krotova. In general, the situation with pioneer camps is not clear: amps are neither being renovated nor sold. As has noticed Krotova, in the Moscow region practically 70 per cent of pioneer camps are in a "suspended state." Reconstruction or reprofiling of former soviet pioneer camps for the construction of cottage settlements will be carried out in the next 5-10 years, Razin predicts.

English in the forest

According to Razin, the sector of commercial children's holiday camps, which are a modern alternative to Soviet pioneer camps is actively developing. Besides being able to have a summer holiday outdoors at a camp there are various intellectual clubs and additional opportunities to study foreign languages and many other things. For example at English club Royal Court, 7-15 years can learn billiards, table tennis, golf, bowling, club dance and English language. A holiday package for 14 days costs about 25,000 rubles with meals 4 times a day. In the Moscow region, according to Vetlugina, there are about 30 commercial children's health camps. Many of them are bordering other regions: Kaluga, Tver, etc. As a rule, these camps have organized leisure that the old camps didn’t have. This may be computer or language courses or be a survival camp. Tsyvin confirms that currently developers are developing a set of formats for children's and teenage camps: health, educational, sports and even religious. Robinson Crusoe style camps are copied from American scout camps. However we don’t have suitable conditions for this. In the US, society is much less aggressive. There local population is not aggressive, and compared to Russia in this respect the environment here is much less safe." Razin gives Lingvo Campus as an example of a modern commercial children's camp, which functions on the basis of the Ognikovo park hotel in the Istrinsky district in the Moscow region, 50 km from Moscow, and also the Big Ben chain of language schools. He also mentions the Artek international camp, which is located in the Ruzsky district of the Moscow region and is based on an all-year-round boarding house. And furthermore the Children's educational club BOOM, which has grown on the basis of the Zvyozdochka children's health center in the Chekhovsky district in the Moscow region. As an alternative to Soviet pioneer camps Korolyov names children's holiday camps abroad. However they are accessible to not many Russians. "The majority of children are sent to camps located on the coast of the Black sea. Taking into account that the material resources of all camps – both those situated near Moscow, and the Black Sea – are extremely worn out, the climate factor plays the main role: food and accommodation everywhere are bad, but the sun and the sea can quite compensate these inconveniences. There are many different camps, with different levels of service including good, but, as always, price exceeds quality. Good but expensive and average and not so expensive are characteristic of the camps," he considers.