The Moscow Times, 3 march 1999

The city government has thrown its weight behind a startlingly ambitious $5 billion development program that starts with the construction of a new ring of seven skyscrapers around Moscow.

The program calls for eventually placing 60 buildings, of 35 to 40 stories, on the fringes of the capital, the developer said Tuesday in unveiling the plans. The first building is to be completed by 2001.

Even though the Moscow real estate market is sagging and the city is scrambling for funds to keep up with its debt payments, the administration gave its blessing to the program in February.

As part of the project, the developer agreed to finance the renovation of dilapidated five-story apartment buildings in the vicinity, which is one of Moscow Mayor Yury Luzhkov's pet projects.

"This is not just a commercial program, it is an important social program," said Timur Timerbulatov, president of Konti Corp., a financial-construction group that was named the project's exclusive developer. "This is also the city government's program."

The program, called the New Ring of Moscow, will be run by a 100 percent city-owned company, Novoye Koltso Moskvy.

The charter capital is to come from the city in the form of 49-year leases for the land, which can be used as collateral to borrow funds for the construction. Konti is to serve as the administrative and executive backbone, with the mayor's office appointing the director and a seven-member supervisory board.

The first project, construction of a $108-million 39-story elite housing and business complex called the Eighth High-Rise, is already in the works. The city has agreed to provide Novoye Koltso Moskvy with the rights to the construction site, valued at $13.2 million, on Ulitsa Davydkovskaya.

Konti expects to cover one-fifth of the construction cost by supplying materials it has acquired in debt swaps involving Gazprom, the city government and federal ministries, Timerbulatov said.

Konti hopes to find a foreign construction company that would be able to attract at least $5.1 million in foreign investment. It named Skanska, a possible partner.

Natalya Brazgunova, marketing manager at the Moscow office of Skanska OY, the Finnish subsidiary of Skanska AB, said the company was looking at the project, but could not comment any further.

Konti also is counting on bank loans of $6 million. "Sberbank is familiar with the project and ready to finance it," Timerbulatov said.

In return for investment, the city-owned company will issue promissory notes to developers and the banks, and repay the debts later. It plans to sell elite apartments in the high-rises at $1,200 to $1,400 per square meter. Timerbulatov said he was counting on a rise in real estate prices, which crisis.

Gerald Gaige, director for real estate consulting at Arthur Andersen, said that assessment of the real estate market was just "one possible opinion."

"If you were in their shoes, that's what you would be saying, too," he said.

It was still unclear what the high rises will look like. The Eighth High-rise was initially designed in 1995, when the project was first proposed, but the design might be altered.

Seven wedding-cake Stalinesque vysotki, part of a 1936 development plan, dot the Garden Ring. The buildings repeat one another in theme and style but differ in architectural detail.

By Natalya Shulyakovskaya
STAFF WRITER