Billionaire Aras Agalarov: "I am no good at making money on public construction projects"

The owner of Crocus in a big interview to Forbes: the builders's problems in the crisis, participation in government megaprojects and optimistic outlook for the future.
16.03.2015
Forbes
Origin source
Aras Agalarov - the owner of the trade and exhibition center "Crocus" and "Your House". It is among the ten largest investor in Russia, over the past years been involved in major infrastructure construction projects. He has the building of the Far Eastern University, Russia, built for the APEC summit in Vladivostok for 73 billion rubles. Today "Crocus International" is the contractor for the construction of two stadiums for the football World Cup in 2018 cost 18 billion rubles each - in Rostov-on-Don and Kaliningrad. In an interview with Forbes billionaire told why building new retail space in a crisis and how to deal with public construction projects.

- The Government has identified the cost of each of the stadiums at the level of 15.3 billion rubles. However, you have entered into a contract for construction stadium in Rostov-on-Don to 18.7 billion rubles. You have met and made an adjustment for inflation?

- An estimate has been revised in light of new developments. The place for construction of the Rostov stadium chosen, in fact, in the swamp, the foundation must be kept in special piles. These piles up in the fiene, because metals have risen in price by an average of 30-40%, the same amount has increased the cost of reinforcement. The estimates are provided to 16 000 rubles per share, and cost us today to 21 000 rubles. I note that this growth has nothing to do with imports. To meet only in the 18 billion rubles, will have to try hard!

- And you stay within 18 billion rubles?

- If stacked with Rostov and Kaliningrad stadiums in those 18 billion rubles, which we allocate, we will be happy. I think that surprises for the government, such as the doubling of the price, as it was with the Petersburg stadium "Zenith" will not. Understand, we do not have the task to make the stadiums. His would not lose money.

Concrete, metal and so on - all this is clear, we fit in the allotted price limits as possible. But, unfortunately, the construction and equipment of the stadium it is impossible to do without imported components. Electronics screens for sound equipment, lighting and other high-tech products have to buy abroad. The issue price is still open, because it is unclear what will be the course of the time sakupki.

- Whether the construction of the stadium began in Kaliningrad? A contract?

- We are now working on a new project. The number of seats will be reduced to 10 000. It was planned retractable roof will not: remove it in order to save. Since the local government wanted to use the stadium as a concert venue, I advised them to make a canopy over the stadium. It protects from rain, but think of the heated premises under the open space will be very dorogo.Chtoby time for the deadline to 2017, the stadium will collect from ready-made concrete structures prefabricated for the LEGO principle. It must also be taken into account in the new project. Due to time constraints, we will clog piles for the foundation base do just as in Rostov, both on site and ready to collect at least part of the stadium they will be manufactured in the factory. We plan to go to the site and start collecting the stadium this year.

- How will be operated stadiums after a championship, how to recoup the costs of construction and maintenance?

- Oh, that's not my question. I can only advise to use both of the stadium as a concert venues. In Rostov, the stadium is also possible to make a collapsible stage, the canopy over it.

- With all the complexities of the construction site and the budget is the meaning of work on such orders?

- This project status. I can not make a public construction projects. Here is an example. The state has allocated to us for the construction of the Far Eastern University 73 billion rubles. However, we did not pay on time, had to invest their own funds. As a result, I invested 3 billion rubles of their money. Plus, on its own initiative, I built an embankment and did conditioning in the building of the university, in the premises of 450,000 square meters. m.Poymite, construction of seven stadiums in different cities - it is also a kind of competition. I started after all. It's a challenge for menya.Ogorchaet one thing: when I do, I know that there are people who say that this could overpower anyone. And then another test will begin with the questions, and why this is so, and that's why it is not? It has already been to Vladivostok.

<strong> - you have included in the list of strategic investors who can qualify for state aid. This is due to the fact that you are involved in preparing for the championship of Russia? On what kind of help do you expect from the state?

- It is necessary to find out what it is, we can be helpful. Maybe we should ask for help on loans to somehow partly compensated for, or subsidized at the rate on new loans would help. Now, if we were given loans at 9-10% or 8% ...

- What is your loan burden?

- We all dollar loans, a very small part in rubles. On December 1 last year, the total amount was $ 1.3 billion. So, we have the body of a loan in rubles has doubled. But to do nothing, we will serve. Before we turn to the state for support, I am beginning to meet with the leadership of our strategic partner, Sberbank, - with German Gref. We'll talk, exchange opinions. We listen to each other. In 2008, when we built the "Vegas" is also in crisis, Sberbank loaned us for a decent, normal rate.

& mdash; What is your business strategy for this year? Projects freeze?

- Salaries will not index this year. Will reduce internal costs, reduce the number of personal cars, and then we've got a fleet of official cars, about 400. I will not recruit new people for construction projects, there may be even some staff reductions, but minimalnye.Nado review the range of procurement for our shopping centers . If you previously could not afford to buy any products, whether they will hesitate to use massive demand, now such experiments will be no more. We have suspended new projects. It was planned to construct two hotels - "Marriott" and "Holiday Inn". "Crocus" is a construction site, but you need loans, and credited rates on ruble today is not possible. Take currency can not be more so. On the construction of stadiums, we were given an advance of 7 billion rubles. It is located in the Savings Bank, the money shall be inviolable.

- What are your other projects?

- Build VEGAS-3 in Kuntsevo, tower №1 [150,000 sq. m] Aquarium [12000 sq. m], "Agalarov Estate" [1,260,865 sq. m]. I stop only two projects, which have not actually started. All that is already under construction, dostroyu. Cheaper continue construction than its canning. For example, if you stop the construction of "Vegas-3", its foundation ploschadyu10 hectares, which we did, you have to fill in two meters of sand, which is 200 000 cubic meters of sand. Very expensive.

- It turns out that, despite the crisis, you enter a new business area, while the demand for them has fallen sharply. Moreover, demand began to fall long before the crisis. What for?

- Yes, last year we opened «VEGAS Crocus City" area of ​​285 thousand square meters. m and two shopping centers, "Your House" - the New Riga and Mytischi. In total, we added 500,000 square meters. m of retail space. But all of them are fully occupied. Our centers are so qualitatively and fun built that tenants will leave us in the least.
That being built "Vegas" is already filled to 30%. From our anchor tenants in existing centers no one left. Of course, not easy now, people come to complain. We are negotiating separately with each rentaltorus, looking at its turnover, we go forward. I think, at the end of this year, rental income would fall by 30-40%, but this is the situation on the market. At the end of 2014 our revenues fell by 2.5 times, despite the fact that we have opened three new shopping centers. But if we do not put into operation, it would have lost even more.

- There are two polar opinions about the development of the economic situation in the country, either this year will mark the peak of the crisis, and then begin a gradual improvement, or 2015 minutes is just the beginning of a protracted crisis. How do you think?

- I think that some economic decisions will be made by the end of the year. We are fixated on the fact that the issue of fear: it is impossible to print new money, do not lend. We are afraid of inflation, we are afraid of everything! Just now it is necessary to credit at a lower rate businesses that will produce and sell on the stock market goods - methanol, ethanol, tin, timber, finally. It is necessary to support the construction industry, because we are creating jobs, paying taxes and the money returned to the budget.

- The printing press inflation accelerates. She's on the official ofnym projected to be double-digit this year.

- When the patient is already half dead, aspirin does not cure it. And inflation is, well, what now, let it be! And so it will not be 15%, and much more and can reach up to 100%. We listened to the whole life of Alexei Kudrin, who said that it is necessary to save money, you can not avoid inflation, all the money will go to the banks, the banks will finance the production and the industry, and all of this will regulate the market. But that did not happen.

- Are you optimistic about the future?

- I have such a psychology: we are all mortal, Earth - a ball in the infinite black space, which revolves around the sun at a certain rate, and it all together somewhere flies. Sit and think about some crises ?! No! We should rejoice and be thankful for every day that (smiles).