2009 - CRE

#8(111) / 02.03.2009–30.04.2009
Part­of­it­was­speculative­while­anotherpart­was­built-to-suit.­In­the­futureit­will­be­difficult­to­sell­speculativeprojects.­This­is­why­we’ll­develop­newproject­in­the­build-to-suit­niche­tomeet­the­needs­of­a­particular­client,­beit­a­factory­or­a­city.­No­crisis­can­bringa­national­economy­to­a­complete­stop:many­companies­want­to­continue­theirbusiness­operations­in­Russia­and­nothing­can­stop­them.
–­Do­you­get­any­requests­for­the­development­of­build-to-suit­warehouses?–­Yes,­we­do­and­we­are­working­inthis­direction­at­present,­studying­possible­projects.
–­Who­are­your­main­clients?
–­We­are­now­dealing­with­non-resident­international­companies­which­arelarge­players­in­their­market­segments­
(FMCG,­retail,­3PL,­automotive­industry).­
This­can­be­explained­by­the­fact­thatour­services­are­more­geared­towardslarge­rather­than­small­businesses.­Ourstandard­warehousing­unit­is­9,200­sqm.­We­may­split­it­in­half­which­means­thatour­minimal­unit­for­lease­is­around­4,600sqm.­If­a­tenant­is­in­need­of­only­1,500sqm­he­will­most­likely­deal­with­a­logistics­operator­who­will­first­lease­muchspace­and­then­sublease­it­to­severalsmall­subtenants.
–­Do­you­see­any­prospects­for­the­industrial­real­estate­market­in­the­Russian­South,­or­only­small­premises­will­bepopular­here­in­the­future?–­Right­now­we­are­already­cooperating­with­large­retailers­FMCG­and­3PLcompanies­operating­in­the­Southernregion.­We­see­that­business­has­brightfuture­in­this­region.­We­also­held­negotiations­with­local­players­but­they­havenot­brought­any­definite­results­by­now.Our­southern­region­is­underdeveloped­from­industrial­real­estate­perspectives­compared­to­the­Central­region.­A­deep-rooted­custom­of­using­smallwarehouses­has­not­been­overcome­yet.­At­the­same­time­the­market­already­hassome­developers,­including­Megalogix,who­advance­state-of-the-art­cargo­handling­and­storing­technologies­which­willeventually­be­in­full­demand­by­all­players,­rather­than­individual­operators.­Ifyou­look­at­the­statistics­of­warehouseson­offer­in­the­southern­route,­thereare­almost­no­A-class­storage­facilitiesand­they­are­not­even­anticipated,­sinceeven­before­the­crisis­no­upmarket­projects­had­been­launched.­Most­A-classwarehouses­in­the­southern­region­arebuild-to-suit­projects­which­are­alreadybeing­used.­We­believe­that­the­southernregion­will­continue­to­develop­and­newstorage­facilities­will­appear­becausethe­situation­in­both­economy­and­tradewill­brisk­up­in­view­of­the­upcoming­Olympiad.­This­means­that­money­willflow­to­the­South­and­demand­for­foodsand­manufactured­commodities­will­be
| North–West |
| : South Region |
| Listings |
­­ However­the­problem­of­project­financing­is­ratheracute­in­case­of­developers­who­have­no­clear­understanding­what­they­want­to­build,­for­what­clients­or­goals.­I­knowmany­examples:­quite­a­few­local­owners­approached­mewith­a­proposal­to­build­something­together­without­knowing­exactly­what­they­want­or­plan.­­
burgeoning.­Class­A­warehouses­will­alsobe­in­demand,­since­the­upscale­warehousing­space­for­general­is­now­limited.­However­it­hardly­makes­sense­to­buildand­launch­more­large-scale­projects­inthe­Russian­South,­or­the­market­will­beoversaturated.
–­Please­inform­us­on­your­future­plans­inthis­region?­When­is­it­realistic­to­expecttheir­realization?
–­The­development­time­of­our­
Krasnodar­project­is­being­adjustedbecause­of­an­uncertain­market­situation.­We­continue­our­search­of­a­suitable­plot.­An­ungrounded­sharp­rise­inthe­land­prices­because­of­the­Azov-Cityproject­did­not­play­into­our­hand­either.­This­pushed­up­the­project­cost­whichwas­beyond­our­pocket­as­we­do­notdevelop­shopping­centers­with­their­highyields.­If­there­is­a­specific­demand­forwarehouses­in­Krasnodar,­the­development­of­this­warehousing­terminal­willbe­more­robust.­We’ll­develop­a­specialproject­in­Novorossiysk.­This­will­be­aport­with­somewhat­different­logisticsby­virtue­of­the­city’s­special­geographical­location.­Logistics­must­solve­theproblems­of­large­wholesale­distribution,rather­than­the­other­way­round.­This­iswhy­only­build-to-suit­properties­willbe­in­demand­here.­For­now­Rostov­hasa­definite­advantage.­At­the­first­stagewe’ll­fill­this­warehouse­and­then­study­apossibility­of­raising­the­second­phase;in­other­words,­we’ll­make­a­stepwiseadvancement.
–­Do­you­have­any­idea­about­the­possiblecost­of­your­future­projects­and­the­ratesof­capital­growth­in­this­segment?
–­I­believe­it­will­come­to­about­
$850/sqm­less­VAT,­including­all­expenditures.­The­net­construction­cost­mayamount­to­$600-650/sqm.­However­itshould­be­borne­in­mind­that­this­costmay­drop­every­month­because­of­sinkingprices­on­construction­materials,­thoughon­the­other­hand­certain­specialized­imported­equipment­does­not­getcheaper.­It­should­be­noted­that­since­September­2008­the­prices­on­construction­materials­have­dropped­by­20-30%.When­prices­further­fall­we­maylaunch­our­next­moderate-size­development­project­that­won’t­exceed­100,000sqm.­We­might­deliver­it­in­phases­20,000sqm­each.­In­this­way­will­the­regionalmarket­will­continue­its­onward­development.­It’s­hard­to­name­any­specificcapitalization­rates­for­the­lack­of­any­
regional­projects;­they­may­vary­between­
14%­and­15%
–­How­did­you­attract­financing­for­the­
Megalogix­Rostov­project?­How­difficult­isthis­process­for­development­projects­tobe­realized?–­The­project­financing­was­decidedupon­from­the­very­beginning­of­ourproject­realization.­Raven­Russia­
(Megalogix­is­a­joint­venture­between­
Raven­Russia­and­Avalon­Group)­hasappreciable­owned­funds­and­maintainsclose­cooperation­with­many­banks.­In­the­upshot­VTB­became­our­lenderfor­this­project.­The­total­investmentamounted­to­about­$150­million.However­the­problem­of­projectfinancing­is­rather­acute­in­case­ofdevelopers­who­have­construction­sitesbut­no­specific­plans.­I­know­manyexamples:­quite­a­few­local­ownersapproached­me­with­a­proposal­to­buildsomething­together­without­knowing­exactly­what­they­want­or­plan.­First­and­foremost­one­should­come­tounderstand­who­to­build­a­project­for­asnobody­needs­a­project­just­for­the­sakeof­beauty.In­addition,­the­transparency­ofbusiness­ownership,­assets­and­the­project­itself­is­very­for­any­investor.­Richexperience­and­an­impressive­portfolioof­projects­and­clients­also­play­a­veryimportant­role­in­the­search­of­financing.­It­is­necessary­to­prove­that­a­plothas­no­encumbrances,­to­show­the­previous­deals,­perform­due­diligence­procedures­and­give­exhausting­informationon­the­available­infrastructure­and­service­lines.­Sometimes­you­ask­the­ownerswhether­gas­mains­and­power­supply­areavailable.­“Yes,­everything­is­close­athand,”­they­replied,­whereas­in­realityit­turned­out­that­a­plot­is­divided­fromengineering­lines­with­a­motorway,­railway­or­even­a­river.­Surely­you­can­throwa­bridge­across­it­but­this­will­call­for­adifferent­level­of­investment.­Nobodywill­give­you­$150­million­just­for­thehell­of­it.­Because­of­the­financial­situation­and­the­lack­of­crediting­lines,­thenumber­of­developers­in­the­southernregion­has­decreased­now.
–­What­is­your­company’s­strategy­intimes­of­crisis?­What­budget­optimizationand­HR­policies­do­you­use?­–­In­this­case­this­is­a­matter­of­theproject­life­cycle,­rather­than­the­crisis.­We­usually­hire­a­team­only­for­a­givenproject.­Once­it­has­been­completed
Information
David Gousset has joined
Raven Russia in 2006
to manage the regional
expansion and develop
Megalogix, a JV with Avalon
Group.
David has 11 years of
experience in the Russian
market.
Up to September 2006, he
had worked as COO of Jones
Lang LaSalle, for Russia
and CIS. Prior to Jones
Lang LaSalle, David had
participated in the setup
of Leroy Merlin purchasing
office space in Russia.
In 1998, David joined FM
Logistic and has managed
the creation, development
and promotion of a
warehousing network in
15 key cities of Russia.
David is 34 and he lives in
Moscow.
most­of­these­folks­continue­to­manageit­within­a­management­company,­whileothers­switch­to­another­project.­Ofcourse­there­are­not­so­many­constructionprojects­under­way­at­present­and­it­willbe­harder­for­them­to­find­a­new­job.­Asfor­the­Megalogix­project,­most­peoplewill­stay­at­the­management­company,­sothe­number­of­layoffs­will­be­very­low.­Theopening­of­the­first­phase­of­our­Rostovproject­will­provide­more­than­1,200­jobs.
–­Could­you­give­developers­a­recipe­ofsurvival­in­this­challenging­time?–­Here­it­is:­it­is­desirable­to­havesolid­shareholders­with­appreciable­financial­resources­and­experience­of­operations­in­the­province;­otherwise­it­may­bevery­difficult­to­complete­any­project.
–­Is­the­situation­in­the­Russian­marketdifferent­from­the­one­in­the­West?­Is­iteasier­to­work­in­Russia?–­Many­investors­always­have­had­animpression­that­Russia­is­a­riskier­place;yet­this­is­also­a­country­which­giveseveryone­a­chance­to­earn­more.­Risksgenerally­seem­higher­when­you­don’tknow­the­country­and­its­laws­and­eachinvestor­must­know­them.­What­else­mayfrighten­investors­away­from­Russia?­Everything­develops­very­fast­here.­Themarket­may­sometimes­fall­very­quickly,it’s­true.­But­quite­often­it­rises­as­quickly,­unlike­the­Western­markets.­­­
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