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CRE: Full report on the first day at MIPIM-2008

12.03.2008 On 11 March started MIPIM-2008, the largest investment exhibition held yearly in Cannes, France.

During last two years the number of participants have increased by 43% and now makes more then 28, 000 participants representing 85 countries.  This year the display area was increased for 2315 m2 of new display zones to accommodate all the applicants to reach 26815 m2.  

Year after year Russian companies are becoming more active: the number of the participants, the number of the stands and the presented projects are increasing. Numerous presentations, discussions and briefings are held non-stop. 

At the opening of the stand of Krasnodar Krai (Krasnodar region) the Minister of Regional Development of RF, Dmitry Kozak made a speech. He said that it is the eighth time that the Krai has its display at MIPIM that proves the high interest to the area demonstrated by investors.   Probably this kind of participation affected the results of selecting Sochi the capital of Olympic Games-2014. The Minister said that Krasnodar Krai “haunts” him {Mr Kozak used to be a Representative of the President of the Russian Federation in the Southern Federal District} now due to the rapid development of the region. Deputy Governor of Krasnodar Krai Alexander Remezov also made a speech at the opening. An interesting detail: a famous TV host Ksenia Sobchak was also seen among the guests of the stand. On hearsay, recently she has had some commercial interests in the development project of the region.

In 2007 the Krai delegation came back from Cannes having received 28 invitations worth 1, 5 million Euros total. This year the Kuban area presented 11 most promising projects in the territory of 400 m2.  Among the projects are a multifunctional complex Festival Sochi, a resort and recreation complex Federation Island, a gambling area Azov City and objectives related to the Olympic Games.

According to Ekaterina Krylova, Moscow exhibition bearing a motto Moscow – a city open for investments has a very large program. The inauguration of the stand was attended by Vladimir Resin, First Mayor Deputy of Moscow, and Head of capital construction complex. Then Vladimir Khaikin, head of Projected Development Management (State Unitary Enterprise) made a presentation on preparing urban planning and design documentation to redevelop Zakhariono and Kozhukhovo villages. The same day few more presentations were made at the stand. These related to the projects of Dekra company (redevelopment and restoration of Studenets (a manor built in the XVIII-XIX centuries, now a monument of park and garden architecture), Kalinka Realty (different construction and redevelopment projects in Moscow, Mercury City complex, etc.), redevelopment of Dinamo premises (the Central Stadium located at Leningradsky prospect). 

The program of Russian Regions stand was also highly topical. Headed by Vladimir Pinaev there was a discussion held by different participants. Thus Jones Lang LaSalle discussed the problems and financial opportunities of investment projects in Russia. Vladimir Semenov from Knight Frank held a consultation on real estate market in the regions. Andrey Alpatov, RusSEZ (Federal Agency for Management of Special Economic Zones) told about the state initiatives on creating favorable investment climate in different regions and on forming special economic zones. Jeremy Oats, Managing Director of Knight Frank, Russia and CIS, held a parallel discussion on Russian hospitality at European standards. The discussion was devoted to hospitality business development in Russia.

In the morning there was a presentation made by Khanty-Mansiisk autonomous region – Yugra when the Governor Aleksander Filipenko told about economic and investment potentials of the area. It should be noted that Yugra accounts for 7% of all the crude oil recovery. The city Khanty-Mansiisk was chosen to host EuroSummit-2008. At the presentation a lot was said about development perspectives and some development projects of YugraInvestStroiProject were presented.  Future icon of the city could become a 280-m skyscraper in the shape of a crystal, made by the architect Norman Foster.  Erick van Egeraat also made a speech at the presentation. He is now taking part in developing the master plan for Khanty-Mansiisk. According to Mr. Egeraat, today the plan looks like a piece of cheese with a lot of holes in it yet with this planning the city cannot grow effectively.
After the presentation, Mr. Filipenko noted that the Exhibition once again made him think that his region has a lot to strive for.

In the afternoon there was a conference titled Russia: investment course, organized by Vedomosty newspaper, reports Ekaterina Krylova.

The conference was opened by Pavel Fuks, President of MCG who said that MIPIM is a unique ground where new ideas are born. Besides he noted that his company adheres to the idea to build multifunctional international business centers.

An expected speaker at the conference was Elvire Nabiullina, Minister of Economic Development and Trade of RF. She said that MIPIM is not just an opportunity to present new projects, but it is also an opportunity to discuss problems and trends of the market. Why is Russia becoming one of the most promising areas in the word? asked the Minister. The answer is the achieved macroeconomical stability. The Minister provided some figures to prove this point.  For the past eight yours the economic grown has made 7% a year. Based on the GDP volume Russia is ranked seven in the world. In 2007 the increase was 8, 1%. According to the Minister, this is the highest figure of last years. In 2007international capital flows reached 120 billion US dollars. And the foreign investors already operating in Russia have a more positive view of the climate in Russia then potential investors.
According to Mrs. Nabiullina, the legislature and tax laws are being improved quite actively. There is an investment fund that has already approved around twenty large infrastructure projects worth 40 billion US dollars, appropriating some of the money directly from the fund. “Based on the key figures, we have a positive outlook for the future including investments into commercial property,” says Elvira Nabiullina. 

The issue on commercial property investments was picked up by Cameron Sawyer, Chairman of the Board of Directors of GVA Sawyer, and General Director of Rutley Russia Property Asset Management. According to him, for the period of 1993-2003 the volume of investments was 2 billion US dollars while for 2007 alone it totaled 20 billion US dollars. Still there are not enough projects in the market that could interest foreign investors. At the same time there is a trend for the return rate to decrease. Thus if in 2001 the return rate for office real estate was  17-18% now it is floating at 7-8%. A typical feature for office projects is unstable lease rates. The return rate of development projects has not seriously altered and is 17-18% and higher. The risk of return rates decrease relates to land price change. Lease rate in shopping centers and warehouses is more stable as there are not so many players in these segments as in the office real estate one. Yet with that the return is decreasing as the land price is increasing faster then the lease rates. Still Mr. Sawyer considers the industrial property an attractive segment for investments due to lack of space in this segment.

Veniamin Golubitsky, President of Renova-StroyGroup presented another perspective direction for investments and development activity: land integrated development in the regions. According to him, in the regions there are plenty of opportunities to create mini towns. And it is not difficult to achieve some synergy results with the government together, in particular, when constructing engineering infrastructure and transportation connections. When telling about the progress on Academia City project, Mr. Golubitsky noted that his year first 30, 000 m2 will be put into operaton. The investors of the project are UBRD and Reiffeisenbank. 

Aleksandr Gnusarev, Chairman of the Board of Directors of United Industrial Corporation presented a redevelopment project located at Red Square, 5. There is a plan to construct a hotel with 78 m2 total area and apartments based on the design of the famous architect Jean-Michel Vilmont.

Among the most remarkable events today are three different agreements of Eurasia City Company signed with the help of the Ministry of Economical Development and Trade. The first one is a memorandum of understanding signed with Moscow Region Government in order to realize in Domodedovo, a district outside of Moscow, an investment project on construction a satellite Konstantinovskoe with the population of 150, 000 people. By 2015 году at the area of 3087 hectares there will have been built 6, 5 million m2 of hosing and 2, 6 million m2 of commercial property. Total investment volumes will surpass 375 billion rubles (15 billion US dollars).

Next agreement was signed with 1TV (Pervy Kanal), the main partner of Eurasia City, to build the first media park in Russia in the territory of Konstantinovo.  Another agreement was signed with Astrarossa to locate a center of industrial design and innovations in Konstantinovo.

Yesterday, 11 March, two memorandums of understanding were signed at the stand of Kalinigrad Oblast between the Government of Kaliningrad and MJBalt Ltd. One is about financing Hilton hotel chain within a complex business and tourist center of 40, 000 m2. The total investments are 80 million Euros. The agreement provides for a heavy encumbrance to develop the infrastructure and public space of the downtown of Kaliningrad. The second memorandum was signed with Russian Property Investments B.V. and provides for developing Ancor hotel chain. Total space is 30, 000 m2, total investments are 50 million Euros.

The first day of the exhibition ended with a cocktail party in honor of the inauguration at Carlton and Martinez. Krasnodar Krai sponsors the even second year in a row. Crowds of those wishing to be at the party, smashing animators, and fairy fireworks – that was the end of day one.


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