It took several months for Sobyanin to audit previously signed investment contracts between the city and its key developers. The job was done at the end of last week, and a third of the agreed projects were revised or cancelled, RBC reported, quoting the city’s economy minister, Andrei Sharonov.
500 deals at risk
About 500 deals are at risk now, according to Sharonov. Among them are projects of such well-known companies as Mirax Group, Engeocom, Mosinzhstroy and MORE Plaza.
Yevgeny Nadorshin, an analyst at Jong Lang LaSalle, said that many of those projects currently exist only on paper, and in many cases developers themselves asked for them to be shut down due to lack of resources.
“The situation also demonstrates that for some developers relations with the new Moscow government represent a certain risk,” said Nadorshin. “But for those who have already completed their projects it’s good news, since there will be less competition for them,” he said.
At a Moscow business forum organised by Troika Dialog in January, Sergei Sobyanin said that the city has been mismanaged, with no clear development priorities. As a result, the city’s GDP had fallen and it has started falling behind, he warned.
“Today we are trying not just to prescribe recipes, but to enact effective treatment… against the diseases that have accumulated in the city during the past decades,” Sobyanin said.
In some cases it was not just economics but residents’ protests that influenced Sobyanin’s decision to close down some projects, such as the Pushkinskaya Ploshchad redevelopment.
Moskva-City under fire
Sobyanin has also criticized the Moskva-City development, calling the project “a mistake” over its underestimate of problems connected with parking and transport. Mirax Group, one of the key developers of Moskva-City, is still unable to complete its ambitious Federation Tower project.
“Well, what’s done is done,” Sobyanin told a City Duma session. “Now we need to make it work.”
Kirill Popov, executive director of Cushman & Wakefield Russia, said that Sobyanin’s axe was aimed mainly at projects located at the historical centre of Moscow.
“The new mayor proclaimed that he intended to bring a systematic approach to all projects and preserve the historic centre of the city,” said Popov, who was quite positive about Sobyanin’s decision. “Besides, many developers now really do not have resources to complete their projects.”
Developers lose out
Tatyana Zabavina, a spokeswoman for Welhome, said that those investors whose projects have been cancelled, but passed the approval stage, will lose out. “It’s quite likely that, due to the high number of cancelled projects, such investors are on the list,” she said.
Nadorshin, of Jones Lang LaSalle, said that risks connected with cancelled contracts will remain for a certain period as “the basic plans of Moscow’s development are being revised now.”
Sobyanin has said that focus of the city’s General Plan of Development, or GenPlan, will now change.
Previously priority had been given to the construction of offices as close to the centre as possible. Now planning will focus on creation of transport infrastructure, tourism, recreation and social housing.
“Such a change of priorities requires revision of the GenPlan and a whole range of projects started before,” Sobyanin said.