2009 - CRE

42
Investment:
Working in all directions
In­the­commercial­real­estate­market­todaythere­
are­ many­ companies­ which­ havewidely­
diversified­ portfolios­ of­ assets­ attheir­
disposal.­ Dmitriy­ Lutsenko,­ member­ ofthe­board­of­directors­of­Mirax­Group,­believesthe­diversification­of­a­business­is­primarily­anopportunity­to­spread­the­risks.­Directions­forthe­expansion­of­business­are­chosen­by­eachcompany­on­the­basis­of­its­available­resourcesand­not­on­its­competence­in­a­particular­area.­At­the­same­time,­one­should­think­about­diversification­during­times­of­favorable­markets,­asthe­development­of­any­new­direction­entailsadditional­expenses.­The­availability­of­diversified­projects­and­the­ability­to­work­in­differentmarkets­allows­us­to­feel­confident­–­even­involatile­times."The­very­concept­of­diversification­is­notnew­for­Russian­businesspeople,"­says­Marina­Rezvova,­deputy­general­director,­and­director­ofthe­real­estate­department­at­Krost.­"However,companies­working­in­the­commercial­real­estatesector­started­to­diversify­only­recently.­Theytend­to­remain­in­their­known­areas­becauseinvestments­into­management­are­at­a­minimum­here,­as­they­follow­a­common­businessmodel­and­operational­technology.­It­is­quiterare­for­a­company­to­diversify­into­a­differentbusiness­which­is­unrelated­to­its­core­business­
–­the­so-called­lateral­diversification."
According­to­ Andrey­Nesterenko,­generaldirector­of­Capital­Group,­the­process­of­portfolio­diversification­by­domestic­companies­isa­recent­phenomenon.­Traditionally,­along­withnew­and­reconstructed­projects­and­diversification­into­various­classes­of­real­estate,­the­otheropportunities­that­were­pursued­have­been­the
author:
Anna­Ryzhova­
..................
photography:
Archive­CRE,­
Capital­Group
­ During­this­global­liquidity­crisis­it­is­ratherdifficult­to­find­an­industrial­sector­which­hasnot­been­affected­by­the­financial­turmoil.­However,­it­would­be­wrong­to­assert­that­allsectors­of­the­economy­have­been­equallyhit.­That­is­why­those­companies­which­havea­diversified­portfolio­of­assets­are­likely­tosurvive­this­crisis­with­the­fewest­losses.
purchases­of­land­plots­and­flipping­them­forquick­
profits.­ Most­ development­ companieshave­focused­on­building­Class­A­offices­in­thelast­few­years­where­there­was­a­great­deficit.­Ifa­company­did­not­have­the­means­to­build­sucha­project,­then­it­would­start­working­on­buildingone­which­was­one­class­lower.­Logistics­centerswith­their­low­margins­of­return­were­usually­atthe­end­of­the­chain.According­to­Dmitriy­Katalevsky,­manager­ofthe­financial­consulting­department­at­Deloitte­–­CIS,­most­often­the­project­portfolios­of­manydevelopers­
were­ diversified­ in­ terms­ of­ thetypes­of­commercial­properties­–­office,­retail,and­storage­facilities.­Also­quite­widespread­wasdiversification­on­a­regional­basis­–­a­number­ofmajor­developers,­after­successfully­conquering­Moscow­and­the­Moscow­region,­pursued­theirdiversification­policy­in­the­regional­markets.
Wide­choice­of­projects­
Among­the­most­interesting­and­noteworthycases­of­diversification­can­be­seen­at­Krost.­This­company­deals­with­the­construction­andmanufacturing­of­industrial­materials­while­atthe­same­time­develops­a­network­of­premiumclass­
beer­ restaurants­ and­ wellness­ clubs.­
However,­even­if­at­first­glance­it­does­notseem­thus,­the­diversification­efforts­of­Krostare­related,­and­vertical.­The­main­aspect­ofthe­company's­diversification­is­the­development­of­manufacturing,­which­undoubtedlyhas­a­positive­influence­on­actual­constructionand­frees­the­company­from­dependence­onthird­party­producers.­It­also­greatly­reducesthe­costs­of­final­delivery­of­quality­materials.­Creation­of­an­exploitative­structure­reduces­
the­costs­of­consumable­materials­and­the­useof­middlemen.The­real­estate­projects­line­has­also­beendiversified.­Krost,­which­used­to­specialize­inresidential­real­estate,­decided­to­complementits­portfolio­with­both­office­and­commercialreal­estate­projects.­
Now­in­addition­ to­residential­complexes­the­portfolio­of­the­companyincludes­
several­ business­ centers­ of­ Class­ Aand­B­(the­School­for­Journalists­on­Malaya­
Dmitrovka,­a­GS­on­Prospect­Mira­and­a­GS­in­
Tushino).­Business­centers­in­residential­neighborhoods­developed­by­KROST­include­Union­
Park,­ Wellton­ Park­ and­ the­ completed­ Silver­
Quartet­RC.
"Given­ the­ current­ market­ conditions­ weremain­quite­loyal­to­our­customers­and­we­aregoing­to­make­concessions­for­them.­We­offerour­potential­customers­options­which­couldrarely­be­found­in­the­pre-crisis­days­in­the­commercial­real­estate­market.­For­example,­todayour­offices­are­leased­with­a­maximum­degreeof­move-in­readinesss­regardless­of­the­class­ofthe­building.­This­way­a­client­can­minimize­hisrenovation­expenses,"­says­Marina­Rezvova.­One­company­whose­portfolios­include­bothresidential­and­commercial­properties­is­Capital­Group.­The­company­owns­business­centers­suchas­Capital­Plaza­and­Capital­Tower­as­well­as­the­
Gorod­Stolits­multifunctional­complex.
"In­the­early­1990s­the­emergence­of­a­market­economy­started­to­stimulate­the­development­of­the­commercial­real­estate­market.­Onthe­background­of­a­shortage­of­good­qualityoffice­spaces­we­tried­to­modernize­and­sell­asmall­
office­ in­ a­ central­ district­ of­ Moscow.­
This­first­step­showed­that­this­was­a­feasible­
direction­for­our­company.­In­our­first­years­ofoperation­we­used­to­build­and­sell­mainly­Class­A­offices­and­during­the­crisis­of­1998­we­alsobegan­to­take­a­look­at­the­residential­sector­aswell.­Implementing­projects­in­commercial­realestate­helped­us­form­our­strategy­for­creatingmultifunctional­complexes­where­all­elementsof­
a­ building­ complement­ each­ other.­ Thisapproach­to­a­facility­considerably­enhancesits­commercial­attractiveness­and­increases­itscompetitiveness,"­says­Andrey­Nesterenko.­Tashir­GC­also­has­a­widely­diversified­portfolio­of­projects­and­is­a­full­cycle­company.­All­activities,­starting­with­site­selection­andending­with­the­management­of­the­completedbuilding,­are­carried­out­by­the­company­on­itsown.­According­to­Vitaliy­Yefimkin,­vice­president­of­Tashir­GC,­all­companies­in­the­group­areautonomous­and­focus­not­only­on­projects­of­Tashir­GC­but­also­on­the­market.­­This­is­why­thecompany­enjoys­extra­business­stability­and­canattract­the­needed­capital.For­Mirax­Group,­diversification­means­entryinto­
foreign­ markets­ which­ the­ corporationstarted­
doing­ in­ 2008.­ "After­ analyzing­ various­countries­we­have­chosen­those­which­webelieve­have­the­greatest­consumer­demand­andmarket­growth­potential.­These­are­Montenegro,­Great­Britain­(London),­Switzerland,­Vietnamand­Turkey,"­says­Dmitriy­Lutsenko.­Mirax­Group­is­also­developing­innovativebusiness­projects­outside­of­its­profile­development­business.­Mirax­Service­provides­a­fullrange­of­real­estate­management­services­(forresidential­and­office­complexes).­Mirax­Pharmadevelops­and­manufactures­unique­pharmaceutical­products.­