2009 - CRE

#8(112) /15.03.2009–15.05.2009
­ The­Kuban­authorities­are­still­confident­that­the­gaming­area­of­Azov-City­will­be­created­in­the­Russian­South­within­the­times­planned­by­the­government.­The­regional­vice­governeris­sure­that­investors­will­stir­to­greater­activity­at­Azov-City­after­they­get­rid­of­the­shock­and­fear­caused­by­the­world­financial­crisis.­In­the­opinion­of­local­officials,­the­project­is­interesting­because­it­is­a­nationwide­undertaking.­The­representatives­of­the­gambling­business,­on­the­contrary,­believe­that­even­in­the­best-case­scenario­the­project­can­be­realized­only­at­a­regional­level.
showed­the­greatest­vitality.­Nevertheless,out­
of­ 16­ plots­ in­ the­ Krasnodar­ part­ of­
Azov-City­put­up­for­sale­only­six­coveringa­
total­ area­ of­ 120,000­ sq­ m­ roused­ theinterest­of­potential­investors.­Krasnodarbased­
companies­ Kubanneft-project­
Ltd,­ Olymp­ and­ Visa­ MK,­ Kazan-based­
Royal­ Time­ Ltd,­ Moscow-based­ Korstondevelopment­and­Saturnius,­Armavir-based­
Business-Consult­ and­ Austrian­ ASATI­ areknown­
to­ have­ outbid­ their­ competitorsat­an­earlier­held­auction­for­the­right­ofland­
lease­ on­ the­ territory­ of­ the­ gaming­area­
in­the­Scherbinovsky­ district­ of­
Kuban.­ Last­ December­ Royal­ Time­ tackled­
the­ construction­ of­ the­ first­ gamingestablishment,­Oracle,­on­its­four-hectareplot.­Curiously­enough,­the­main­term­waschanged­in­the­tender.­While­earlier­on­thetime­of­construction­
completion­ was­setat­July­1,­2009,­later­it­was­pushed­back­to­July­1,­2011.­For­now­the­local­authoritieshave­demonstrated­ostentatious­optimism.­Kuban’s­vice­governor­Alexei­Agafonov­isnever­tired­of­repeating­that­in­spite­of­theworld­financial­crisis,­not­a­single­investorin­the­Kuban­part­of­the­gaming­area­Azov-
City­has­reneged­on­their­initial­commitment­to­get­involved­in­this­project.
The­ companies­ that­ have­ not­ made­ afinal­
decision­ yet­ talk­ of­ technical­ problems.­Casinos­Austria­which­won­the­Julytender­for­the­right­to­lease­a­1.5-ha­plotin­the­Rostov­part­of­Azov-City­emphasizedthat­it­is­still­interested­in­the­project­butdoes­not­intend­to­sign­a­contract­of­leaseand­investment­agreement­until­a­masterplan­
of­ territorial­ development­ has­ beendeveloped.­
According­ to­ the­ head­ of­ thecompany,­Casinos­Austria­isn't­waiting­forthe­
gaming­ area­ to­ be­ launched­ but­ justwants­to­familiarize­itself­with­the­finalizedplan­of­its­development.
The­ Kuban­ authorities­ are­ still­ confident­
that­ the­ gaming­ area­ of­ Azov-Citywill­be­created­in­the­Russian­South­withinthe­times­planned­by­the­government.­Theregional­vice­governor­is­sure­that­investors­
will­ stir­ to­ greater­ activity­ at­ Azov-
City­after­they­get­rid­of­the­shock­and­fearcaused­by­the­world­financial­crisis.
In­ the­ opinion­ of­ local­ officials,­ theproject­is­interesting­because­it­is­a­nationwide­
undertaking.­ The­ representatives­ of­
| North–West |
| : South |
| Listings |
­­ One­can­assume­that­the­crisis­will­be­a­comfortable­excuse­for­some­players­to­give­up­on­highly­risky­projects­without­spoiling­theirimage.­If­all­the­announced­projects­were­deliveredto­the­market­we'd­have­around­750,000­sq­m­of­quality­supply­in­the­warehouse­­segment­by­thebeginning­of­2011
the­ gambling­ business,­ on­ the­ contrary,believe­that­even­in­the­best-case­scenariothe­project­can­be­realized­only­at­a­regional­level.­Lavrenty­Gubin,­press­secretary­of­Storm­International­B.V.­(one­of­the­largestnational­gaming­operators),­says­that­evenbefore­
the­ financial­ crisis­ it­ was­ obviousthat­Azov-City­could­not­be­realized­on­alarge­scale­and­within­the­times­set­by­thegovernment.­“Now­as­the­nation­is­struggling­with­a­budget­deficit­the­allocationof­billions­to­the­construction­of­a­gamingzone­would­appear­extremely­strange,­giventhat­the­commercial­effectiveness­of­suchprojects­
is­ doubtful.­ Theoretically­ localoperators­may­get­involved­in­the­project,while­the­zone­itself­can­be­quite­successful­in­the­distant­future­but­only­at­a­locallevel­as­it­satisfies­the­demand­of­respective­regions­(Krasnodar­Krai­and­the­Rostovregion).­On­the­other­hand,­this­zone­willnever­be­capable­of­operating­at­a­federallevel,­so­to­say.”In­his­words,­Storm­International­B.V.may­
enter­ the­ project­ only­ provided­ anairport­
is­ built­ right­ on­ the­ zone’s­ territory,­
a­ quality­ motorway­ and­ railway­ arelaid,­
all­ other­ essential­ infrastructure­ isprovided­
along­ with­ government­ guarantees­and­investments­and­tax­breaks­overthe­period­of­the­master­plan­developmentfor­the­given­territory­that­is­to­be­strictlyobserved.­All­of­that­calls­for­plenty­of­timeand­
investments.­ Nevertheless,­ althoughthe­project­raises­an­ever­increasing­number­of­questions,­it­can­still­be­implementedafter­necessary­corrections­are­entered.
Might-have-been­war
Experts­ foresee­ an­ upcoming­ strugglebetween­
regional­ transportation­ hubs,namely­Krasnodar­and­Rostov,­for­the­status­of­the­logistics­capital­of­the­Russian­
South.­ At­ present­ the­ southern­ logisticsmarket­is­represented­only­by­low-quality­Soviet-type­storage­facilities­and­the­firstphase­of­the­warehouse­complex­Megalogix­Rostov­that­was­delivered­to­the­market­ashort­time­ago.­As­reported­by­CB­Richard­
Ellis,­ all­ new­ A-class­ logistics­ projectswere­frozen­in­the­Russian­South.­As­soonas­
Russia­ successfully­ gets­ itself­ out­ ofthe­world­financial­crisis,­we­may­witnesssome­reviving­interest­in­Krasnodar­Krai­onthe­part­of­both­private­and­institutionalized­investors,”­points­out­Bairam­Karliev,spearheading­
the­ industrial­ propertyresearch­
department­ at­ CB­ Richard­ Ellis.­
Yet­ he­ makes­ a­ reservation­ that­ the­ realdemand­for­A-class­storage­facilities­defiesa­
credible­ analysis.­ This­ did­ not­ hinder­
developers­from­launching­a­great­numberof­huge­projects.­Here­are­the­main­ones:ProLogica­Park­Takhtamukai­–­104,000­sqm­(Development­YUG);
Megalogix­ Krasnodar­ –­ 100,500­ sq­ m­
(Raven­Russia­and­Avalon­Group);
Eastfield­Park­Krasnodar­–­110,000­sq­m­
(Eastfield­Group);
Logistics­ Park­ Yuzhny­ –­ 300,000­ sq­ m­
(M-Industria);
Parkridge­ Krasnodar­ –­ 117,000­ sq­ m­
(Parkridge­Holdings).
Not­a­single­of­the­above-listed­projectsis­being­actively­developed­at­present.
All­ these­ warehouses­ were­ plannedas­rather­risky­speculative­developmentsand­it’s­not­quite­clear­whether­they­willfind­
buyers­ in­ the­ new­ reality.­ “Nobodywill­develop­speculative­warehouses­in­thecurrent­situation,­not­even­in­the­Moscowregion­
where­ speculative­ activity­ in­ thegiven­
market­ segment­ has­ plummeted.­
None­will­now­finance­speculative­development,”­Karliev­confirms.One­can­assume­that­the­crisis­will­bea­comfortable­excuse­for­some­players­togive­
up­ on­ highly­ risky­ projects­ withoutspoiling­their­image.­If­all­the­announcedprojects­were­delivered­to­the­market­we’dhave­around­750,000­sq­m­of­quality­supplyin­the­warehouse­segment­by­the­turn­of­2011.­The­market­would­simply­choke­fromsuch­redundant­logistics­space.
If­ the­ work­ on­ the­ given­ projects­ isresumed,­the­question­of­sale­will­be­veryacute.­
As­ noted­ by­ experts,­ it’s­ not­ clearwho­will­lease­these­upscale­premises.­Theywill­hardly­suit­the­average­Russian­tenant.­Transport­companies,­3PL­providers­and­thelike­might­be­the­first­to­lease­these­facilities.­
However­ this­ category­ of­ lessees­ isextremely­unreliable­nowadays.­In­the­current­situation­they­all­run­very­high­risksand­might­be­on­the­verge­of­default.
As­ we­ can­ see,­ most­ megaprojectsbecame­hostages­to­their­own­ambitions.­The­planned­volumes­call­for­bulky­investments.­
For­ all­ that,­ these­ projects­ wereoften­speculative­developments­ignoringthe­possible­risks­and­having­no­elaborateconcept.­
Notwithstanding­ these­ growthpains,­it­shouldn’t­be­forgotten­that­thereis­
short­ supply­ in­ most­ commercial­ realestate­
segments­ in­ the­ Russian­ South.­
Those­developers­who­will­be­able­to­maketheir­
projects­ interesting,­ above­ all,­ forlocal­players­and­return­their­investmentswithin­the­acceptable­time­will­be­the­winners.­Another­possibility,­more­customaryfor­Russian­players,­is­to­harness­the­current­political­situation.­­
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