News from the Northern Capital

Yelena Minenko / For REQ

Finding Value In A City's Heritage

By Yelena Minenko

Historic central districts should keep their bars and nightclubs, says a prominent St. Petersburg developer, amid calls from members of the Legislative Assembly to clear them out of Dumskaya Ulitsa and Apraksin Dvor.

Shooting incidents on Dumskaya Ulitsa in September and October led United Russia deputy Evgeny Marchenko to propose closing all bars and night clubs in the area. Marchenko told the Legislative Assembly the territory must be reorganized.

There are about ten different bars or night clubs at the crossing of Ulitsa Lomonosova and Dumskaya. Police investigating the shootings found that several bars did not have licenses to sell alcohol and closed them. However, with a high density of venues it remains a popular with bar-hoppers.

The area should be more civilized, safe and outwardly attractive, Marchenko said. Rather than attracting tourist income, the bars damaged the image of St. Petersburg. "Instead we could open restaurants, coffee shops or confectioneries  and create a pedestrian area like in many other European cities".

However Oleg Barkov, CEO of the investment and construction group of companies Hansa Group said, "I think that the night clubs should still exist and Dumskaya Ulitsa is not the worst place for them since nobody lives here." When the bars began to open in the mid-2000s, they turned a deserted neighborhood into a lively destination.

Barkov agrees that the area deserves a more respectable fate. "The bars could be moved someplace else, for example, to one of the blocks on the territory of Apraksin dvor", said Barkov.

The bars are located in the historical buildings of a former market space called Maly Gostiny dvor. Built in 1790s by Giacomo Quarenghi the market was reconstructed in 1880s. In 1997 St. Petersburg investment and real-estate company Peterburgskoye Agentstvo Nedvizhimosti (PAN) rented the building on Dumskaya 9 and  in 2008 developed plans to turn it into a hotel. But since PAN wasn't the sole leaseholder, the company couldn't go through with the plans and in 2010 the building was put up for auction.

Maly Gostiniy dvor was purchased by the PAN's subsidiary, Moika 22, with encumbrance on the property. Another leaseholder the Federal State Culture Foundation, Ingria, rented its territory to the company, Tsentr Plyus, for 49 years before being liquidated itself in 2006. The lawsuit between Tsentr Plyus and the State Property Management Committee lasted till April this year, when a court cancelled the tenancy. The plans to open a hotel are still standing.

Similar controversy has dogged Apraksin dvor, a big market territory of 14 hectares between Sadovaya Ulitsa, Ulitsa Lomosova and the Fontanka River.

Named after one of the original owners of the land Count Fyodor Apraksin, it has always been a market place. Nowadays this large retail block has  57 buildings, many of which are the city's property. Deputy Vitaly Milonov calls the place "a stigma on the body of St. Petersburg's culture and civilization". In February police raided the area, seizing extremist literature and arresting 300 migrants.

St. Petersburg Georgy Poltavchenko in May opposed the complete demolition of the complex though he agreed with local deputies that the area damages the image of the city and creates social tension.

The main architect of St. Petersburg, Oleg Rybyn, the president of the Town-planning and Architecture Committee of St. Petersburg, said "The territory of Apraksin dvor along with Maly Gostiny dvor on Lomonosova Ulitsa needs to be reorganized. The complex of buildings needs to be renovated, but with preservation of the historical look".

One of Russia's largest construction companies, Glavstroy, undertook the last attempt to renovate Apraksin dvor but that resulted only in the erection of a fence around the site. City authorities cancelled the agreement with Glavstroy in February.

At the beginning of November, the Moscow Architectural Bureau of Timur Bashkaev won a competition to design a renovation plan for Apraksin dvor, organized by the Investment Committee of St. Petersburg. Bashkaev will present the project in December and reconstruction works will begin in June. The other finalist was Nikita Yavein's Studio 44.

President of the Investment Committee Irina Babyuk said in a newsletter that Apraksin dvor should become "a modern multifunctional center with a high class pedestrian area". According to Babyuk, the historical look of the territory should be preserved.

Barkov, of Hansa Group, says one reason redevelopment has taken so long, is that the central location makes the objects profitable regardless. "Both objects are very valuable on the real estate market because of their location, which makes it easy to get profit and skim the cash flow without even bothering about renovation".

"So far the renovation of Apraksin dvor has been selective and low-quality. The spaces in Maly Gostiny dvor are rented in  "as is" condition", he added.

The president-elect of the Russian Guild of Managers and Developers, Andrei Stepanenko, CEO of the Russian Auction House said services in the area should match the cultural and historical status of the location.  "The current state of these objects — spontaneously established areas of retail and entertainment — is far from what the center of St. Petersburg should be like."

Experts share ideas of how the territories could be renovated: hotels, apartments, high-quality shops, restaurants could be opened. But it is easier said than done.

"From the economic point of view, investment in such projects is ambiguous. It requires a large input of resources, a long payback period, besides, it is impossible to fulfill the plan without city's support",  Stepanenko said.  

The lack of one single owner, makes the property's legal status more complex. "In the cases like these we need to compromise because the high costs of reconstruction and consolidation of property are usually combined with quite severe restrictions: not to demolish or change in any way historical objects. I don't think it's reasonable. Real investors like these do not exist. That's why I think Glavstroy was unsuccessful", said Barkov.

New Terminal To Boost Hotel Sector

By Irina Titova and Mark Gay

The new domestic airport terminal at Pulkovo will give the city's branded hotels a boost, but transport from the plush airport to grand hotel lobbies still needs improvement, says Head of Hotels & Hospitality, Russia & CIS at Jones Lang LaSalle, David Jenkins.

The city's branded hotels, like the W St. Petersburg, the just-opened Four Seasons Hotel Lion Palace, are likely to be the winners from better international flight connections. Traditionally such hotels have housed tourists in the summer but for the rest of the year, mostly business travelers and weekend leisure visitors from Moscow. The proportion of business to leisure travelers is roughly 50:50.

"The airport is great, the Grand Hotel Europe or the Astoria is great. The problem is getting from the airport to the hotel. For someone looking forward to a luxury weekend, at $500 to 600 a night, the local journey is disappointing," said Jenkins.

Currently the domestic Pulkovo 1 terminal and Pulkovo 2, the international terminal, are six kilometers apart. The new terminal, which can handle up to 17 million passengers a year, adjoins Pulkovo 1, which is currently awaiting reconstruction.

The project is the first in the Russian aviation industry implemented through public-private partnerships without recourse to any state funding. The Northern Capital Gateway consortium includes Russia's VTB Capital, German's Fraport and the Greek Copelouzos Group.

There are plans to turn it into a hub by 2025 but this requires attracting new airlines. The airport also needs more direct flights from European capitals, says Jenkins. Visas also remain a familiar and longstanding obstacle to last minute, wealthy tourists who can go to Prague, Riga or Tallinn on the spur of the moment but need to apply for a visa to visit Russia.

Russia also needs a national body to promote tourism if it is to capitalize on the publicity that the Sochi Olympic Games will generate next year, said Scott Antel, Partner and Head of Hospitality and Leisure for Russia, CIS and Turkey, at DLA Piper. "The various hotels and airlines cannot do that on their own."

St. Petersburg's mid-market hotels face a greater challenge because hotels are opening that were planned before the global financial crisis. That caused a "double whammy of a boost in supply of 30 to 40 per cent and a sudden drop in demand," said Jenkins. "The competition is probably making hotels work harder so it is good for consumers. I don't see any reason to doubt that demand will overtake supply."