Developer RGI International plans to invest $1.3 billion in its economy-class residential project in Moscow as market distress is forcing it to broaden beyond the high-end property segment.
Emanuel Kuzinez, RGI director and board member, said the company planned to spend $150 million in 2010-11 in the first stage of the Kingston complex in northwestern Moscow.
"Total investment planned throughout the entire project — all stages over seven to eight years — is approximately $1.3 billion," he said in an interview, adding that RGI would need debt financing in the range of $50 million to $70 million to kick off the project.
Russia was hit particularly hard by the financial crisis, and a shortage of funds forced many construction projects to be abandoned.
The Kingston Development was originally designed to be a higher-end complex, but the company decided to turn it into what it calls a "premium economy class" development after the real estate market collapsed during the economic downturn.
Kuzinez said RGI believed that the low supply of residential space would support demand, especially in the Russian capital, although homebuyers were being more cautious.
Rivals AFI Development and LSR Group recently announced plans to enter the housing market, while PIK Group, the country's largest economy-class residential developer, has pledged to build 90 percent of its housing in and around Moscow.
"Everybody understands it is an attractive field to play at these days," Kuzinez said.
"Economy-class residential is not only attractive for developers, it is also attractive for financial institutions. They would also like to participate," he said.
He said RGI had begun initial discussions with banks about financing and hoped to finance the bulk of the project with pre-sale revenue.
The Kingston Development will be 1.3 million square meters, comprising apartments, commercial space and parking. The first stage will be to build 90,000 square meters of the complex.
The company has said it expected that once the complex was completed, it would contribute about $900 million to its net profit.
RGI, a midsize Israeli company focused on Russia, is majority owned by its founder Boris Kuzinez. Morgan Stanley holds a 8.49 percent stake.