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. Last Updated: 07/27/2016

Skanska to Build $42M Alfa Complex

Business heavyweight Alfa Group this week resurrected its $42 million deal with Swedish construction giant Skanska to build a commercial complex in central Moscow.

The new Alfa Arbat Center will sprout up at the foot of Stary Arbat, next to the Praga restaurant and the Arbatskaya metro station.

The center's ground level will host a department store, shops, banks and fast-food restaurants, while the remaining eight stories will offer office spaces.

Alfa and Skanska initially shook hands on the Arbat Center deal in August 1998 — just days before the economic crisis — only to postpone the construction when the failing economy spooked potential renters.

"Now is the time to re-open the project because the economic situation is better and we've secured financing from our future client," Boris Kiperman, head of Alfa Development, said in a telephone interview Thursday.

That client is Alfa Group affiliate and national No. 4 oil major Tyumen Oil Co., which has already bought a quarter of the space in the 42,000-square-meter project for an undisclosed sum. According to Kiperman, the oil giant may buy more since "the company is growing fast."

Skanska plans to complete the project in August 2002. Teaming up with a construction company that can complete the work on time is crucial for Alfa, said Kiperman.

"That's why we chose Skanska," he added. "Unlike its Russian competitors, Skanska can guarantee that it will perform high-quality work on time and within our budget."

Kiperman conceded those guarantees do not come cheap:

"Svanska charges a lot more compared with its counterparts, but when you have a big project like this eliminating the risk factor is crucial," he said.

Wednesday's agreement comes on the heels on Skanska's other major undertakings in Moscow. Last year, the firm completed the nation's first IKEA furniture store and the new British Embassy.

Svanska is also heading a $1 billion project to renovate and expand the international terminal at Sheremetyevo Airport.

"We believe in the Russian construction market," said Tapio Korkka, senior vice president of Skanska's East European arm. "We think in 2001 the market will bounce back to the pre-crisis level."

Thanks to Skanska's aggressive expansion strategy, the company is now poised to become one of the construction behemoths in Russia and Eastern Europe.

Earlier this year, Skanska bought a controlling stake in IPS, the Czech Republic's largest construction company. The firm already owns Poland's largest builder Exbud.

"We always keep our eyes open for opportunities in Eastern and Central Europe," Korkka said. "We plan to be a permanent and very active player in these markets."