Belgravia to Invest $2 Bln Across Russia
By Yekaterina Dranitsyna
Staff Writer
The British investment group Belgravia is to announce a $2 billion joint venture to develop business parks across Russia, the Financial Times reported Monday citing the group’s head, Duncan Hickman. The joint venture will be operated by Belgravia in cooperation with Immo Industry Group, a Belgium-based industrial property company, and Rostik Group, a Moscow-based operator of restaurant and leisure businesses. “There was rapidly increasing demand for industrial space in Russia given the growth of the economy and the arrival of many multinationals. The current supply of business parks was insufficient even for existing needs,” FT cited Hickman as saying Monday. The partners will together invest $1 billion which – with gearing – means investment of $2 billion into more than two million square meters of buildings on 15 sites, Hickman told the newspaper. All the sites have been pre-let to 44 industrial occupiers. In addition, the Hilton Group has committed to providing 15 hotels on the sites, which include Moscow, St. Petersburg, Novosibirsk, Rostov-on-the-Don and other large cities, Hickman said. There will also be Planeta Sushi, TGI Friday’s and 1-2-3 Cafe retail outlets. Oleg Barkov, general director of real estate consultancy Knight Frank St. Petersburg, was positive about the prospects of this venture, though it would be a long-term investment for Belgravia, he said. “The market is very promising. It’s far from saturated, especially in the regions,” Barkov said. “But in Russia investors could face difficulties in acquiring land plots and obtaining the engineering infrastructure. If they have signed prior rent agreements with chain tenants, it could be easier for them to accumulate the necessary resources,” Barkov added. Barkov considered operating through a joint venture and developing projects from scratch to be favorable. “They will not have to negotiate with local partners or bargain. In Russia, developers and land owners are not easy partners to negotiate or merge with,” he said. According to Barkov’s estimations, about 100 foreign investment funds operate in Moscow looking for new projects and about 30 funds in St. Petersburg. “Interest to the Russian real estate market has been steadily growing for the last three years. The problem is that investors find very few appropriate objects for investment,” he said. Nevertheless, according to Knight Frank’s data, in the first half of 2007 Russia held first place in Eastern Europe in terms of foreign investment into real estate. The largest western funds and banks including Morgan Stanley, Merrill Lynch, Goldman Sachs, Immoeast, Quinn Group, JER Partners, Rutley Russia and others have announced investment of millions of dollars into real estate in Moscow, St. Petersburg and other large cities in Russia. According to Knight Frank, capitalization rates in Russia are still higher compared to European markets. Profitability of A-class office centers in Russia varies between 8.5 percent and 10.5 percent a year, of luxury shopping centers – between nine percent and 11 percent, and for logistic complexes – between 10 percent and 12 percent. Russia is ahead of Poland, the Czech Republic and Romania, where capitalization rates vary between six percent and eight percent a year. According to The Financial Times, two weeks ago Deutsche Bank, AIG and the Redwood Group paid an estimated $450 million for a portfolio of industrial property in Russia. Earlier this month RBC news agency reported that Taller Capital will invest into a network of over 100 shopping and industrial areas in Russia and Ukraine. Located on major high-ways, the areas will combine industrial premises, warehouses, shopping and entertainment centers and hotels. The company and its partners will invest about $100 million into each area, and the project is expected to be completed by 2014.
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