News in Brief

No Construction Downtown

By Bela Lyauv / Vedomosti

Maxim Stulov / Vedomosti
Romanov pereulok

Moscow authorities will allow investors to complete construction projects that have already been approved for the Central Administrative District, but new construction in the city's downtown will not be permitted, City Hall announced in February.

The ban follows a de facto freeze on downtown construction since last March.

"We will definitely not begin any new construction projects, but we will finish the old ones," Marat Khusnullin, deputy mayor for city planning and construction, told Vedomosti. Currently, construction permits have been issued for 5.86 million square meters of various real estate. Khusnullin calls this amount "colossal." Now, he said, further building will take place only under certain conditions: for renovating apartment blocks, large-scale remodeling and adaptive reuse of existing properties.

Last year, Mayor Sergei Sobyanin announced a downsizing in the amount of new construction. He indicated that the majority of projects that had already been started, such as converting offices and shopping malls into hotels and apartment buildings, would be finished. And the Mayor's Office made the decision that new buildings should not outnumber old ones in their surrounding areas.

The press service for the construction sector could not say whether permits for new buildings in the Central Administrative District had been issued under Sobyanin. Developers surveyed by Vedomosti said there have been practically none.

According to Khusnullin, 1.1 million square meters of projects in downtown Moscow have been discontinued, and another 700,000 square meters have undergone changes to their functional designation. In the next three or four years the authorities aim to "stabilize" the downtown. Khusnullin cited Romanov Pereulok, where several buildings are being reconstructed, as an example.

"It's necessary to finish the ongoing construction projects and landscape the area. Subsequently, if someone asks for permission for construction, such questions will not be considered because development of the area will be considered complete," he said.

The decision to limit building in the center is long overdue, said Konstantin Kovalev, managing partner of commercial real estate firm Blackwood.

In the center of European capitals, typically only redevelopment of old neighborhoods is allowed, in which developers construct modern buildings while preserving the architectural fabric of the location. Developers in Moscow are willing to engage in redevelopment where it's possible; officials have uncovered a lot of abandoned buildings within the Garden Ring. Half a year ago, in the Central Administrative District, 179 properties that were not undergoing any form of construction were counted, and 21 of them were architectural landmarks.

But that type of business is not as profitable as what really attracts Moscow developers: to acquire a land plot, build and sell, Kovalev said. Now the majority of owners of land downtown are trying to sell those properties due to a high level of uncertainty and difficulties in getting permits, he said. The prices for shopping mall and apartment building projects in the center have almost returned to their pre-crisis levels, he added.

Moskva Hotel Reopens as Mall

By Rachel Nielsen / The Moscow Times

Vladimir Filonov / MT

Galereya Moskva

The Moskva Hotel is reopening after reconstruction that lasted a decade. A slew of Moscow real estate players unveiled the building on Feb. 14, relaunching the premier Soviet hotel as a commercial center with 70 shops, a department store, underground parking and a hotel.

Galereya Moskva, the mall comprising the shops and department store, was scheduled to open to the general public on Feb. 15, though only about half of its shops were up and running. The site had been under construction for nearly 10 years, with the original hotel razed in 2003-04.

At a news conference in the mall's gleaming black, white and gray interior, State Duma Deputy Vladimir Resin, the capital's urban development head under former Mayor Yury Luzhkov and current Mayor Sergei Sobyanin, said the city had preserved "a symbol of an epoch" by replacing the first building with a lookalike.

Built in the 1930s, the Moskva is flanked by the Bolshoi Theater, the Teatralnaya metro station and Manezh Square. The brown-and-beige stone building, at just over 10 stories, was a Mecca for celebrities such as first cosmonaut Yury Gagarin and Italian film star Marcello Mastroianni.

Strabag rebuilt both the Galereya Moskva section of the complex and the new hotel. The Austrian-based contractor won the tender for construction in December 2004, Alexander Ortenberg, general director of Strabag's Russian division, said in an interview on the sidelines of the news briefing. Following the financial crisis, Strabag took on new financing of 4 billion rubles ($130 million) for the project in summer 2010, Ortenberg said.

Ortenberg said his firm has wrapped up its part of the Moskva renovation. "We're done," he said. "We've finished building."

The mall, which takes up less than a fifth of the Moskva's 186,000 square meters, includes a number of high-end jewelry, clothing and handbag shops, many of them Italian and French.

The rest of the complex will be filled with a Four Seasons hotel, expected to open in 2013, and a spa, business center, "culture and leisure center" and hotel apartments.

Development firm DekMos said by e-mail that it is the sole developer of the Moskva project. Strabag was the general contractor, while Lusine, builder of the Ararat Park Hyatt on Neglinnaya Ulitsa, directed engineering work, DekMos said.

DekMos declined to name the current owners of the Moskva complex.

Though the grand opening of Galereya Moskva was advertised as Feb. 15 on giant red cubes on Ploshchad Revolyutsii, only about 30 of the 70 stores were stocked or in the process of stocking when the news conference ended in the afternoon of the day before. At a handbag shop on the first floor, men in jeans were testing the security panels at the store entrance, while in other shops, workers were rolling on paint and finishing trim.

Meters away from the speakers, headless naked male mannequins filled a men's clothing shop. By the end of the afternoon, one of them had acquired a crimson scarf.

About 20 stores had windows plastered with brand names and "opening soon," while an equal number were papered with just the Galereya Moskva logo.

DevMos said a "large part" of stores will open at the end of March, and restaurants will open there in May and June.

Oktyabr Getting Facelift, Residents Concerned

By Irina Filatova / The Moscow Times

Controversy has arisen around the redevelopment of the former confectionary factory Krasny Oktyabr. Muscovites started collecting signatures online in January to protect the site and preserve the creative atmosphere in the heart of Moscow.

A development project with cafes and restaurants, apartment complexes, museums and underground parking that analysts said could be worth more than $120 million is planned for the site.

The project will be implemented on the 50,000 square meters of land on Bersenevskaya Naberezhnaya acquired by Guta Development along with the factory's buildings in 2002. The company is currently leasing part of the space out, and major tenants include private media outlets like Slon.ru, Openspace.ru, TV channel Dozhd and IT center Digital October.

Due to the number of exhibition halls, the factory's territory has become an art space popular among Muscovites and tourists, but the developer's plans to upgrade the territory raised concerns among city residents that construction work could damage part of the complex and result in tenants being ousted, leading to the signature drive.

Meanwhile, Guta Development's chief executive Artyom Kuznetsov said all the tenants will remain in their offices and that the company hopes to accommodate more "creative studios" at Krasny Oktyabr.

The developer's project to upgrade the factory's territory will also involve locating cafes and restaurants on the first floor and creating a big museum of modern art, he told experts and City Hall officials gathered at a round table in February to discuss Krasny Oktyabr's future.

Three of the factory's buildings are landmarks protected by law. Others don't possess that status, but they are valuable for adding to the historic atmosphere of the place, said Natalya Samover, a preservationist with Arkhnadzor.

The reason behind residents' concern is the common practice of some developers to save time and money by demolishing buildings with no landmark status and constructing copies, she told The Moscow Times.

Moscow's chief architect Alexander Kuzmin, who participated in the round table, vowed that no construction would be carried out that could damage the historical buildings on the Krasny Oktyabr territory.

Kuzmin also said City Hall is working on a project to develop the territory that will undergo public discussions.

If approved by residents, the document, which will specify the maximum volume of space to be built and the location of new buildings, will subsequently be provided to the developer as a base for future construction work.

Guta Development plans to build housing on the site as part of the project, Kuznetsov told The Moscow Times, declining to elaborate on the possible construction volumes before City Hall provides all the regulation documents.

Kuzmin supported building the apartment complexes, saying the construction of housing would help keep the place "alive" round the clock, not only in the afternoon.

Kuznetsov declined to specify the overall investment in the project, saying the information is confidential.

Alexander Ziminsky, head of high-end property sales at Penny Lane Realty, said it could exceed $120 million based on the potential construction volumes of 40,000 square meters.

The developer invested $400 million in relocating the factory's production facilities, but leasing out the freed space didn't allow it to return the investment, Kuznetsov said.

The company might see returns after building housing on the factory's territory, since the location of the site and the developed infrastructure could bring the approximate apartment price between $15,000 to $30,000 per square meter, Ziminsky said in e-mailed comments.

Hoteliers in Talks

The Moscow Times

Mikhail Shishkhanov is in talks with Georgian businessman Boris Ivanishvili to repurchase the InterContinental and Central hotels, Vedomosti reported Feb. 3.

Structures close to Bin Group co-owner Mikail Shishkhanov are interested in buying Boris Ivanishvili's Unikor real estate portfolio, two sources close to both negotiators said. The talks, according to them, are at an early stage; there are no documents to be signed.

Unikor's main assets are the 64,000-square-meter Summit business center, which includes the Hotel InterContinental Moscow Tverskaya (203 rooms) on the site of the Hotel Minsk, the 450,000-square-meter Garden Quarters residential complex under construction in Khamovniki and the Luxe Hotel (formerly the Central) with 18,300 square meters, for which a management agreement has been signed with the Mandarin Oriental chain.

Moscow Metro to Get Translated Signs, New Stations

Combined Reports

Vladimir Filonov / MT

Metro Delovoi Tsentr

Signs with English translations of station names will be installed in the Moscow metro as part of the city's effort to make the capital more comfortable for foreign visitors, a city transport official said Feb. 7, RIA-Novosti reported.

At present, signs indicating the names of adjoining stations at transfer points in the Moscow metro are only in Cyrillic.

Wi-Fi hotspots will also be created on Circle Line stations of the metro, said Maxim Liksutov, head of the city transit department. The changes are part of the city's plans to create an international financial center in Moscow, RIA-Novosti reported.

Liksutov said 400 old metro cars will replaced with new ones this year and that three new stations will be opened: Novokosino in the east, Alma-Atinskaya in the south, and Pyatnitskoye Shosse in the northwest.

The transport official also said 30 percent of station doors will be replaced with lighter ones that are easier for the elderly and children to open and that are not susceptible to slamming into passengers when blown by strong winds.

In other subway news, a transfer hub will be built at the Moskva-City business center, according to the press service of the city's construction department, citing Sergei Kidyayev, vice president of Ingeokom, the main contractor for the construction of the Khodynskaya and the Kalininsko-Solntsevskaya lines.

In addition to the existing Vystavochnaya station on the Filyovskaya line, the hub will consist of two new stations, Delovoi Tsentr on the Kalininsko-Solntsevskaya line and Delovoi Tsentr on the planned Khodynskaya circle line, Vedomosti reported in January.

"If we don't [build the hub], then in 2015, when construction of the business center is complete and 3 million square meters of office space is commissioned, the Filyovskaya line won't be able to cope with the exponentially increased passenger traffic," Kidyayev explained.

The Moscow construction department announced in December the beginning of the new Kalininsko-Solntsevskaya line to link the central areas of the city and Moskva-City with the Dorogomilovsky and Ramenki districts.

In the first stage, a line will be built from the Delovoi Tsentr station to the Park Pobedy station, and the Delovoi Tsentr station at Moskva-City will be opened. Work on the first phase of construction is scheduled for completion in 2013.

(Vedomosti, The Moscow Times)

Group Seeks Greater VVTs Protection

By Howard Amos, The Moscow Times

Architectural preservation group Arkhnadzor has called for the All-Russia Exhibition Center, or VVTs — which they refer to as Moscow’s “Soviet Versailles” — to receive increased legal protection ahead of a $1.5 billion redevelopment expected to be approved by city authorities this spring.

The planned transformation of VVTs has prompted concerns from campaigners that the site’s aesthetic unity will be violated and valuable landmarks destroyed.

The company that controls the 236-hectare VVTs is 70 percent owned by the federal government and 30 percent by City Hall. Its director, Alexei Mikushko, publicly outlined the “rebirth” of the site in November and told The Moscow Times last week that building plans were expected to be finalized in 2012 and construction work would begin within 18 months.

During a news conference last week, Arkhnadzor activists compared VVTs to other great national exhibitions of the 19th and early 20th century that took place in London, New York and Paris. Unlike the VVTs, none of them have survived.

The proposed redevelopment plans envisage the creation of five zones and the construction of an innovation campus, a large leisure complex, an underground parking lot and four-star hotels.

A key point of contention between preservationists and developers is the decision to change the heritage status of the VVTs to permit construction work. About $500 million of the budget for the project has been allocated for the renovation of existing buildings.  

Arkhnadzor said that instead of a downgrade, the legal protection that VVTs now enjoys should be expanded. Of its more than 100 historically significant structures only 40 enjoy a protected status, activist Irina Trubetskaya said.

There are also specific concerns over a number of buildings on the edge of the site that represent a range of architectural styles and contrast with the Stalinist grandeur of the pavilions and fountains on the main walkway.

They include the No. 7 Seed Pavilion that sells bulbs, seeds and other gardening equipment. Natalya Duskina, professor at the Moscow Architecture Institute, said this was one of several examples of modernist architecture at the VVTs. Only about 11 percent of Moscow’s protected historical monuments are from the 20th century, she said, and called for all the modernist pavilions at VVTs to receive legal protection.

Under the current plans, which should be realized within six years, the Seed Pavilion falls in an area slated to become an enclosed leisure park.

Though Mikushko said Jan. 26 that none of the redevelopment has been officially approved yet, a shop assistant in the Moskhlebtorg Pavilion — adjacent to the Seed Pavilion and also on land intended for the leisure park — who requested anonymity to talk to the press, said he had been warned that he was likely to be required to vacate his premises by the summer.

Other workers in nearby pavilions told The Moscow Times that they were aware of discussions about the redevelopment plans, but had not been given a specific time frame.

Contractors Being Chosen to Fix Moscow Roads

Vedomosti

The city construction department in January aimed to select general contractors for the reconstruction of major throughways at a cost of almost 50 billion rubles ($1.57 billion) and is to select general contractors for the reconstruction of all city throughways by the end of the year.

The contractors picked in January will rebuild the Ryazansky and Volgogradsky prospekts, Shosse Entuziastov, the Mozhaiskoye, Leningradskoye and Yaroslavskoye shosses, as well as the roadway called Balaklavsky Prospekt on one end and Rublyovskoye Shosse on the other.

“The bids were unsealed on Dec. 30 and now they are being analyzed,” said Andrei Bochkaryov, head of the construction department. Bidding for the remaining 10 routes will be held in the near future, according to Bochkaryov.

The most expensive project is the reconstruction of Mozhaiskoye Shosse from the Moscow Ring Road to the Garden Ring, the starting price of which is 10.9 billion rubles ($360 million). The least expensive job is repairing Leningradskoye Shosse between the Sokol metro station and the Moscow Ring Road for 2.14 billion rubles ($70 million).

The results of the bidding were published on the web site of the tender committee. The bidders were largely the same for all contracts. The reconstruction of Mozhaiskoye Shosse drew bids from Ziyad Manasir’s Stroigazkonsalting, which offered to do the work for 10 billion rubles, and Ingeokom, which offered 9.6 billion rubles.

Ingeokom also bid on Ryazansky Prospekt, which had a starting price of 9.58 billion rubles, competing with SU-888 and MISK.

“There are no more than 15 companies with experience in complex construction in the city. The existing capacity is enough for the work on the highways so far,” Bochkaryov said.

The reconstruction of Varshavskoye Shosse by Ingeokom for 10.78 billion rubles and Kashirskoye Shosse by ARKS Investment and Financial Construction Company for 8.53 billion rubles has been ongoing since November.

In addition, Moscow is looking for contractors to bid to build three interchanges on Dmitrovskoye Shosse at a cost of 21 billion rubles.

Hotel National Sold

The Moscow Times

Smart Finance Group obtained ownership of the National hotel at an auction held late last week by the Moscow Mayor’s Office, Interfax reported.

The company was representing the interests of Sait-Salam Gutseriyev, banker Mikhail Shishkhanov said in a statement.

The 100 percent share package in the National was sold for 4.67 billion rubles ($150 million). The starting price of the package was 4.58 billion rubles. The National is one of the oldest hotels in Moscow. It was completely reconstructed and renovated in 2009 and currently has 201 rooms, including 56 suites.

The property of the National also includes a unique collection of furniture and works of art from the Tsarskoye Selo and Anichkov palaces that belonged to the Russian royal family.

Deals Undergird Record Investment Year in 2011

The Moscow Times

Russia’s commercial real estate market saw a record investment volume of about $10 billion in 2011, according to a report by Colliers International. The Moscow region attracted about $7.34 billion of that investment, almost twice as high as the year before, when it was $3.94 billion.

The most active buyers included VTB Capital, Holding Center trading house, the Gutseriev family, Boris Mints’ O1 Properties and UFG Asset Management, the report said. The most active sellers in Moscow were Vladislav Doronin’s Capital Group, VTB Bank and the Luxembourg-based Orco Property Group, which sold its main assets in Russia.

Major investment transactions in Moscow, 2011
Property Transaction amount ($mln) SellerBuyer
Ritz-Carlton Hotel700Capital PartnersVerny Capital
White Square and White Garden business centers600CoalcoVTB Bank JV Texas Pacific Group
Mosmart portfolio566n/aM.Square Holdings
Filion and Gorbushkin Dvor SECs450n/aKompleksnye Investitsii
Don-Stroi retail center portfolio370VTBHolding Center
Concord business center241Capital GroupUFG Management
Alfa-Arbat Center business center237TNK-BPPromSvyaz Nedvizhimost
Moskva-City site number 15231Moscow government Zarakh Iliev and God Nisanov
Lesnaya Plaza210VTB CapitalO1 Properties

Source: Colliers International