President of the Tashir group of companies and one of the leaders in the rating of kings of Russian real estate - about the crisis, new projects and heirs

Samvel Karapetyan first appeared on the Forbes list in 2010 with a fortune of $750 million (No. 91). Since then, the developer has managed to multiply the volume of business; in 2014, Forbes estimated the entrepreneur’s fortune at $4.3 billion (No. 26). What is the secret of Karapetyan’s success? In short: do not take out loans from banks, focus not on the volume of business, but on the margin, and make all decisions alone.

“We develop primarily from profit”

Forbes: What is your forecast for the real estate market in 2015?

Samvel Karapetyan: The year will be difficult, but the crisis definitely has its advantages: competitors leave, and those who remain become stronger. We have always accepted the crisis as a period for new opportunities, we will stay, and everything will be fine with us.

After the 2008 crisis, several large developers left the market. Did they make some kind of systemic mistake?

The first is overlending, the second is ineffective management, when decisions are left to managers. In Tashir everything is different. Of course, it’s very nice to take out loans - it’s the easiest money, but it’s hard to pay them back. We also have people in our company who want to indulge in this. I strictly stop them, because I understand what it’s like to return this money with interest. Therefore, we use one approach: we develop primarily from profit. If it’s not enough, we can take out a loan, but this is a completely insignificant share that has absolutely no effect on the project (up to 10% of its cost). My principle is this: no more than a fifth of our objects can be financed. Today, out of 30 commercial real estate properties, only five have credit obligations. We have a fairly comfortable dollar loan - $700 million - from one of the Russian banks. In addition, there is always a safety net - free funds so as not to borrow if necessary. That is why we have never depended on anyone and do not depend on anyone, we do not report to anyone, we do not ask for restructuring, but we work calmly and confidently. The risks are minimal; in the worst case, we will get less profit. We had this business approach in 2008, and I’m sure it’s still relevant now.

Do you think that the situation of 2008 will repeat itself?

Yes, the situation of 2008 will repeat itself. The only difference between this crisis and that one is that it is local, and therefore, in my opinion, will be shorter.

But now Russia is under sanctions.

I firmly believe that sanctions cannot hinder Russia's development. And we must rely primarily on ourselves. All these restrictions are temporary; they are introduced and then lifted. I think that we need to succumb less to panic and fuss, and work more. Everyone must do their job. We don't feel any sanctions.

But you don’t live in a vacuum: oil is getting cheaper, the ruble is weakening...

We must come to terms with this and adapt to the current economic situation: be more vigilant and continue to move forward. We have already experienced the devaluation of the ruble several times. Well, the ruble has devalued. And what?

Like what? Calculations are in rubles.

I don't see anything wrong here. There is temporary panic, but it will pass. Then inflation will begin, which is also a new impetus for business, by the way.

Do you have any plan B in case the crisis drags on and affects you?

Of course, we make different forecasts and understand what will happen to us if a dollar costs, for example, 100 rubles, and we are ready for such a situation. In this case, we will earn more in rubles, and less in dollars.

Are your tenants already asking for rent reductions?

Yes. In some cases we make concessions, in others we don’t. Everyone needs to reformat. If we understand that the crisis will drag on for years, we will adapt to a different regime and lower rates.

In what cases do you make concessions?

Today, Tashir’s portfolio includes about 30 shopping centers. In the most successful ones (there are about 20 of them), rates were not reduced. In such super-successful centers, tenants can afford to pay at the rate of 100 rubles per dollar. As for the rest, negotiations are ongoing. For example, rates were tied to different exchange rates - from 40 to 50 rubles. But, according to my personal observation, half of those who ask to reduce rates objectively need it. In other cases, it is ordinary blackmail.

How do you manage to understand whether it is blackmail or not?

This is easy to understand from the companies' revenues. Tashir has its own stores in almost every trade segment, so we understand very well what kind of revenue and profit someone can have. This information also helps us in negotiating rates.

Is anyone already giving up space?

Because of the crisis, no one has left while tough negotiations on rates are ongoing. There is a natural rotation of tenants: some stores close, others open. It was always like this, even on the rise.

Which of your tenants are most vulnerable right now?

First of all, this is fashion retail. They account for about 80% of the average shopping center's revenue. At first, in all crises, it is this segment that receives the first blow, since during a crisis people spend less on clothes. But at the same time, I would like to draw your attention to the fact that the revenue of a number of companies in this segment has been falling since the beginning of the year, mainly for Russian brands, and vice versa for international brands. After clothing companies, problems usually begin with electronics sellers.

“For us, the main indicator of business is not turnover, but profitability”

Are you interested in the projects of competitors that may find themselves in a difficult situation?

Naturally, we study the market very carefully. Now we can’t allow any misfires, we need to score goals. If we talk about our projects, at the moment we do not consider the hotel and office segment as key. In general, our interests have not changed: commercial real estate with a good location. We intend to continue development in the field of business and business-plus class housing.

Why didn’t they start focusing on economy-class housing, since such apartments sell better?

Economy-class housing is sold without a margin, while in the business and business-plus segments the margin is quite high. In addition, economy class housing is primarily affected by the crisis. We have a different approach: let the volumes be smaller, but there will be profit. For us, the main indicator of business efficiency is not turnover, but profitability. Our margin is sacred.

Why did you become interested in housing in the first place?

We never gave it up. Currently we have about 500,000 sq. m of residential real estate, we will continue to increase our share in this segment. Firstly, we have investment funds that are simply impossible to realize in such a volume in commercial real estate. Secondly, we need quick cash flow, and only housing can provide this.

Are you worried about the economic downturn? Will you adjust your plans for housing development or are you still planning to invest $1.5 billion in construction in Skolkovo?

No, it's not scary. We will not freeze any projects; on the contrary, we are going to increase the pace. During a crisis, it is possible to build cheaper, and we want to take advantage of the situation and launch more projects. Plans for Skolkovo have changed a little. They planned to build approximately 700,000 sq. m, but received GPZU only for 400,000 sq. m (and another 200,000-300,000 sq. m underground), so investments will be half as much - somewhere around $700-800 million.

In addition, we are launching an interesting project for the construction of luxury housing on a 1.7 hectare site on Krasnopresnenskaya embankment in Moscow, which belongs to Mosenergo. We plan to invest $250 million. A total of 45,000 sq. m. will be built. m and another 15,000 sq. m restored (there is a cultural heritage site on the site - the power plant of the Trekhgornaya Manufactory factory, which will be preserved. - Forbes). It seems to me that everything will be built in two years.

What other projects do you want to start during the crisis?

Today we need short projects. With long terms, problems begin, again, loans that you service for five or 10 years, and in the end the banks receive the entire margin. We don’t take on a project if it takes longer than three years to build, although we haven’t even had construction projects that long before.

What projects in other industries are you interested in?

We received a “green corridor” for the supply of goods from China. This is a very big project that we have been working on for three years. Our partners are Chinese state corporations. The first experiment is now underway. We will increase volumes starting in March.

What will you carry?

Everything possible. We also have a retail format called “Our Home”. On this basis we will develop the Chinese project throughout Russia. Plus, we will import for other importers, provide logistics and electronic customs clearance, which provides efficiency and completely eliminates gray schemes. This is relevant for the country, because today state policy is aimed at eliminating gray schemes in business, and in this regard, we hit the mark very well in time.

How do you make investment decisions and who do you consult with?

I make decisions on absolutely all projects myself, single-handedly. This is not even discussed with anyone! I can listen to opinions when a project is presented to me, but only I make the decision.

Were there any mistakes?

So far everything has been flawless (smiles). I don’t know what will happen next. I find my bearings very quickly. I looked and immediately understood: ours or not ours, whether it is necessary or not, I don’t waste time on long negotiations. That's why we don't have partners. It may happen locally in individual projects, but it has never happened within the group and we do not plan to. I am not inclined to spend many months on approvals with my partner; this slows down the process. With my approach, all business processes within the group are carried out as quickly as possible and, most importantly, efficiently: we made a decision, and we begin to develop the project. This approach helped us survive in 2008, and even come out of the crisis with a plus. I'm sure it will work now.

Are you 100% immersed in the affairs of the company?

I am immersed in absolutely all directions. We have completely manual control.

How sustainable is a company if it essentially depends on one person?

This can be judged at least by the fact that Tashir has turned into a huge diversified group and continues to develop and develop new markets. Single-person management is very important in some periods, especially in times of crisis. When everything is going well, you can even let top managers make decisions.

“If you don’t steal, then no one will put you in jail”

The state is one of the main customers of construction. What is the share of government orders in your revenue?

Approximately 30%, if you count Gazprom. Naturally, we plan to increase it. Over the years, we have built a good reputation for ourselves.

There are cases where contractors for the construction of government projects have ended up in prison. Isn't it dangerous to work with the government?

Let's see who ends up in jail. People take advances from the state, spend, most likely, on some personal needs, and then cannot fulfill the state order. This simply cannot happen here: we always fulfill all our obligations not only to the state, but even to the smallest businessman. You can't steal from the state. If you don't steal, no one will put you in jail.

How can a business build relationships with authorities at the federal and municipal levels?

You know, you don’t need to try hard to build these relationships either. You must mind your own business and then you will be in demand. If your company has a reputation as a reliable partner, then they will turn to you. Judge for yourself, if officials have the opportunity to choose between reliable and unreliable people, it is clear who they will choose. You need to keep your word and keep your promises. It is also important not to overload people with unnecessary requests. That's all.

That is, acquaintances are not important here, so that someone introduces someone to someone, takes someone by the hand, introduces them... Personal connections, likes, dislikes do not play a role?

It makes no sense to deny that personal sympathies play a role. It is clear that if a person does not like you, he will not do business with you. Sometimes it’s enough to say three wrong words and the issue is closed.

What are the wrong words?

The ones you say imagining your excessive importance.

Do you need to be modest?

Yes, and not only a modest, but also a reliable person.

You worked with the Moscow authorities under Yuri Luzhkov, and now you are working with the mayor’s office of Sergei Sobyanin. What are the fundamental differences in the system of relations with investors?

Yes, I worked with the mayor's office then and now. The important thing is that now the rules of the game have appeared. The city authorities very clearly define what investors are capable of, and within the framework of this they build a relationship with you. The current mayor's office has identified a pool of investors who are able to invest money and develop the city's economy.

But even under Luzhkov there was a certain pool of investors. What is the difference in the criteria?

Then there was no pool of investors, but there were “conductors” of these investors. Previously, it didn’t matter who you were, if you got access to the “pipe”, then no one cared what you could and couldn’t do.

Did you have any “guides” in business?

No, I have never had and never will have lobbyists. We have always resolved issues precisely. If an issue needs to be resolved, I solve it myself. With any person. If we talk about Moscow, now there are no “guides” at all, they are not on the field. The mayor's office operates according to clear rules.

Can you formulate these rules?

There are many rules, but first of all these are reliability, solvency, and the timing of project implementation is extremely important. If you are given a deadline of 2-3 years to invest and build a facility and you do it efficiently and on time, then you are a reliable partner for the city. And then the city will help you.

How does the mechanism of the city land commission work? Can you influence her decisions?

No, absolutely. This is what I call “building the system correctly.” If the application for the project is completed correctly, it will be considered. If the answer is yes, all permissions are obtained automatically.

To successfully present a project, you need to understand what the mayor’s office wants. How do you capture this?

Analyzing. We constantly evaluate what may be promising for the city in each specific period of time, and try to rebuild in this direction.

Do you find out the wishes of the mayor's office not in personal conversations with officials?

Naturally, I and all other developers have an element of personal communication, but it also cannot be overestimated. The mayor has an investment committee where interesting initiatives are constantly discussed. And we are present in this dialogue, but this in no way means that you can do whatever you want. There are strict rules of the game.

“My children are like me in everything”

You do not hide the fact that Tashir is an Armenian company. How united is the Armenian diaspora in Russia? Do you help each other?

We help each other and support each other when needed, but most importantly, we never get in the way. I am proud to be an Armenian, proud of my family, my children and the business I created. We are a small but very proud and wise nation. We never stepped on anyone, but on the contrary, we always tried and are trying to survive, while maintaining our originality and uniqueness. Times, of course, have changed, we are not talking about direct physical preservation, but situations are different. Our unity allows us to do a lot both in business and in life. Everything is built on trust, so no one has ever deceived us and neither have we. There were never any ships. Businessmen who have survived all these years understand how important words are in business. Others simply didn't survive.

Your company is completely manual. It's a busy schedule. Are you planning to hand over control to managers and relax?

To be honest, not yet. Although I think that every person comes to this at some point, and I am mentally prepared for this. I'm still interested in doing business. Real estate is the most dynamic area, because you have to constantly create something new, real, tangible, that can serve people for a long time. I really enjoy this process.

Are there people you could delegate things to?

There are, and they are already starting to manage the business. I have two sons, 16 and 22 years old, and a daughter who is 22 years old. The youngest son is studying at the institute, and the eldest is responsible for managing commercial real estate in the company. The daughter is gradually entering the family business. It was a given to me that my children would go into business. They knew this, and most importantly, they wanted it. It couldn’t have been any other way; none of them even abstractly imagined their future in another place. They initially understood what they would do.

Did you raise them strictly?

I think that I raised them correctly; an appropriate environment was created from childhood. I didn't indulge. In addition, there is a gene factor. My children are like me in everything. I never liked nightlife, but work, on the contrary, inspired me. I look at them now - they are the same.

How were you raised, what family are you from?

The father devoted his whole life to raising his children. He was a teacher and taught mathematics as a school director for more than 50 years; his mother taught English. An intelligent and very hardworking family, I learned a lot from them. My parents created a special environment for me, from a young age they explained that the main thing in life is to be a decent person and keep your word.

Are you now the sole owner of the group or do your children already receive shares in the business?

I am the only group owner with my children. We are a family business.

But how is this formalized legally? Are there any entries in the registry?

They just entered the arena, so these recordings will be out very soon.

Are the children already doing something?

I would say that they are already doing a lot of things successfully. His son’s first project is a shopping center in Mytishchi (about 200,000 sq. m, investment $200 million). This is exclusively his full-fledged project from the moment of design and purchase of land to operational management. So let's see how he implements everything. The daughter manages the media business and the entertainment industry. Under her leadership, the Cinema Star cinema chain has become one of the leaders in Russian film distribution in recent years. And cinemas, in turn, provide greater attendance at our shopping and entertainment centers.

At what point did you feel like a rich person?

There was no such moment. I don't have yachts or rare paintings. Of course, I like luxury, but I have never become obsessed with it and do not make a cult out of it. It's simple: if you like the plane, you buy it. But not for the sake of saying that I have it. The main thing is different, and this fills me more - I do my own thing. For me, it is much more important not to fail anywhere, not to stand still and to move forward little by little, but persistently.

Have you made any mistakes in business? Are there decisions that you, having already had experience, would change?

There were no obvious mistakes. If we say what I would adjust, I would not get involved with the hotel business. Profitability in this segment is either very small or nonexistent. We own the Moscow City hotel chain. These are modern upscale hotels, but they do not generate the kind of profits that would make it worth investing heavily in. I expected different results when we started working in this direction. We do not have unprofitable hotels, but profitability is generally low.

Are you planning on getting rid of these assets?

We won’t sell; for me, hotel projects are projects for the soul. In many regions of Russia, our hotels are sometimes almost the only ones in terms of service and star rating; with their opening, tourism began to develop more actively - both domestic and international. This is important for us.

Billionaire Samvel Karapetyan: “Our margin is sacred”