The Moscow Times

In a move described by some realtors as mere hype, by others as "bold," the
Stroimontage construction company will become one of the first Russian
developers to enter the Western real estate market when it begins work on a
residential project near Paris next summer.

Stroimontage opened its French branch in April and has already acquired a
1.5-hectare site in the Paris suburb of Massy, where cellphone company Ericsson used to have its offices. It will begin the construction of a
30,000-square-meter residential project on the site in June, said Emin
Iskenderov, general director of Stroimontage de Paris.
Iskenderov described the Paris development, which will have over 400 apartments, as "high-quality housing for the middle class" and said that it was not specifically targeted at Russians wanting to buy property abroad.
"We are aiming at the local market in order to become more competitive," he
added.
The housing complex will comprise six six-story houses, two of which will be
built in an Italian style, two in a style that Iskenderov described as a
"mixture of French and Ottoman," and the remaining two in a "modern" style.
Apartments will cost roughly 3,000 euros ($3,600) per square meter, which is an average price for a Paris suburb, according to Iskenderov, who also said that the company expects to achieve a 15 percent return on the investment.
BATEG, a subsidiary of French construction giant Vinci, will be the project's
general contractor.
Stroimontage was founded in 1994 in St. Petersburg and, according to the
company's predictions, will control roughly 10 percent of the city's housing
construction market by 2005. It has also been active on the Moscow market, where it has completed several residential and office projects.
The company's most high-profile project to date is the $500 million Federation Towers, 92 and 44 stories high, which are part of the bigger Moskva-City development. It is scheduled to be completed in 2007.
The company estimates its annual turnover to be $310 million.
The entire Parisian project will cost between 70 million and 75 million euros
($85 million to $90 million) and might use loans from French banks, Iskenderov said, stressing that it was still "too early" to say to what extent it could require outside financing.
He also added that Stroimontage was "in the process of acquiring" a neighboring plot, on which another 10,000- to 15,000-square-meter housing complex would be erected.
While some Moscow-based realtors praise the "boldness" of Stroimontage's
decision to do projects in Western Europe, others dismiss it as a publicity
stunt meant to boost the company's prestige at home.
"It will be interesting to see how they perform," said Michael Lange, managing director for the CIS at Jones Lang LaSalle. "This is definitely a bold move."
However, Lange added, the company is going "against the flow," as Moscow's much higher returns are attracting foreign developers. <br>
One other company that has seemingly gone against the flow is the construction arm of St. Petersburg-based corporation LSR Group, which opened a Munich-based European branch, LSR Europe, in early 2004 and announced plans to build apartment blocks in central Munich and Cologne. <br>
However, a company spokesman said work is yet to begin on any of these projects.
According to company information, LSR Group was responsible for 50 percent of
all construction in St. Petersburg last year. The group, which also controls a large share of the city's construction materials market, expects its revenue to top 14.7 billion rubles ($500 million) in 2004.
A representative of a large construction company, who requested anonymity,
called Stroimontage's plans "completely insincere" and dismissed them as an
"attempt to draw attention to the company."
Another builder said that his company had also considered doing projects in
Western countries, but came to the conclusion that they would be "not nearly as profitable as the ones here."
<b>Konstantin Romanov, a director at Knight Frank, agreed that the Moscow market currently generally offers higher returns, but stressed that a specific project's characteristics and its exact location should also be taken into account when calculating its profitability.
Stroimontage's Paris project could play an important role in promoting the
company's image.
"Such steps are essential for a company that positions itself as a leading
developer. It will definitely pay off," Romanov said.