The company explained that three shopping centers will be constructed on the acquired land with an overall area of no less than 75,000 sq. m. Two of the properties are old department stores which Finstar has already started to reconstruct. The commercial area of 10,500 sq. m. (total area 15,000 sq. m.) will accommodate a food supermarket (3,800 sq. m.), a household appliances and electronics superstore (2,350 sq. m.) and a 4,350 sq. m. shopping area. The commercial area of the second shopping center (6,900 sq. m., total area – 10,500 sq. m.) includes several anchor tenants (4,000 sq. m.) and a shopping area (2,900 sq. m.). The future shopping center will be focused on household goods and products for performing repairs. According to the company, $35 mln were invested in both shopping centers. It is expected that they will be opened at the end of 2009.
The third property is a new regional format shopping and recreation center. The company acquired a 57,000 sq. m. land plot for this project. It is planned to open the center in 2010. The building has an overall area of 49,500 sq. m. and houses a DIY center (10,000 sq. m.), a food supermarket (8,000 sq. m.) and a household appliances and electronics store (2,300 sq. m.). The recreational area (4,700 sq. m) consists of a multi-screen cinema, food court and a recreation center. Approximately 13,000 sq. m. have been allocated for a shopping area (clothes stores, shoe stores, perfume and cosmetics stores). 1,250 parking spaces will be provided. The Chief Deputy Director of Finstar Properties, Sergei Khramov commented that it is planned to invest $60 mln of the company’s own funds in this project.
Finstar Properties was founded at the start of 2007 to implement professional retail real estate developer projects in Russia and the CIS countries. The company’s founder is Finstar Financial Group, an international investment holding specializing in project development in the fields of real estate, the gambling business and retail trade. Currently there are 27 shopping center construction projects at the implementation stage in 18 cities of 13 Russian regions. The total area of projects in development equals 1 mln sq. meters and before the end of 2008 it is planned to increase the number of shopping and recreation centers to 28. The first shopping and recreation centers will be opened in the 1stand 2nd quarters of 2009. It is expected that the portfolio of the company’s projects will increase to 1.4 mln sq. m. in 2009, and to 2 mln sq. m. in 2011. The main formats according to which the company implements projects are district (area of 10,000 – 30,000 sq. m.), regional (area of 40,000 – 80,000 sq. m.) and super regional (area from 80,000 sq. m. and above).
The Chief Executive Director of Finstar Properties, Sergei Khramov explained that the volume of the market for shopping centers in Ulyanovsk can be valued at 152,700 sq. m., or 250 sq. m. for every 1,000 inhabitants, which is clearly insufficient for such a city. “A normal figure for second tier cities with a population of 500,000 – 900,000 thousand people is considered to be 500 – 600 sq. m. of shopping center per every 1,000 inhabitants. At the same time, taking Finstar Properties’ projects into account, there are around 10 projects with an overall area of 259,000 sq. m. in the city at various stages of construction. If the developers’ plans are to be trusted, then all the properties will be commissioned by 2011. In such a case, the level of modern shopping center coverage for the city’s population will reach 670 sq. m. per 1,000 inhabitants, i.e. market saturation,” predicted Khramov.
“Not one consultant will talk of market saturation at the moment, because the development of retail real estate is proceeding with long strides and is mainly directed at the regions,” pointed out Tatiana Kluchinskaya, the Director of the Department of Retail Real Estate at the consulting company Colliers International. “If earlier developers were drawn towards the cities with one million plus populations, then now they are already focusing on the smaller cities.” Ms. Kluchinskaya considers that Finstar Properties has selected the right strategy, because it is quite common for former supermarkets in regional cities to be transformed into shopping centers and a good concept will allow them to engage the right operators required.
Aleksei Stepanov, the Director of the Commercial Department of developer company Vzlet-Invest LLC considers that “on the whole, the commercial real estate market in Ulyanovsk even falls behind slightly in comparison with similar cities despite being in the active phase”. Mr. Stepanov thinks that this is in no way a disadvantage since it is already possible to take into account the mistakes made by developers in other regions. According to Stepanov, the main area of development is conceptual commercial real estate in the shopping and recreation center format, which is covered by the future shopping and recreation centers of Finstar Properties. There are few of these conceptual projects in Ulyanovsk, such as (to a certain extent) Samolyot Shopping and Recreation Center, the Aquamoll Shopping and Recreation Center of DARS-Invest and the shopping and recreation center of the company Maksima-X.
Mr. Stepanov considers that judging by its specifications, the shopping and recreation center project announced by Finstar Properties will pay for itself after 7-9 years. He rates the amount of investments announced by the company as “absolutely correct”, but minimal: “they will be struggling to remain within the investment limit”, “you have to understand that it’s rather difficult to achieve the lowest possible net cost as currently the net cost of a square meter in Ulyanovsk is around $1,200 – $1,400”.
