$15Bln City to Rise Just Outside Moscow

bta.kzMukhtar Ablyazov
Kazakh banker Mukhtar Ablyazov plans to build a $15 billion city south of Moscow for 150,000 people replete with stadiums, schools, hospitals and even a movie studio.

Construction of the project near Domodedovo Airport will probably start in 2009 or 2010 and take nine years to complete, according to Ablyazov's Moscow-based developer, Eurasia City.

"If talks to buy land are successful, we plan to get permission from Moscow region authorities next year," the company said in a statement.

"We intend to build houses, shops, stadiums and even a Russian Oxford and Hollywood," Ablyazov, 44, said in an interview in Almaty, Kazakhstan, in November.

The city will have a university and research complex as well as a "media park" for film and television, Eurasia City said.

Ablyazov was energy minister of Kazakhstan in 1998 and 1999. The country holds 3.3 percent of the world's oil reserves, according to BP.

A former opposition leader, he was jailed on fraud charges in 2002, only to be freed by President Nursultan Nazarbayev a year later. His lender, Bank TuranAlem, is Kazakhstan's second largest, with assets of $24 billion, and he has property projects in Turkey and Ukraine in addition to Russia and Kazakhstan.

Ablyazov's warehouse unit, Eurasia Logistics, recently borrowed $747 million from German bank Eurohypo to help finance a 1.1-million-square-meter logistics center in the Moscow region, which will be Europe's biggest. That complex is next to the proposed Eurasia City site. "Investors may participate in our projects via buying equity or providing financing,'' Ablyazov said. "JPMorgan and Goldman Sachs are helping us implement our projects."

Eurasia City said it was in preliminary talks with several investment banks, without elaborating. The London offices of Goldman Sachs and JPMorgan both declined to comment on the project, as did Yury Glagolev, a senior Moscow region administration official overseeing construction.

Ablyazov's rival, Kazakh developer Capital Partners, called the $15 billion price tag for Eurasia City "reasonable" because the investment will be spread over a decade and much of the residential space can be pre-sold.

"These large-scale projects can be successful, provided that demand is there and it is done in phases," Yusuf Sarimsakci, Capital Partners' head in Kazakhstan, said by telephone from Almaty.

Ivan Vashurin, investment director at AFI Development, Israeli billionaire Lev Leviev's Moscow-based developer, called Eurasia City the most "grandiose real estate project" in Russia.

"Nine years is a very ambitious deadline," Vashurin said. "I am sure the company will have to push it back in order to ease fundraising and implementation."

Darrell Stanaford, head of property consultant CB Richard Ellis in Russia and Ukraine, said such projects tend to take 10 years to 30 years to complete. That means success "will largely depend on the overall performance of the economy," Stanaford said.

Russia is entering a 10th year of uninterrupted economic expansion that has boosted incomes and demand for commercial and residential property. Direct investment in Russian real estate has surged more than 50-fold in the past six years to about $6.5 billion this year, according to Jones Lang LaSalle.

"These kinds of major projects involving billions of dollars and dozens and hundreds of hectares are becoming increasingly common," said Maxim Gasiyev, regional retail director at Colliers International, which advises real estate developers and investors.

Billionaire Suleiman Kerimov's holding company Nafta-Moskva is investing $3 billion to build 2 million square meters of residential space on a 430-hectare plot northwest of Moscow.

Another billionaire, Sergei Pugachyov, is investing more than $1 billion nearby to build 1 million square meters of luxury housing over eight years.