A Plan to Make ZiL a Business Mecca

VedomostiPart of the ZiL factory near Avtozavodskaya metro would be turned into 1 million square meters of office space under the proposal.
The Center for Investment Projects and Programs headed by Grigory Luchansky wants to remold the defunct ZiL truck plant in Moscow into a Mecca for small businesses.

With the support of City Hall, the center hopes to turn part of the plant into the world's largest small business incubator, with 1 million square meters of office space.

A year ago the center proposed to partially finance the struggling factory by building an office center on its territory, a representative said.

A ZiL shareholders meeting is to vote on transferring its property to the management of the Moscow Automobile Co., created by the center for investment projects and programs.

Floor space at the center is to be sold or rented to small and medium-sized businesses. Insurance companies, banks, the Tax Police and warehouses will also have branches inside the incubator.

The hyper-incubator, as its creators have dubbed it, will take up 16 hectares of land and cost from $320 million to $400 million to build. They expect construction to last between a year and a year and a half and the project to pay for itself within four or five years.

The center is prepared to invest $100 million of its own funds into the project, half of which will be used to buy land from ZiL. Representatives of the center said another investor could be the Turkish M&M Group, which built a similar complex in Turkey.

The center expects the complex to bring in an estimated $70 million to $80 million in rent and as much for other services per year.

The ZiL factory is to become one of the office center's shareholders. An agreement between the Moscow Automobile Co. and ZiL will allow the investment center to manage ZiL's land for an unspecified sum.

Nikolai Yevtikiyev, the city government's deputy industry minister, was not able to say if the city would invest in the project or support it in any other way, but supported the idea in principle.

M&M Group said it would participate in the project in all its stages from construction to rent. "We are trying to lower the cost of the project at every step so we can offer medium-sized businesses space at attractive prices," M&M Group head Moskhar Kizeltan said.

Costs for class C office space inside the Moscow Ring Road currently approach $300 per square meter per year, but the Moscow incubator expects its prices to be around $150.

But industry players were skeptical about the project. "Building 100,000 square meters in one year is considered a crazy tempo and a huge investment for one company," said Andrei Zakrevsky, head of Sistema-Gals, a developer currently building a class B office center.

Penny Lane's senior leasing specialist, Maxim Zhulikov, agreed. "It would be hard to reach even class C quality [in such a short period of time]," he said.