Guiding Lines News

Investment Deals

Marshall Real Estate Fund to buy up real estate

Marshall Real Estate Fund is considering purchasing commercial real estate premises in Moscow and the Moscow suburbs for investment.

Michael Golomb, managing partner of the company has told Vedomosti that the company is choosing from already completed premises that have often already been rented out to tenants mainly in Moscow, within the Garden Ring. "There are currently quite a few offers on the market with good rates of profitability," he says. The current rates of capitalization are 20-25% while in the past year they have been no more than 12-13%. The rental rates for class A office premises have decreased from $1,200-$2,000 per sq.m a year to $700-$850, and in class B are $550-$700. But many proprietors have still not accepted the situation and are trying to offer premises at former rates, the expert notes. "Our feeling is that the market has still not reached bottom," he considers.

The company is considering mainly class B and B+ offices, retail premises measuring up to 20,000 sq.m and warehouses. In the long-term future they may purchase elite housing projects at the initial stages of development and save them for better times, and also projects of the Accessible Housing Program.

"We have received such a stream of offers that we have not had time to process them all,” Golomb continues. “More than 100 premises are currently under consideration". We are seeing offers from St. Petersburg and other regions, but the company is being compelled to reject these variants: "There is no sense for us to purchase premises where we don’t have our own office or reliable partner."

The decision to purchase a premises depends first of all on its location and profitability. The company is not considering development projects - "there is no sense investing in a premises under construction if a lot of the building has already been rented out," explains Golomb. Out-of-town premises do not interest Marshall Real Estate Fund, as the company owns 20,500 hectares in the Simferopol direction. Currently in Oka two projects are being realized – the Tsargrad and Okskara Sloboda cottage settlements, and the Tsargrad Spas-Teshilovo Hotel is being constructed. 6,000 hectares have been allocated for the development. Not all land has been transferred from agricultural-purpose but this will be done. Marshall Estate, as the development company, will develop them, involving partners, and may simply sell them.

In the long term Marshall Real Estate Fund plans to join its development companies, obtain a controlling stake and consolidate them into one large development structure. The fund is also interested in service companies, many of which own real estate (cleaning, pharmaceutical, etc.). "Previously it was impossible to get at such companies but now they are all prepared to negotiate," Golomb comments.

The fund has allocated $500 million to buy real estate, and an injection of $150 million more from several investors is also possible.

In Breif

Alliance of Consultants

CB Richard Ellis Group, Inc. (CBRE) has announced that an agreement has been signed under which one of the leading retail real estate advisers in Russia – Magazin Magazinov - has become an associate member of the global chain CB Richard Ellis.

Cooperation with Magazin Magazinov is part of CBRE’s strategy to increase its market share and expand activity in the retail real estate market in Europe. CBRE recently acquired two leading players in the retail real estate field, one in Italy (Espansione Commerciale) and one in Belgium (CT Retail).

Magazin Magazinov was established in 1999. The founder and general director is Anna Shiryaeva, and there is a total of 45 staff.

According to a review by CBRE, Moscow is third in the list of the most expensive retail real estate markets in the world based on rental rates at the end of 2008.

Rodex Group to buy cottage settlements

Investment-construction holding Rodex Group is considering buying cottage settlement projects at various stages of construction. Many small and medium-sized developers are currently unable to cope with long-term obligations and finish already started projects. "Now is a good time to buy liquid real estate premises at a lower cost," says general director of Rodex Group Evgeny Rodionov. The company is negotiating the purchase of cottage projects in the Moscow region, and also regions where Rodex Group has a presence: the Leningrad and Samara regions, the Perm region and the republics of Tatarstans and Bashkortostan. The company is interested in business and economy class settlements located on a territory of at least 15 hectares.

Next stage for Mirax Group

Mirax Group has completed the concrete works on building D of the Mirax Plaza business complex. At building D work is now being carried out on the installation of internal partitions, the installation of lifts, the lining of external and internal engineering networks, and glass work. According to Sergei Sadovnikov, vice president of the board of the corporation, all areas in building D have been sold.

Mirax Plaza measures 387,300 sq.m. Construction of the complex began in September 2006. The building is expected to be completed in the second quarter of 2010. Total investments in the project are almost $1 billion.

Management

Kursky Vokzal (Kursky Station) in private hands

The management of railway stations – a branch of RZhD - has signed a contract with BFM-Kursky Vokzal (a structure of Mirax Group) on the exclusive management of the Kursky Vokzal complex.

"For the first time a station complex has been transferred to the management of a private operating company," notes Maxim Privezentsev, a member of the board of directors at Mirax Group, which has carried out the modernization of the station.

Kursky Vokzal was constructed in 1869. In 2008 Mirax Group modernized the station. The concept for the modernization was developed by specialist company Deutsche Bahn AG (German Railways).

Shopping Centers

Metropolis opens

Capital Partners has opened the Metropolis shopping complex at Voikovskaya metro station. The area of the premises is 241,000 sq.m. The total investments in the project stand at $800 million.

The company has attracted more than 250 tenants. Even before the center opened 98% of its areas had been leased. Swedish company H&M, one of the largest global fashion-retailers, has finally entered the Russian market and is located in the center. The chain has chosen the Metropolis for its debut syore. Among international brands opening their first boutiques in Russia are River Island, GAP, Zara Home, Bebe, SMYK, IKKS, Yo! Sushi, Justice, Energie, Gerard Garel, Lizzaran/Mariachi (restaurant).

Rental rates in the Metropolis vary from 200 to 4,000 euros a year.

Unique Structure

AFI Development under a dome

AFI Development has finished the installation of a unique glass dome measuring 10,000 sq.m in Mall Rossiya shopping and entertainment center, which is located in Moscow-City. It is the only glass dome of its size in Moscow. The design, manufacturing and installation was carried out by German company MERO-TSK. The covering of the dome consists of shock-resistant glass panels, each measuring 2 х 2m, weighing 250kg, and consisting of several layers of glass and air 5cm thick.

The dome is installed with a modern system for liquefying snow and ice, capable of clearing the glass in 2-12 minutes, whereas a usual system of heating glass for defreezing would require no less than a day.

Mall Rossiya measures 179,000 sq.m. The complex is planned to be opened in the fourth quarter of 2009.

Trade

The old comes back in fashion

In January First General Contracting Company (Stroigrad, which provides general contracting services in the non-residential construction market) announced its transition of account settlement to the exchange of commodities. And St. Petersburg’s Stroimontazh has established Mir Nedvizhimost (World of Real Estate), which plans to sell the apartments of various builders, using schemes for the exchange of commodities. "Many customers of First General Contracting Company have still not completed the construction of premises, which need to be finished on time and to free money resources, of which they have a deficit," noted a press release of the company.

"By moving to the exchange of commodities, we will stimulate the production of the customer, also allowing it to reduce costs in connection with large-scale construction, and also minimize time spent on accounts,” says Dmitry Smorodin, general director of First General Contracting Company. “To pay with products is easier than with money. It saves money on credit, interest and the time it takes to receive credit.”

In place of money the company is ready to accept machinery, equipment, materials, and food stuffs from customers. Received goods plan to be realized independently.

Apartments as payment are not quoted. "Square meters in the future will be difficult to realize. It is very unlikely you will find a company that buys real estate in bulk and sells it in groups of 10-20 apartments,” explains Smorodin. “The market grew at fantastic speed and has been strongly overestimated. Now prices are falling, and the end is not in sight yet.”

Now in St. Petersburg all builders are looking for barter schemes, confirms Igor Alekseyev, head of the sales department at PIK Severo-Zapad (PIK Northwest). The production of PIK - sandwich-panels, roofing and wall panels – are found less and less at commodity markets for real money, recognizes Alexeyev. The exchange of commodities is a forced measure. But it allows us to exclude money from accounts and keep jobs and production going, he adds.

PIK has signed a contract on cooperation with the Anti-recessionary commodity settlement centre, which was opened recently by Herman Sterligov. The idea is the same - to help settle accounts between market participants that may have financial, crediting and sales problems. But in chains of exchange produced on a computer, "there is always money as a last option," the businessman emphasizes. At the moment the system does not have much data in it (due to the low volume of applications from companies) and therefore the company has been unable to realize anything via the system yet, says Alekseev. The system will start working from April 2009.

Influence of the crisis

St. Petersburg results

Experts at London Consulting Management Company | LCMC have revealed that in the period from 2010-2017 a total area of 10.8 million sq.m of commercial real estate, which is part of 24 projects, will be built with unspecified completion dates. Companies Adamants, Teorema, LSR Group, Glavstroi, LenSpetsSMU, Ruric AB, Setl City, and PIK have all frozen construction. According to LCMC’s report, of 33 shopping centers announced for commissioning, only 19 premises have opened. The percentage of retail space put into operation from that announced does not exceed 53% whereas for 2006-2007 this parameter was 60% and more.

In the office real estate market the number of premises for sale has increased from 5% to 10%. There are seven operating premises and 10 premises under construction worth $1 billion for sale. In the hotel sector several projects have been frozen, in particular the Domina Prestige on Bolshoi Morskou Ulitsa and a hotel at 1 Nevsky Prospekt belonging to LSR.

Business Center

Tyubitieka in Naberezhnye Chelny

Class B business center 2.18 is located in the center of Naberezhnye Chelny, near to the building of the city administration. It measures 18,635 sq.m and includes standard offices, high-class offices, a shopping gallery and a SPA salon. On an adjoining territory is a car park with 300 spaces. The complex has been fitted with four high-speed Otis lifts, and modern ventilation, air-conditioning and security systems.

AK Bars Bank, Amot, Chelnisnabzheniye, OptTorgBiznes, etc have all already become tenants of the center. At present the business center has been 22% filled.

Rental rates for standard offices in block B are from 600 rubles per sq.m a month (includes everything except cleaning and phone bills). Investments in the project total 325 million rubles. The planned time of recovery of outlay is seven years. The developer of the project is City Center, and the investor is AK Bars Bank. Everostil acted as the general contractor and Real designed the project. London Consulting Management Company | LCMC will be engaged in the management and operation of the business center and for finding tenants.