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City news
City Cuts Spending On Okhta Center Project
07.20.2007 11:00

okhta_center_view By Yekaterina Dranitsyna

Staff Writer

The St. Petersburg government has decreased its planned spending on the Okhta Center — Gazprom’s controversial construction project to be sited on the Neva embankment near the Peter the Great Bridge.

At a meeting of the St. Petersburg government Tuesday amendments were approved to the “Law on the special program for the construction of an administrative and business center in St. Petersburg”, the press service for the St. Petersburg governor said Tuesday in a statement.

“The city will get 49 percent of shares in the Public and Business Okhta Center limited company. When construction is completed, we will have the new premises at our disposal. It will provide double and even triple benefits to St. Petersburg. We have to explain this to the citizens,” St. Petersburg Governor Valentina Matviyenko was quoted in the statement as saying.

According to the agreement signed by the Gazprom and Gazpromneft companies on May 27, 2007, the construction will be financed from two sources — the city budget and private investors.

As a result of the latest amendments, budget funding of this project will decrease by 50 percent. Of the total construction cost of 60 billion rubles, 51 percent will be provided by Gazpromneft and “Public and Business Okhta Center” and 49 percent by the St. Petersburg budget.

The city government will get a 49 percent stake in the company that owns the center and will own a corresponding share of the completed property.

Instead of the committee for construction, the committee for state property management will be Gazprom’s partner in this project.

Matviyenko emphasized that at the moment the industrial area is in a poor state and requires modernization. The rationality of replacing it with a business center is undoubted, she said.

Following a request from City Hall, Gazpromneft added a significant number of social infrastructure elements to the project, Matviyenko said, including residential areas and cultural and sports facilities for public use.

She stressed that the height of the main building is still a subject for discussion. However, architectural nuances would not stop the project from being realized, Matviyenko said.

Okhta Center is to be completed in 2016. The center, occupying 71.4 hectares of land, will become the largest office center in Europe. Gazprom and its subsidiaries will occupy 16 percent of the facilities, tenants will occupy 49 percent and social infrastructure will account for 35 percent.

“When analyzing the project for the Okhta Center you just can’t use criteria such as the pay-back period. It’s a political project in the first place,” said Oleg Barkov, general manager of Knight Frank St. Petersburg.

“If a historical parallel is to be found, the construction of the Admiralty in St. Petersburg was once a symbol of Russia becoming a sea empire,” he said.

However, Barkov admitted, the project could be commercially profitable if parts of the center will be leased.

In seven years the expenses could be covered, he said.

“If the additional commercial areas will be developed, the normal pay-back period would be five years for office centers and almost immediate return for residential areas. Investors will be highly interested in developing those areas, including the largest western conservative investors,” he said.

“In other respects it would be a purely social project with a large number of public areas — exhibition halls, concert halls and sports areas. Investment into such premises for the city is a social obligation in the same way as the construction of schools and nursery schools,” Barkov said.

News source: times.spb.ru
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