Sponda’s Russia business unit leases, manages and develops business premises for use by companies and organisations. The focus of the company’s business operations shifted as a result of a change in strategy in 2013, and Sponda now plans to divest its Russian operations within the next three to five years.
Sponda has a very good reputation in Russia, and the company is perceived as a reliable and transparent partner. The company owns three office properties, two shopping centres, a logistics property and two land areas in Moscow and St. Petersburg. New owners are now being sought for these properties based on the market situation.
Change in strategy shifts perspective from buying to selling
The challenging economic situation in the European property market was also reflected in the Russian market. While the vacancy rates of properties increased, the occupancy rate of Sponda’s properties clearly exceeded the market average, totalling 96.0 per cent at the end of 2013. The unit’s total revenue was EUR 28.6 million (2012: 28.7).
Two office buildings in St. Petersburg, with a combined leasable area of approximately 6,000 square metres, were sold in the summer 2013. The selling price was EUR 9.9 million.
In late 2013, Sponda began to examine the market from a seller’s perspective, as the company’s change in strategy resulted in a plan to discontinue business operations in Russia. The profitability of the Russian operations has been good, but achieving sufficient growth has been challenging. The Russian operations’ share of the Group’s total revenue has remained fairly small. No new investments are planned for the Russian market, and the properties currently owned by the company will be divested within the next three to five years. The survey of potential buyer candidates has begun well.
The instability of the world economy will be reflected in Russia in 2014, with economic growth expected to slow down. The weak economic conditions will lead to tenants looking for cheaper and more efficient business premises. Combined with the new properties' entry into the market, competition is set to become more intense.
Further challenges will be posed by the rent increases for land plots of Moscow city as well as the new countrywide real estate tax, which will increase the costs of business premises. The rent increases entered into force in 2013 and the real estate tax will take effect in 2014.
Energy consumption monitoring and community-oriented activities
Sponda continued to focus on environmental responsibility in 2013 also in Russia. As part of the company’s Energy Efficiency Programme, the energy consumption of Sponda’s properties in Russia was monitored and joint efforts with customers were used to reduce consumption.
Sponda organised events for tenants and their families in Russia. In addition, the company co-operated with local organisations and authorities to organise community events at its shopping centres.
|Properties in Russia 2013|
|Western Realty||Gasheka Street 7||Moscow||14,411|
|Sun Paradise 1||Borovskoe highway 6||Moscow||9,079|
|Adastra OOO||Zanevka||St. Petersburg||7,872|
|Sun Paradise 2||Vokzalnaja ul. 4b, Ramenskoe||Moscow||6,551|
|Bakhrushina House||Bakhrushina Street 32||Moscow||3,926|
|Ancor||Prospekt Mira 6||Moscow||2,785|
|Total revenue, M€||28.6||28.7||25.1||23.6||21.8|
|Operating expenses, M€||-6.8||-6.5||-6.1||-5.9||-5.5|
|Net operating income, M€||21.8||22.2||18.9||17.7||16.4|
|Fair value of properties, M€||247.8||269.4||224.6||204.2||181.4|
|EPRA, Net Initial yield,%||8.0||9.2||9.8|
- Sponda sold two office buildings in St. Petersburg in summer 2013.
- After the change in strategy, the company’s focus at the end of the year shifted to surveying potential buyer candidates.
- The occupancy rate of the properties in 2013 stood at 96.0 per cent.