The EBRD is considering providing €40 million in debt financing to OOO SibStroyInvest (the “Borrower”) for the development, construction and operation of a class-A retail and entertainment centre with a gross buildable area of 144,810 sqm and a gross leasable area of 59,479 sqm, located in Novosibirsk, Russia.
The Project, which will include a strong energy efficiency component, will feature:
- a quality shopping mall on four overground levels including a supermarket, a DIY store, a multiplex cinema, and retail gallery with smaller tenants and catering facilities;
- two underground levels of parking facilities for 1,528 cars
The transaction will promote the following key areas for transition impact:
Improvement in sector’s business conduct and standards
The Project will introduce to the Russian regional market improved environmental standards, with a special emphasis on energy efficiency measures. The Project utilizes a complex package of the Best Available Techniques in the energy-efficiency area, and will be a model project for architects, designers, engineers and developers in the Novosibirsk region, providing new construction and performance benchmarks for the sector. The Project will also contribute to a more widespread use of international standard construction contracts, including performance bonds, warrants and retentions to reduce the construction risks.
Competition, change in market structure and market expansion
Due to the on-going financial crisis, most of the announced shopping centre projects have been put on hold as funding is currently very scarce. Considering the existing and planned retail schemes to be completed by 2011, the city still has lower retail space provision than other Russian cities with over one million inhabitants. Due to its scale and location, the Project has the potential to establish itself as one of the prime shopping centres in the area, ultimately increasing competition and reducing the cost of goods and services to domestic consumers.
Positive demonstration effects: ways to finance activities
The potential for syndication of real estate transactions in Russia is currently very low. Commercial banks are facing liquidity constraints and are especially reluctant to take the construction risk. Due to the good location of the Project, very experienced Sponsor/Developer and a conservative financing structure, the Bank is likely to syndicate part of the loan, which would have a positive demonstration effect with regard to the return of commercial banks to the property market.
OOO SibStroyInvest is a special purpose limited liability company incorporated in Russia and ultimately owned 50%/50% by Amstar Global Property Fund I L.P. and Ilicak Family of Turkey. The Sponsor is Volga Dis Ticaret ve Danismanlik Limited Sirketi, a limited liability company incorporated in Turkey.
EUR 40 million.
Screening category and justification
Screened B according to 2008 Environmental and Social Policy. The construction and operation of a new retail centre are associated with some environmental, health and safety issues, which can be readily identified, assessed and mitigated.
Due Diligence undertaken and outcomes
The Environmental & Social due diligence up to date included a review of the project against the EBRD’s Performance Requirements (PRs). The review confirmed that the project has been developed in accordance with the relevant national law, and there are no significant environmental issues to prevent the project's further development: the site is not contaminated and is suitable for the development; the construction is currently being carried out with the adequate permits and in accordance with Russian environmental standards; waste water from the project will be discharged into the city’s sewerage collection network and treated by the waste water treatment plant; and the project design aims to achieve higher level of energy efficiency. The due diligence, however, identified specific construction worker health, safety and legal protection issues (PR2), potential disturbance to neighbouring community (PR4), and requirements for grievance mechanism (PR10). These issues will be addressed through the implementation of the Environmental and Social Action Plan (ESAP) which is currently being finalised.
The project will be required to comply with the Bank’s PRs as well as ESAP. The ESAP will be comprised of worker health, safety and legal protection as well as grievance mechanisms for workers and neighbouring residents. The Bank will monitor the project’s environmental and social performance during the life of the Project by reviewing an annual environmental and social report as well as site visit where necessary and appropriate.
The Project qualifies as built environment project with substantial sustainable energy investments and has been listed for energy performance assessment and corporate energy efficiency and environmental policy support. A consultant engaged by the EBRD will assist the Borrower with the organisation of a regional workshop on energy efficiency in the property sector in Novosibirsk as well as with the elaboration of the corporate energy efficiency policy guidelines.
Associate Banker, EBRD, Property and Tourism
Tel: +44 (0) 207 338 6213
For business opportunities or procurement, contact the client company.
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Tel: +44 20 7338 7168
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