Izvestiya Building Turns into Mixed-Use
Moscow bids farewell to the legendary
Izvestiya building that will be redeveloped
into a new mixed-use center.
The project described as questionable
by some market participants and as
controversial by others will take three
years to be delivered.
One of the first business buildings in Soviet
Moscow, created in the style of Constructivism
by architect Grigory Barkhin in 1925–27 and
now being the asset of Presidential Property
Management Department, has been in a rundown
state for several years already. The editorial staff
of the Izvestiya newspaper actually abandoned it
18 months ago; some of the quarters were occupied
by the Tverskoy Passage store that was scandalously
closed down in October on the owner’s
demand. In response the tenant Piramida-2000
stated that the owner was forcing it to rescind a
20-year lease agreement signed back in 1996, and
characterized this tactic as a hostile takeover. In
addition, the so-called comprehensive reconstruction
(with dismantling of some structures and
new construction of 10 buildings for the editorial
office – a quarter bounded by Pushkinskaya
square, Tverskaya St, Malaya Dmitrovka St, and
Nastasyinsky Bystreet ) is totally prohibited for
architectural heritage buildings. The architectural
community and public activists (Archnadzor, in
particular) have already pointed to this fact, having
shared their fears that the erection of a mixed-use
center might change the image of Pushkin square
beyond recognition.
The reconstruction project developer (the investment contract is estimated
at $15.8 bln) was named back in 2006 under Yuri Luzhkov – little
known on the market Legacy Development with an authorized capital stock
of 10,000 rubles. Yet no works had been done till October 2012. It became
known the other days, however, that the general contractor will be Tashir
Group. Based on an investment contract worth $500mn a 168,000-sqm
mixed-use complex must rise here. Tashir may get a certain stake in the
project. Tashir, in the person of Tashir’s PR manager Marina Gaze, refused
to comment on the situation as of the time of this issue’s release to the
printer.
In his turn, Viktor Khrekov, Press Secretary of Presidential Property
Management Department, announced that the new multifunctional complex
will house restaurants, concert hall and exhibition venues. CRE
tries to grasp whether this new MFC is altogether needed at this place in
Moscow and if so, then in what form.
In the opinion of Elena Lisina, deputy director of strategic consulting and
appraisal at CBRE, opinions about the efficiency of the MFC format today
are rather contradictory. “Mixed-uses are traditionally harder to manage
than single-function properties,” says Ms Lisina. “They are difficult to implement
successfully, first of all, because every function requires its own
logistics, whereas the premises are to be arranged so that they might be
complementary. This is achieved by competent zoning and effective layout
solutions. Meanwhile a skilled selection of functions may greatly raise the
property’s attractiveness and therefore the entire economics of a project –
thanks to a synergy effect.”
However, as estimated by the market players, premises on the key retail
route of Moscow will always be in demand, but largely as street retail. Ms Lisina mentions the existing structural design as
well as the impossibility to organize ample parking
space as limitations for a full-scale shopping
center. In her turn, Vera Setskaya, president of
GVA Sawyer, thinks the shopping mall’s format is
unacceptable in the historical center in most
cases. The main problem is access ways providing
for the essential traffic, along with parking spaces,
lists Ms Setskaya. The practice shows that even
spacious underground parking is not enough while
the arrangement of an outdoor parking lot becomes
a serious problem. The second difficulty in
downtown Moscow is the availability of branchy
engineering infrastructure underground, including
special telecom systems within the jurisdiction of
state security services. In the upshot the development
of underground space in central Moscow is
either very expensive or just impossible. A mixeduse
with a competent functional mix might be an
acceptable solution allowing competent utilization
of the building and adjacent grounds – with
minimum environmental impact, Vera Setskaya
believes. As regards the “door-to-door” exit from
the subway that already existed in Tverskoy
Passage, this can also be a disadvantage. Access
to the complex via the metro’s entrance lobby
may end up in the dictatorship of midmarket
brands and cause problems with the attraction of
luxury brands to the upper floors. “For the mixeduse
format to function successfully, it should be
understood that all premises in the complex must
fall within the same pricing segment – for appropriate
positioning of the entire complex,” the expert
reminds.
Yulia Nikulicheva, Head of Strategic Consulting,
Jones Lang LaSalle, describes the locus of
the Izvestiya building as a “gold place” and says
that any real estate function can be realized within
the mixed-use center. In high demand will be retail,
for which large space was originally earmarked –
all underground space and the first floor level;
but it should be borne in mind that retail premises
will require larger parking space, while the loss factor
is higher. The office space realized here will fall
within the Kremlin zone and will be rented out at
premium rates ($1000–1200 per sq.m per year).
Denis Trushchenko, Managing Partner, Bluestone
Group, thinks the creation of a mixed-use center
in downtown Moscow well fits into the general
trend of renovation or construction in Moscow.
Vladislav Vasnev, board chairman of Piramida
2000, reminds that any large property in Moscow
overtaxes the transport and infrastructure at
large, including engineering networks, and whenever one resolves to build
another multipurpose facility, “this is a very responsible move.” Mr Vasnev
thinks it necessary to hold public hearings to discuss the development
project.
Major market players generally agree on what “Tverskaya lacks” today
and whether the new MFC will be able to “struggle.” Denis Trushchenko
laments almost a complete lack of thru retail passages in central Moscow,
similar to Petrovsky. Vladislav Vasnev mentions the shortage of hotels,
cafes and other facilities found in abundance on main European streets.
Vera Setskaya and Yulia Nikulicheva say about housing with street retail,
including restaurants, banks, boutiques and boutique hotels. Elena Lisina
opines that an office part and a hotel would be pertinent in a multifunctional
center, but the issue of parking will have to be addressed.
Who stands behind such development structure as Legacy
Development? Who has the chances to get involved in this project? Who
will be the anchor tenants in the complex? The professional community
has had no answers to these questions to date. “Anywhere else in the
world the status of tenant owner would be looked upon as an additional
advantage in the delivery of a real estate object,” shares Mr Vasnev. “As
you may see, not only are we not invited to participate in the future project;
they let us know, using all means including force, that we stand in their way,
that they do not want us here. I would not name the potential stakeholders,
although we know them, to be sure. These must be companies having
essential experience and helmed by competent people. At any rate, the
project does not have requisite documentation at present. Reconstruction
has been declared, but things do not move further.” Denis Trushchenko
believes that much will depend on the quality of issued “papers” to avoid
“any problems in the future as well as disputes on the rights of ownership
after the project is complete.” “I think the structures related to the owners
of Evropeisky mall and Ukraine Hotel will be involved in the project.” This
could be of interest to several oligarchs, including the owner of Bazovy
Element,” lists Trushchenko. The fate of the Izvestiya buildings and their
neighborhood seems to be a tabooed topic for many market players – at
least five experts flatly declined to comment on this situation on the premise
that it is “too complicated.”
It’s symptomatic that Moscow today almost lacks any successful
case studies of Soviet property redevelopment into mixed-use centers.
Ms Lisina remembers Smolensky Passage, Tretyakov Plaza (MFC
Sheremetyevsky), and Vozdvizhenka Center (former Voyentorg), adding
that the commercial success of their retail parts is a big question.
Thus, after the anchor tenant (Stockmann department store) moved out
of Smolensky Passage, the attendance of the shopping mall decreased
dramatically. Mr Trushchenko mentions the Actor Gallery as one of the first
attempts at redevelopment, dating from the nineties: the project is morally
antiquated, but still rather attractive as a small MFC. Vera Setskaya cannot
recall any successful metamorphoses of old buildings into mixed-uses and
argues that renovated properties that did not change their original designation
function more smoothly than others. One example is Izmailovo Alfa,
Beta, Gamma-Delta and Vega hotels or office facilities created in Soviet
administrative edifices. Ms Setskaya anticipates the salvation of several
famous Constructivist buildings and their adaptation to new functional
uses. “It hurts to see the objects studied at Western architectural schools
crumbling before your eyes.”
CRE №22 (197), November 2012
