City Plans to Relocate Factories From Center

City Hall is going to put a stop to the ongoing uncontrolled conversion of industries located in the city center. From now on, to obtain a plot of land in the center, an investor will have to pay for an old factory to be relocated to the suburbs as well as for its modernization. It will be up to City Hall to make a list of industries to be relocated.

The city government's plans, approved last week, involve the creation of several industrial zones in the suburbs. Large areas will be turned into "prom-cities," or "industry-cities." The first such prom-city will occupy 100 hectares in the northern district of Molzhaninovo.

"We have the opportunity to seize the initiative in industry reorganization from structures like Rosbuilding," said Oleg Tolkachyov, the head of City Hall's land and property division.

Moscow City Duma Deputy Irina Rukina, who is in charge of industrial development in the Duma, said there are hostile takeover plans for some 2,000 Moscow firms. Factories that must be relocated outside the city center by 2020 in accordance with the city's general plan currently occupy a combined total of 6,000 to 7,000 hectares.

While the land they stand on is estimated to be worth $10 billion to $15 billion, to buy controlling stakes in these firms would cost no more than a combined $1 billion to $1.2 billion, Rukina said.

City Hall is worried that the consequence of such takeovers could be that firms are closed down for good while employees are kicked out. This was the reason for the city's recent conflict with Rosbuilding, a company that had purchased a number of factories and other industrial objects.

The city is planning to draw up a list of firms to be relocated to Molzhaninovo in the first quarter of 2004. According to Tolkachyov, the prime candidates for relocation are factories located on Krasnaya Presnya Ulitsa and Gruzinsky Val as well as around Paveletsky Station. There are also plans to build another 300-hectare prom-city in Yuzhnoye Butovo.

The relocations are to be carried out by OAO Prom City Moskva, which will be owned and managed by the city government, despite earlier plans to give management rights to OOO Prom City, which, according to its general director Alexander Bezrukov, was established by a group of private individuals "engaged in industry."

Would-be buyers of city industries are interested in the project. A high-ranking Rosbuilding official said his company is thinking of taking part in the program, as is Vizavi bank, which buys up Moscow factories that have ceased production, said Anton Velikhovsky, director of the bank's investment department. AFK Sistema has also expressed an interest.

Vasily Boiko, general director of Vash Finansovy Popechitel, said the prom-city program is likely to attract investors, but only if the city takes care of the infrastructure costs involved. A relocation would cost millions of dollars, and if you include communications expenses, which come to about $150 to $200 per square meter, projects like this lose all their financial attractiveness, Boiko said.

Rukina estimates total prom-city expenses to be about $10 million per hectare.

But Moscow realtors are not happy about City Hall's plans for Molzhaninovo, where the city's investment program department is planning to build 500,000 square meters of housing by 2008.

According to Yevgeny Leonov, who heads the future projects division at City Hall's investment program department, Molzhaninovo has enough space both for housing and industry.

But Sergei Yeliseyev, director of marketing at Inkom-Realty, said that proximity to the industrial zone will make apartments in Molzhaninovo much cheaper. The fact that it is located close to an airport and experiences transport problems because it is too far from the rest of the city already works against it, he said.