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Project name: |
Detsky Mir Flagship Store
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Country: |
Russian Federation
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Project ID: |
34332
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Business sector: |
Property and Tourism
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State/Private: |
Private sector
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Projected EBRD’s Board date:
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30 November 2004 |
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Status: |
Passed Structure Review
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Date PSD disclosed:
Date PSD updated:
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October 29, 2004 |
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Project description and objectives:
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The proposed project will provide financing for the redevelopment of a landmark retail site in the heart of Moscow housed by the Detsky Mir children’s store, as well as various commercial entities. Over the course of its 50-year life the building has not been properly maintained and is currently in a very poor condition. The interior layout is also suboptimal resulting in a very low ratio of lettable to total space. The Project will help convert the site into a modern retail and entertainment complex targeting the middle-class family market.
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Transition impact: |
Providing financing to this project, the Bank is supporting corporate governance improvements, including introduction of the OECD Corporate Governance Code by both AFK Sistema and OAO Detsky Mir. This is the first time that a real estate project sponsored by Sistema is financed by international banks. To attract such a substantial loan for a record term for Russia of 10 years, the client committed to a thorough due diligence from the Bank and involved international consultants to advise on the market aspects, project costs, legal environment, etc. The interaction with top professionals from different sectors resulted in the transfer of knowledge and skills and understanding of the requirements of international banks for project financing.
The project will increase competition in the Moscow retail property market by adding 79 thousand sqm shopping centre which creates approximately 39 thousand sqm of high quality rentable retail area. The Moscow retail real estate rent rates are among the highest in Europe, which slows down the growth of the retail industry and inflates the prices for the goods paid by end users. The shopping centre will target middle-class families market, while most of the stores in Moscow downtown are oriented towards high net worth customers.
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The client: |
OAO Detsky Mir, a Russian company and the owner of the building will act as borrower under the project.
AFK Sistema, one of the largest non-natural resources based Russian industrial groups, will act as sponsor contributing equity to finance the project.
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EBRD finance: |
USD 90 million senior loan, including up to USD 50 million to be financed by EBRD and the rest to be syndicated to commercial banks under EBRD A / B loan structure.
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Total project cost: |
USD 157 million, which includes the construction and construction related costs of approximately USD 100 million plus land lease, financing and consultancy costs.
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Environmental impact: |
The project was screened B/0. The new conversion of Detsky Mir store into a landmark retail building in the central Moscow may involve some environmental, health and safety issues principally associated with previous use of the site, safety and energy efficiency of the building design and construction materials and potential impacts arising from the construction as well as environmental and safety consideration during the operation such as life and fire safety issues. Initial environmental due diligence did not indicate any significant environmental issues. Preventive and mitigation measures to be implemented by the Sponsor will include the following:
a. All construction work and operation of the building will be conducted in accordance with Russian and EU environmental, health and safety standards and requirements;
b. Public concerns related to the project will be addressed in accordance with Russian law and in line with the Bank’s requirements;
c. All conditions stipulated by the Russian regulatory requirements on environmental, health and safety matters applicable for the project will be complied with;
d. Contractors will be obliged to take appropriate health and safety measures for the workers during the construction work;
e. Appropriate life and fire safety measures will be placed in the building; and
f. The Sponsor will be required to report the EBRD annually on environmental, health and safety matters.
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Technical cooperation: |
None
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Company contact: |
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Business opportunities: |
For business opportunities or procurement, contact the client company.
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General enquiries: |
EBRD project enquiries not related to procurement:
Tel: +44 20 7338 7168; Fax: +44 20 7338 7380
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