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Alfa Group returns to the residential estate market

March 29, 2019. TAG: Investment

A1 has become the owner of Prime Park residential compound being built at the location of the old air terminal building along the Leningradsky Prospekt.
Alfa Group’s investment unit – A1, has taken ownership of Prime Park residential project under construction, a company representative told Vedomosti. Bulat Shakirov, Managing Director of Optima Development (the project developer) confirms the information. He says that Optima Development will remain the developer and main contractor for the project, while A1 will be the financial investor.
Prime Park construction started in late 2017 at the location of the old air terminal between Leningradsky Prospekt, Chavez St. and Aircraft Designer Mikoyan Street. Back in 2016, Moscow City Urban Planning and Land Commission issued a building permission for just under 400,000 sq.m. of real estate to be built on a plot of 39.2 hectares, of which 250,000 square meters would be residential and the rest commercial estate. Prime Park is the first major residential project handled by Optima Development. The company also owns and manages OZ Mall shopping center in Krasnodar. Its owner is a former tobacco distributor, Albert Hudoyan. Shakirov says Optima Development is not planning to leave the housing market; on the contrary, it expects to acquire more development projects in the premium segment. He explains the Prime Park sale by the company receiving an attractive offer from an investor with solid business reputation and substantial financial resources.
The decision to acquire Prime Park project is in line with the company’s strategy of investment portfolio diversification, says A1 Managing Partner Andrey Elinson. Previously the company invested in Unitile (producer of ceramic tiles and ceramic granite) and DC Controls (manufacturer and distributor of pipe fittings). Elinson adds that thanks to its work with non-core assets, A1 has accumulated substantial experience of real estate management and sales. A source close to the company says Prime Park acquisition is purely an investment deal not related to settling any lending liabilities.
The parties would not disclose the deal amount. Colliers International partner Vladimir Sergunin believes the project in its current state can be worth 12-15 billion rubles. The project declaration states investment in the construction is 29.7 billion rubles.
Right now, Prime Park is the only residential project in Alfa Group’s portfolio. Nevertheless, it has some experience in the segment. In 2012, Alfa purchased “a substantial stock share” in Gras Group of Companies, which built housing in Moscow and Sochi. However, Alfa Group later sold its share to other shareholders, as soon as in 2013.
Prime Park is a great target for investment with exceptionally high sales, says Irina Dobrokhotova, Chair of the Board of Directors of Best-Novostroy. According to her data, an average of 35 apartments a month were sold here in 2018, which is one of the best figures in the premium segment. Maria Litinetskaya, Managing Partner of Metrium, agrees. She says this residential compound is one of the most popular projects in the premium segment, with more than 80 apartment floor plan options, 6 hectares of parks and recreation areas, and own fitness center. Besides, this is the only premium class development in the area, other competitors are a class below. Prime Park apartment prices have already gone up 48% since the start of sales, Litinetskaya says: the two buildings that went on sale in January 2018 at the average price of 219,900 rubles per square meter are now being sold at 326,600 rubles per square meter.
In the recent years, developers often have been inviting major investors into the projects, Dobrokhotova says – this allows them to use the sales revenue to purchase new sites. For example, several years ago Coalco and MR Group sold VTB Group 90% shares in its affiliate companies owning Presnya City (Khodynskaya Street), Tsar Square (Leningradsky Prospekt) and Basmanny 5 (Ryazansky by-street) projects.

A1

A1 is one of the leading investment businesses in Russia and the CIS. It focuses on investments in companies facing financial difficulties and engaged in corporate conflicts. Alfa-Bank (Russia), TNK, VimpelCom, Perekrestok (part of X5 Retail Group) and Rosvodokanal Group were originally A1 projects that later became strategic businesses for Alfa Group as well as core companies for the wider Russian economy.