December 22, 2006

Development

Exporting know-how to Russia

PATRICIA WILLIAMS

staff writer

Toronto-headquartered Giffels is exporting its expertise in real estate development to Russia.

The company, which provides integrated consulting, design-build and asset management services, is developing an industrial park on a 256-acre site about 30 kilometres south of Moscow.

“We’re building a state-of-the-art, Western-style business park,” said Scott Hayes, vice-president of Giffels Management Ltd.

Hayes told Daily Commercial News that the park is one of the first of its ilk in the city. Construction of the $130 million (U.S.) first phase is scheduled for completion late next year.

The company, which has opened an office in Moscow, is providing conceptual design services from Canada.

It has retained a Russian design-build contractor to construct the 700,000-square-foot first phase.

Giffels is responsible “for all aspects of the physical development” of the SouthGate Industrial Park — from securing building permits and ensuring necessary services are in place to hiring subtrades — and even leasing.

“We’re playing the traditional role of developer and investor,” said Hayes, whose firm has invested funds in the project.

“This is right down the centre of what we do on a day-to-day basis in Canada.”

“There is more demand than you can ever meet.”

Scott Hayes

Giffels Management

Giffels Management Ltd. provides asset management and real estate development services in the industrial, commercial and residential markets.

Project types include greenfield developments, retrofits of existing properties and site redevelopment.

Giffels, part of the Ingenium Group Inc., is constructing the Moscow project on a speculative basis.

Debt financing is being provided by a large German bank.

Hayes, whose firm spent “many months” doing market research and then checking out potential sites before acquiring the SouthGate property, said demand for modern industrial space is “incredible” in Moscow.

He said the city, which has a population of well over 10 million, currently has only 6 million square feet of “functional and state-of-the art” industrial space.

“There is more demand than you can ever meet,” Hayes said.

“If you were to build this site tomorrow, you could lease it four times over.”

Construction is expected to get under way in earnest next spring. Site preparation is currently under way.

Hayes, a member of the Giffels team that did the upfront research and who was closely involved in the nuts and bolts of the site acquisition, said buying property is in fact “the number one challenge” in doing business in Russia.

“Land ownership is relatively new in Russia,” he said.

“There are a lot of things that you take for granted in the Western market that they have never encountered. That’s just the reality of a young market.”

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