Moscow investment digest

March 2018

Dear colleagues!

The Moscow Department for Economic Policy and Development, in cooperation with the Moscow City Investment Agency, presents a new issue of the Moscow Investment Digest.

NEWS

In 2017, investments in fixed assets in Moscow amounted to almost RUR 2 tn

According to Mosgorstat, in 2017 the volume of investments in fixed capital assets in Moscow amounted to RUR 1.972 tn, which is 12.8% more than in 2016 year 76.6% more than in 2010, in comparable prices.

“Moscow is implementing a comprehensive program for investment development and support. Along with the development of major transport and urban infrastructure projects, the city pays a lot of attention to industry and high-tech sector support, including both existing enterprises and new projects. Due to this support, businesses are actively investing in the creation of new capital construction projects and production development,” Deputy Mayor of Moscow for Economic Policy and Property and Land Relations Natalya Sergunina noted.

"Despite the increase in the Moscow Targeted Investment Program volume in 2017 as compared to 2016, the share of extrabudgetary investments in the structure of funding sources increased from 70.6% to 72.6%.  In 2017, investments in fixed assets were mainly financed by organizations at their own expense (59.1%), Natalya Sergunina said.

Innovative museum to be established in Moscow

A major cultural center will appear at the former site of one of the Moscow oldest power stations recognized as a regional cultural heritage item. HPP-2 Multifunctional Complex construction project received an investment priority project status.

Under the agreement with the Moscow City Government, the investor shall invest at least RUR 8 bn in the complex construction and preserve the cultural heritage site with an area of 15,000 sq. m. The designed complex area is going to make 38,800 sq. m.

Moscow topped a life quality ranking of Russian regions

Moscow had once again topped a life quality ranking of Russian regions, Deputy Mayor of Moscow for Economic Policy and Property and Land Relations Natalya Sergunina said. According to Natalya Sergunina, the Moscow City Government has created favorable living and business conditions in the city.

Minister of the Moscow City Government, Head of the Moscow Department for Economic Policy and Development Vladimir Efimov noted that in 2017 the salaries in the overwhelming majority of the Moscow economy sectors were growing faster than the inflation rates, partially due an increase in production volumes. The city has practically zero unemployment rate. The city's industrial production index is also growing, and small and medium-sized business is developing dynamically thanks to a convenient patent system, with the rate of new individual entrepreneurs registration in Moscow twice as high as Russia's average.

Experts discussed measures to improve investment climate in Moscow

The Moscow Chamber of Commerce and Industry hosted a meeting of the Working Group for Investment Climate Improvement at the Business Protection Headquarters.

First Deputy Head of the Moscow Department for Economic Policy and Development Dmitry Presnov called the city investment project support measures including tax benefits and financial support an effective mechanism to stimulate investment growth. The most significant support in Moscow is provided for technoparks, industrial complexes, industrial parks and the Technopolis Moscow Special Economic Zone (SEZ).

In turn, Head of the Moscow City Investment Agency Leonid Kostrom noted that the Moscow SEZ is currently an area of 207.5 hectares where significant tax and customs benefits are applied, allowing to reduce the project regional tax burden almost twofold. In addition, residents are provided a free connection to utility networks, as well as the right for preferential land purchase.

SUPPORT MEASURES

Thanks to state support, in the first months of 2018 small business financing tripled as compared to the same period of the last year

Just during the first two months of 2017, the Moscow Small Business Credit Assistance Fund provided guarantees for RUR 1.7 bn, allowing small and medium-sized businesses in Moscow to receive RUR 3 bn of loans.

According to the Fund, entrepreneurs were provided with unprecedented guarantee support in 2017. In total, last year the Fund issued guarantees for RUR 12.1 bn and provided more than RUR 22 bn of funding to small companies.

The fund is supporting companies that do not have enough own securities to access loans. The Fund guarantees cover up to 70% of funding attracted by small companies.

"If an enterprise requires a larger amount of collateral, then there are resources of the Federal Corporation for SBE Development that is cooperating with the city under a number of programs," Alexey Fursin said.

The Fund provides support of up to RUR 100 m to the companies registered in Moscow handling excisable goods and having an annual revenue of less than RUR 2 bn and employing less than 250 people. Also, the Fund requirements include zero tax debt.

Moscow will provide loans to exporters at 5% interest

The Moscow Fund for Industry and Entrepreneurship Support has launched a new loan program for the Moscow industrial enterprises with a revenue from export to the CIS and non-CIS countries making at least 1% of the total annual revenue. The loan amounts range from RUR 10 to 50 mn. The maximum loan period is 5 years. The interest rate for the new type of loans will be 5% per annum.

The loans are expected to be granted for purchasing new equipment, financing research&development and research&technology works, acquiring industrial engineering services, purchasing software for industrial needs, refinancing investment bank loans, and acquiring rights for intellectual products.

Production sites in Kotlyakovo industrial zone to be preserved and revamped

The transformation of the enterprises in the Kotlyakovo industrial zone located in the Tsaritsyno area in the south of Moscow with an area of over 200 hectares will result in the creation of new high-tech production sites with highly remunerative jobs.

The industrial zone accommodates such facilities as OAO Tsaritsyno (the Moscow meat processing plant assigned with an industrial complex status), the Atsetilen plant (production of acetylene and other technical gases for welding and metal cutting) and OAO PEF Soyuz (the largest manufacturer of corrugated cardboard packaging).

Today, one of the main tasks in Moscow is the comprehensive development of industrial and communal area. It is necessary to make these areas modern, safe, and comfortable, and to properly arrange them", Head of the Moscow Urban Planning Policy Department Sergey Lyovkin said.

The redevelopment priorities include the industrial zones Nagatinsky Zaton, Serp i Molot, Graivoronovo, the former site of the Likhachov (ZIL) plant. The renovation plans for the industrial zones Rudnevo, Zapadny Port, Kaloshino, Beskudnikovo, Lyublino and several others are under way.

MACROECONOMICS

Moscow export increased by 4% in 2017

"In 2017, the Moscow export increased by 4.1% against 2016. The export grew by 6.5% for services, and by 3.5% for goods. As Minister of the Moscow City Government, Head of the Moscow Department for Economic Policy and Development Vladimir Efimov told to the Moscow Investment Portal, the total volume of the Moscow export amounted to more than RUR 9.8 tn.

The Minister also said that the most significant export growth was registered in high-tech manufacturing industries. According Mr. Efimov, in 2017 the export increased by 30% for chemical products, by 26% for machinery and equipment, and by 17% for car and aerospace industry.

According to Mr. Efimov, the export of goods and services of the largest IT enterprises grew by 22.5% due to the industry support program launched in Moscow two years ago. The program goal is to develop high-tech modern production plants able to compete in global markets.

MOSCOW AUCTIONS

Ca. 5,000 sq. m. in Mosgormash technopark are planned to be leased through auctions until late 2018

The auctions to lease eight production, administrative and multi-purpose facilities located in the Mosgormash industrial park and owned by the city will be held in early May. The total facilities area is about 3,500 sq. m. Mosgormash is also planning to put up for auction about 1,200 th sq. m. of production space until the end of 2018.

 "Businessmen can rent premises of different area; currently the area of the auction lots is ranging from 57 sq. m. to 1,300 sq. m. The lease term varies from 11 months to 5 years. Based on the experience, entrepreneurs have a good opportunity to rent a lot at a starting price, with guaranteed transaction transparency," Head of the Moscow Department for Competition Policy Gennady Dyogtev said.

The auctioned lots are located within the technopark territory at the address: Kashirsky proezd 13 and Kashirsky proezd 13/2. The lots technical condition is satisfactory. All the items are connected to heat and power networks. An average initial price for 1 sq. m. is 7,000 RUB a year. The technopark is offering comfortable working conditions.

Please find the documentation regarding the auctioned lots at the Moscow City Investment Portal in the section "Lease of non-residential premises".

Premises for small businesses put up for auction at a special price

79 non-residential items in Moscow were put up for auction at a special rental rate that is applied for small businesses only. The premises are located in all the Moscow Administrative Districts, except for Troitsky and Novomoskovsky, and occupy the ground and semi-basement floors of residential buildings, as well as administrative and commercial buildings. The items area ranges from 100 to 300 sq. m. Such items are demanded the most

"There will be many more lots. It is planned to auction about 300 facilities to be leased to small business entities (SBE) by the end of 2018," Head of the Moscow Department for Competition Policy Gennady Dyogtev noted.

The auction winner will be entitled to conclude a 10-year leasing agreement at a fixed rate. All the documents can be found on at the Moscow Investment Portal, in the section "Items for SBE".

OOO Yunost block of shares put up for auction with a 10% price reduction

The auction was organized by the owner of the Yunost shares PAO Plant n. a. I. A. Likhachov (AMO ZIL) that put up for auction 100% of the Yunost shares. The initial price is RUR 89 mn. Investors will compete for the right to purchase the asset at an auction on April 18, 2018.

This item is expected to attract tourist market players, since the auctioned asset includes the holiday center Vaskino (currently not in use) comprised of 33 buildings with an area of over 30,000 sq. m. The holiday center is located within a territory of 49.7 hectares. The applications for auction participation are accepted until April, 12.

The auction winner will restore the Measuring Chancellery in Kitai-Gorod

The auction for the right to rent the main 17th-century urban estate building that used to accommodate the Moscow Measuring Chancellery was won by the investment and development company KFS-Group.

Three companies took part in the auction. In the course of a prolonged auction, the lot price increased threefold and amounted to RUR 43.4 mn. Before exercising the right for preferential leasing, KFS-Group is obliged to repair and restore the facility within the next 5 years.

The item located in Khokhlovsky pereulok and is a three-floor building with an area of 1,700 sq. m. On the west side of the building, there is a late-XIX-century palisade, i. e. a level space with a fountain. The investor will have to preserve the estate roof, floor structures, facades, and interior.

Year to date, tenants have purchased 20,000 sq. m. of urban premises

Since the beginning of 2018, the Moscow Department of City Property has concluded real estate purchase agreements with entrepreneurs for RUR 1.85 bn to exercise the preferential right for the leased property purchase.

Minister of the Moscow City Government, Head of the Moscow Department of City Property Maxim Gaman noted that the privatization of premises allows businesses not only to expand their capabilities, but also to reach a new level of operation and development.

To date, 5,565 tenants have already used the preferential right to purchase the leased property with a total area of more than 1.15 m sq. m. worth RUR 122.23 bn. Under Federal Law No. 159-FZ dated 22.07.2008, the preferential privatization right is to be granted to responsible tenants along with the option to purchase premises without a bidding procedure and a 5-year installment payment plan.

The Moscow City Investment Portal ( www.en.investmoscow.ru) is currently representing over 2,000 city real estate items.

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Manager of the Year Award

The Department of Economic Policy and Development of Moscow

www.depr.mos.ru

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