St. Pete Factory Gets a New Lease on Life

ST. PETERSBURG -- Arsenal, one of the oldest industrial enterprises in St. Petersburg, is planning to turn its former factory into a multifunctional business center in a project that will cost $100 million to $150 million, the company said in a statement.

The 4-hectare complex will include a business center, shopping area, mini-hotel and restaurant. The land is located between Ulitsa Komsomola and Arsenalnaya Ulitsa.

"This plot and buildings in proximity to the River Neva are owned by Arsenal. Our production facilities have been being dismantled over the last two years. At present there are only a few tenant companies on this territory," Yevgenia Krasnova, PR manager at Arsenal, said earlier this month in a telephone interview.

"The elimination of redundant production facilities is a result of our strategy to modernize production equipment," she said.

The company is negotiating with potential investors, though no agreements have yet been made, Krasnova said.

Investors are being offered an off-plan construction scheme, according to which Arsenal will retain a controlling share, despite the fact that the company will supply only the land and the buildings, while construction expenses will be covered by investors, Krasnova said.

"At the moment we are preparing the paperwork and negotiating for permission from supervising bodies. A historical and cultural survey is required because a number of architectural monuments are located on the plot of land. The documents should be ready within two years. As for investors, we expect to make a decision over the next 12 months," she said.

"The location is very advantageous. In this area, all the premises will be in demand, especially the office center. If the center is large enough, it will guarantee the success of the restaurant," said Oleg Barkov, general director of Knight Frank St. Petersburg.

A three-star hotel could fit well into this project, Barkov said, although it would be better to negotiate with a hotel operator first and tailor the hotel concept to specific standards.

Barkov estimated that the project would cost at least $500 million to build.

According to Knight Frank, a large number of development projects have been announced in the same area, which will change it dramatically over the next five years.

Maxim Mikhailov, executive director of Maris Properties in association with CB Richard Ellis, said the office center was the most rational and potentially successful part of the project. He named as advantages existing power networks, the opportunity for open planning in the building and its proximity to a metro station.

"A mini-hotel will be less efficient and should be constructed after the office center, when the outlook of this area has improved," he said.

Mikhailov questioned the chances of success for a shopping area in this project. "Shopping areas do well in residential districts or in proximity to highways. ... This plant is located in an industrial district," he said.