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Business news
Transas Unveils Plans for New Complex
01.15.2007 13:12

entertainment_complex By Yekaterina Dranitsyna

Staff Writer

Local technology company Transas has set an ambitious goal to develop a chain of entertainment complexes across Russia with one of the largest to be located in St. Petersburg, RBC reported Tuesday.

Investing $4.5 million into the project the company expects to open a Trans-Force complex in St. Petersburg by 2008. The 3,000 square-meter building, designed in the form of a flying saucer 42 meters in diameter and more than 17 meters high, will house 500 visitors.

The complex will be equipped with virtual attractions, projectors and a cylindrical panoramic screen.

“The location of the complex is not approved yet,” RBC cited Transas vice-president Nikolai Muzhikov as saying. The company is negotiating for a base near Mega and Ikea shopping centers.

Transas plans to construct two similar complexes in Moscow and about five complexes in large Russian cities.

Those will be followed by ten smaller complexes capable of serving 200 spectators. Transas expects to invest $1.15 million into each complex, RBC reported.

Beside this, 40 complexes for 70 spectators will be opened in large shopping centers, with $350,000 invested in each. By 2010, Transas hopes to operate a total of 284 complexes with a capacity of 70 and 200 visitors each.

Transas’ core business is production of navigation equipment, and sail and flight simulators distributed in over 110 countries. In 2006, Transas reported a turnover of $160 million.

Trans-Force complexes are constructed according to license agreements with local partners, the company web site says. Transas already operates a Trans-Force complex located on the third story of the Nord shopping center in the north of St. Petersburg. The second city complex for 70 visitors is due to open in February in the city’s Oceanarium.

According to Muzhikov’s estimations, a 70-visitor complex could generate annual profit of $200,000, while a 200-visitor complex can make $500,000.

According to Becar real estate company, entertainment tenants occupy up to 25 percent of areas in shopping centers. Multiplexes, fitness and bowling centers are the most popular. Billiards clubs, nightclubs, slot machines and videogaming centers are less widespread.

Andrei Kosarev, head of consulting department at Knight Frank St. Petersburg, estimated the share of entertainment zones at between 15 percent and 30 percent of retail areas.

“Competing for customers, managers and developers of shopping centers increase the share of entertainment facilities that attract additional clients, and increase recognition and loyalty,” Kosarev said. Kosarev sees opening entertainment facilities in separate buildings instead of shopping centers as unprofitable.

“Profitability of entertainment facilities is lower than that of shops. However entertainment tenants increase attractiveness and profitability of shopping areas,” he said.

In a shopping center, entertainment tenants can occupy the upper story and pay a low rent while constructing a separate building entails considerably higher costs.

“You need a very successful idea — which could soon become outdated or copied by competitors — otherwise profitability will decrease,” Kosarev said.

Without the cost of land and equipment, Kosarev estimated construction costs at $3 million to $4 million for a building for 500 visitors. Land plots near Mega cost about $1 million.

“The complex will be in demand, though economically this project could hardly be so profitable for Transas to replicate it in other cities,” Kosarev said.

Igor Gorsky, director for development at Becar Realty Group, was optimistic about Trans-Force’s profitability estimating a five year payback period.

“Investment goes mainly in construction and interior equipment. Real estate prices are growing. And this is not such a huge capital that it could not be repaid,” he said.

However he saw expanding into regions as a risky venture demanding serious prior marketing research.

“Neptun saw the same risks. It was a pioneer project. Nobody could guarantee that people will come to see fish,” Gorsky said of the St. Petersburg aquarium.

“This entertainment format is unique. We know slot machines and children’s playgrounds. This is entertainment on another level — for children of five years to 15 years old and adults. The rise of such complexes is a sign of transition to non-standard formats,” Gorsky said.

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