There may be only four large developers left in Moscow. All are associated with the state

“Now representatives of inspection services flock as soon as they see the crane! Previously, there were a lot of construction projects, there was enough for everyone,” says the owner of a large Moscow construction company with indignation. “Over the past two months, not a single property has appeared in Moscow,” says Georgy Dzagurov, general director of Penny Lane Realty. The volume of construction in Moscow has halved, and cranes are indeed less common. The business that gave Russia such colorful characters as Sergei Polonsky, who promised to eat his tie and fought on television with billionaire Alexander Lebedev, or Vladislav Doronin, whose girlfriend was model Naomi Campbell, is undergoing dramatic changes.

From 2001 to 2008, at least 4.4 million square meters were built in Moscow. m of housing per year (for comparison: one multi-storey microdistrict is 0.2–0.5 million sq. m). His first deputy, Vladimir Resin, who oversaw the Moscow construction complex (after the last Duma elections, he was going to take the chair of a State Duma deputy), liked to report on records at meetings with Mayor Yuri Luzhkov. Now everything has changed. In 2010, 1.7 million square meters were commissioned in Moscow. m of housing, this year is expected to be 2.2 million, and no further growth is expected. The situation is similar with commercial real estate. In 2007, 2.5 million square meters were built. m of shopping centers and offices, in 2010 - 1.3 million sq. m. A square meter of any real estate in Moscow costs at least $3,000, which means that $11 billion less money is now coming to the market. In 2008, there were officially 3,759 construction projects in Moscow; in 2011, there were 2,804 construction projects.

The first blow to Moscow construction projects came in the 2008 crisis, and in the fall of 2010, Sergei Sobyanin, who was appointed mayor, began a complete review of construction practices in the capital. “Unfortunately, a murky environment of investment contracts has been created in Moscow, which is an example of Russian corruption, bureaucratic lawlessness, and simply stupidity,” he said and created the Urban Planning and Land Commission (GZK), headed by the former Minister of Construction of Tatarstan Marat Khusnullin and Federal Deputy Minister of Economic Development Andrei Sharonov - officials who have nothing to do with Moscow business or the team of the previous mayor. This commission began reviewing investment contracts concluded by the city.

What is an investment contract? In fact, until recently, this was the most popular way to conduct development activities in Moscow. Most of the land in the capital escaped privatization and remained in municipal ownership. To build a house or store on this land, the developer entered into an investment contract: the city allowed construction, and in return he had to receive a share of the finished space in real or monetary terms. All other documents - the lease agreement for the site, the planning project, etc. - were secondary in relation to the investment contract.

The investment contract was considered a serious asset. Having an investment contract, developers recorded unbuilt objects in their portfolio when they sold shares to investors on Western exchanges: the capitalization of Sistema Hals exceeded $2 billion, RGI International - $1.4 billion, and the latter had revenue in the previous year of $380,000. Investment contracts were a commodity , they were resold and, taking into account the peculiarities of the capital's land market, replaced the purchase and sale of land.

Sobyanin is completely reshaping this system. The mayor personally heads the Urban Planning and Land Commission (according to market participants, he signs 120 resolutions during an hour and a half meeting, which excludes the possibility of careful study). It was planned that the State Land Committee would have time to review 1,300 investment contracts concluded by the city with businessmen by September, but this work has not yet been completed. As of early December, the SLC had made decisions on only 800 contracts: 344, almost half of them, should be terminated.

Deputy Mayor Andrei Sharonov, answering questions from Forbes, names the main reasons for the termination of investment contracts: the inability to formalize land relations, too large a volume of projects that the infrastructure could not support, the presence of complex encumbrances on the site. “Of course, one can guess,” he says, “how such absurdities were agreed upon in their time - as they say, in “manual mode.” At the same time, mainly those investment contracts are terminated, the construction of which has not begun.

From January 1, 2012, the Moscow administration will have another powerful weapon in the fight against the system of investment contracts. A law adopted by the State Duma comes into force, which allows the administrations of Moscow and St. Petersburg to terminate investment contracts and lease agreements with developers without paying compensation, except for documented costs. The contract can be terminated if more than 40% of the work is not completed on time, if there are encumbrances and for other similar reasons. Until this law was adopted, developers often went to court; several dozen such processes have already been registered.

By shutting down one system of relations, the authorities did not create a new one. “There is no market for investment proposals in the city,” said a letter prepared in November by the Moscow Investors Association and Moscow City Duma deputy Ivan Novitsky. — In 2011, eight land auctions were held for the construction of buildings with a total area of only 46,000 square meters. m. Other legalized forms of attracting investments (concession agreements, agreements for the development of built-up areas, trust management, etc.), as before, do not work in the city.”

Unanswered Questions

“The talk that we stopped construction is not true,” Deputy Mayor for Urban Policy and Construction Marat Khusnullin answered investors a few days later at an extended meeting of the construction complex board. According to him, since the beginning of the year, 339 new construction permits have been issued in Moscow, and the area of all projects under construction in Moscow exceeds 32 million square meters. m.

But compared to what Moscow is used to, this is already a noticeable slowdown. At the same meeting, Khusnullin said that although the General Plan envisages the construction of 200 million square meters. m of real estate, only 80 million sq. m. will be built within the current boundaries. m, the rest is in the “new Moscow”, on a large territory recently attached to the capital from the southwest. This means that in “old” Moscow they will continue to build half as much housing and half as many shopping and office centers. Fighters for preserving the historical appearance of Moscow and opponents of infill development may rejoice, but for developers such blockage is disastrous. There are simply no new projects.

The mayor's office understands that the painful pause between the stop of one business mechanism and the launch of another has been prolonged. The authorities offer developers two options. The first is a game on the same territory according to new rules. When implementing investment contracts in relations with investors, it is necessary to switch to the format of land auctions, explains Andrei Sharonov. And after they are carried out, construction is allowed on the basis of an urban planning plan for the land plot (GPZU), taking into account known and understandable restrictions from the very beginning. However, this mechanism does not yet work. “I would love to participate in the auction,” the general director of the construction company objects. “But where are the auctions?” At the eight that took place, it was mainly about the construction of garages, the total area of which was 46,000 square meters. m - a drop in the ocean of the Moscow real estate market.

Why can't the city allocate more lots? Because he doesn’t have time to prepare those same GPZUs. “Previously in Moscow there was two types of development,” says Leonid Kazinets, owner of the Barkley corporation. — Development of buildings and land development - collection of documents necessary for construction for a site and sale of such a legally prepared site to the developer. Today the state has reserved the function of land development only to itself.” But preparing a site for an auction is a Byzantine-long, intricate process, and it is no easier for the state to go through all the circles of bureaucratic hell than for a private owner. “There was a complex system that Resin knew, although he did not fully control,” says a former Moscow government official. “All the departments had some kind of their own interests and could bargain: here you will make concessions to my project, and here I will endorse the papers according to yours.” This system was destroyed, but a new one was not created.”

Investors will be able to resume their activity in the new territory, Deputy Mayor Andrei Sharonov suggests another way, referring to 160,000 hectares of “new Moscow”. But there are no conditions for doing business there either, and it is unclear when they will appear - there are no real deadlines. An official from the previous Moscow government notes that there is simply not enough water in the new territories. Land relations have not been regulated, there is no urban planning documentation, it is unclear who will prepare it, the capital’s developer states. Moscomarchitecture specialists were already overloaded with work; it is not clear where to get the resources to double productivity.

It turns out that both paths come down to the inability of city authorities to cope with the tasks they have taken upon themselves. Market participants have accumulated many questions about the effectiveness of Sobyanin’s team. They say, for example, that a simple meeting protocol is signed within 25 days.

The story of kindergartens is retold like an anecdote. The city order assumed that 50 kindergartens would be introduced within a year. For 12 of them, we did not have time to hold an auction, just to prepare all the papers. At 22 sites, gardens were “tied” from prefabricated concrete structures, the builders completed the zero cycle, when it suddenly discovered that the plant that produces parts for the gardens had stopped. In September, the city decided to build monolithic kindergartens instead of prefabricated ones, but given the redesign work, it can be assumed that the plan is unlikely to be fully implemented. The housing commissioning plan is being implemented slowly: it is already clear that 2.5 million sq. m. m, which were talked about at the beginning of the year, will not be built, the maximum is 2.2 million. At the same time, only 1.4 million were commissioned at the end of November.

“The fact that this team is not efficient became clear about two months after its arrival,” fumes the developer, for whom the capital’s authorities are trying to cut down space. — Khusnullin had 50 objects in Tatarstan, one of my companies had 45, and in Moscow there are several thousand of them! In Kazan it was possible to hold a meeting on each object and go to it, but here it won’t work.” His colleague recalls one of these visits: “He came to me, inspected the site, and praised me. I asked how long I was going to build. I replied that 50,000 sq. m. - How much is there? - 5000. - Leave 5000. There is no need to overload the city."

Outraged developers can, of course, be considered biased. The general director of the Moscow division of the Pioneer group of companies, Oleg Soroka, on the contrary, praises the Moscow authorities for putting things in order in land relations. “Pioneer” is building a residential building on the lands of the Housing Development Fund (RHD, a federal organization not controlled by Moscow, to which the state transfers land it does not need, for example, military or agricultural land within the city). The company says that it receives all possible approvals as quickly as possible. The only problem is that the RHD Foundation held only four auctions in Moscow.

Investors and developers may be indignant, say that they are not allowed to work, and write collective letters, but, in fact, the Moscow government is not faced with the task of protecting their business. The priority in the development of the city, as Sergei Sobyanin has repeatedly explained, is transport construction. The adopted targeted investment program of the city for 2012–2016 suggests spending 183 billion rubles on housing and 892 billion on transport. The era of investment contracts is ending.

Where to go for a builder

For many developers, the extremely profitable business of developing Moscow’s “Golden Mile,” where the price per square meter amounts to tens of thousands of dollars, is becoming a thing of the past. No matter how sweet the Moscow real estate market may seem, developers are forced to move to other territories. “We will now complete all the projects for which we received documents under Luzhkov, there are no new ones yet let’s start,” says Leonid Kazinets. Barkley is one of the largest developers of Ostozhenka; in addition, the company’s portfolio includes several business-class residential buildings in other areas of Moscow; in total, as Kazinets assures, there are more than 300 investment properties. “We can work on any land, we worked in the Baltic states, the Czech Republic, Montenegro,” says Kazinets. But, of course, one cannot dream of the same profitability. According to Knight Frank, the average price per square meter of luxury real estate in Moscow is $22,800, and in Prague - only $8,000.

It’s always easier to work in the provinces, says Viktor Nesterenko, general director of Mosfundamentstroy-6, because it’s easier to get approvals there. Having built more than a million square meters in Moscow, his company is going to move to the region and is preparing to build a large residential complex in Nizhny Novgorod. The cost of real estate here, according to the Gdeetotdom portal, is three times less than in Moscow: 47,000 rubles versus 150,000 rubles per 1 sq. m. m.

The rules introduced by the third Moscow mayor may have a positive impact on solving the city’s transport problems, but will negatively affect the price per square meter, says Artem Tsogoev, project manager of the real estate company Trinfico Property Management. Due to the decrease in new supply, prices could, according to his estimates, increase by 20% in the near future. Now the average cost per square meter in a business class apartment in Moscow is approximately $6,800. The supply of apartments in Moscow has a clear downward trend, which means that the cost per square meter will increase, agrees Konstantin Kovalev, managing partner of Blackwood.

Forbes looked at several examples of how changes in the usual work pattern in Moscow affected the business of individual developers.

To the region

The largest developer of Ostozhenka, Moscow's "Golden Mile", was RGI International. The founder of the company, Boris Kuzinets, is a trendsetter in the construction of the most expensive and high-quality housing. Price $50,000 per 1 sq. m in his houses before the crisis, no one was surprised. One of the penthouses in RGI buildings was put up for sale for $30 million. Apartments in his buildings very rarely appear on the secondary market. For a long time, the figure of Kuzinets was surrounded by an aura of mystery. He held countless meetings with clients but refrained from talking to reporters. In 2007, RGI International listed on the London Alternative Investment Exchange (AIM). The company's financial performance was more than modest - revenue of $380,000. However, the development portfolio, six promising sites on Ostozhenka and Sretenka, amounted to more than $200 million, and RGI's capitalization six months after the placement of shares exceeded a billion dollars.

For four years, the company built only one shopping center - Tsvetnoy on Tsvetnoy Boulevard. For the rest, pre-design work was carried out, but now Boris Kuzinets may perhaps regret his slowness. The State Construction Committee prohibited increasing construction volumes, thereby negating the economic effect of development. On one of the sites where Kuzinets planned to build an office complex of 25,000 square meters. m, the commission will allow the construction of only 5000 sq. m. RGI still continues to rent out the old building standing on the site and has reduced its estimate of the cost of the project by 3.5 times - from $38 million to $11 million. It is not surprising that investors who bought shares in RGI are dissatisfied with the management and operating performance of the company. According to Synergy, a shareholder of RGI, the current state of each of the projects in the center of Moscow does not allow for a return on investment in the acquisition of rights.

Of the seven promising RGI projects, only the micro-city “In the Forest”, an economy-class residential area outside the Moscow Ring Road with an area of 1.3 million square meters, is currently under active construction. m. According to the business plan, the cost of a meter here is about 10 times less than in Ostozhenka - $2600. The founder of RGI invited top architect Sergei Tchoban, but now he has to refuse personal meetings with each client.

Around the Moscow Ring Road

The largest Moscow house-building plant, which builds about a million square meters of housing per year, is undergoing serious changes. Even before the crisis, DSK-1 won at auctions held by the city tender committee the right to demolish dilapidated housing and build three microdistricts in Kuzminki, Ivanovsky and Nagatinsky Zaton with a total area of about 1 million square meters. m. But DSK-1 was unable to fulfill these investment contracts. It turned out that they did not meet the requirements of land legislation, says Andrey Pankovsky, Deputy General Director of DSK-1. Auctions were held for the right to conclude an investment contract, and the Land Code requires that the right to conclude a lease agreement be played out. The Federal Reserve System simply would not have registered the ownership of the property, and therefore the rights of the final buyers of the apartments. The sites returned to city ownership, and the city returned the money spent on the auctions. DSK-1 has no other such large investment contracts in Moscow.

Another important part of DSK-1’s business is the construction of municipal housing. Before the crisis, the city built about 2 million square meters at its own expense. m, of which 650,000 sq. m accounted for "DSK-1". Now the entire city order is 650,000 sq. m. m, and the share of DSK decreased to 150,000 sq. m per year, that is, volumes decreased four times. In addition, the new Moscow authorities are developing new standards for “municipal housing.” It should have many one- and two-room apartments of small size, but, according to the head of the urban planning policy department Sergei Levkin, such a house should be “out of series” in order to encourage Moscow DSKs to compete with each other. Marat Khusnullin believes that the competition for the site to which the P-44T series is tied is a pseudo-competition, since only one company produces this series. “Such conversations have been going on for the last 10 years,” says Andrei Pankovsky. — To launch a new series, we and other DSK need to modernize their capacities, and this costs hundreds of millions of rubles and takes about three years. If they announce a competition for a house that will have, say, two-room apartments with an area of 54 square meters. m, then none of the DSK will simply be able to reach it, since it does not have series with such a set of apartments.”

The order portfolio of DSK-1 now largely consists of the construction of microdistricts around the Moscow Ring Road, at a distance of approximately 10 km. Based on the results of three quarters of 2011, the revenue of DSK-1 is 20.2 billion rubles (the same figure last year was 30 billion rubles). In addition, this fall there were changes in the structure of the plant’s owners: four companies became the owners of 92% of the shares, three of which were registered abroad, in particular in London. The beneficiary of one of them with a 25% share is Vladimir Kopelev, who worked at the plant for more than 50 years and was previously considered the main owner. —

State construction

In one of his interviews, the co-owner of the Don-Stroy company, Maxim Blazhko, valued his business at $7 billion. This was in 2008, when Don-Stroy was one of the largest builders of business-class residential buildings and commercial real estate. After the crisis, not a trace remained of its former greatness. The Don-Stroy-invest company, which is building residential complexes, came under the control of VTB Bank - Don-Stroy's debt to it reached 80 billion rubles. Vice President of VTB financier Alena Deryabina became the General Director.

Now, three years later, she is already confidently spewing construction terms when she speaks at the construction industry board about the problems of re-approving projects after the crisis. “I would like builders to be able to put a facility into operation with the same set of documents with which they started building it,” she says. Don-Stroy-invest can afford to fight legislative practices, because no one risks suspending its large projects. Among the Don-Stroy-Invest projects approved by the State Construction Committee is the construction of 100,000 sq. m of housing on Pogodinskaya Street in the Central Administrative District. The company currently has eight projects in operation; sales volume in 2011 exceeded 64,000 sq. m. m.

“Construction is the last non-monopolized large business segment,” says one of Don-Stroy’s competitors. - Now it will also be nationalized. Four large state-linked developers will remain in Moscow: VTB, Sberbank, Rostekhnologii and someone else.”

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