Bid for Universality

The 130,000-sqm Ramstore Capitol shopping and entertainment center opened on 2 December 2006 in Moscow on the upper side of Prospect Verdanskogo. The retail center houses more than 100 various retail operators, a nearly 8,000-sqm office complex, an eight-screen Karo Film cinema, an entertainment complex with bowling, a fitness center, bank branches, as well as service industry businesses, cafes, restaurants and many others, including Russia’s very first Media Markt electronics and appliance store. Ramenka Ltd. is the owner, having received two Commercial Real Estate Moscow Awards professional awards. Furthermore, this year Ramstore Capitol was awarded the prize for being the best Large Shopping Center, with Enka architecture firm’s specialists winning the Architect of the Year award for this very project.

62nd Green Kangaroo

First of all, the Turkish developer was reluctant to speak about its facility, so CRE had to seek information from third-party sources.

Ramstore Capitol was the company’s sixty-second store in total as well as the ninth largest shopping center in the chain. This Ramstore hypermarket is 6,000-sqm and offers around 35,000 brand name products and industrial goods. At the project’s beginning stages, the developer figured that around 10,000 shoppers would pass through the check-out lanes daily on the weekdays, while up to 20,000 people would visit during the weekends and pre-holidays.

“The shopping center is conveniently located in a prestigious region, next to the Universitet subway station, on a lively artery, thus Ramstore Capitol is easy to reach for visitors from all over Moscow,” notes Maksim Marukhlenko, head of the development department at LEON. “Therefore, the facility will likely not require a new concept for the next five years. The interior is attractive and it is convenient to rest here, while there is high visitation during the evenings, and the layout is original while being functional.”

Nevertheless, the complex’s concept of being a family shopping and rest and relaxation center is not very original among Moscow’s predecessors, while specialists have recently started debating whether it is fine to combine “family” and “leisure activities.” However, Ramstore Capitol can and should count on a wide group of clientele, as the center is located five minutes on foot from the subway and residential buildings, and ten minutes on foot from a business center and the circus as well as fifteen minutes on foot from Moscow State University and attending park. So, students positively discuss the project on Internet forums, and the location of the center has lot to do with the praise.

“On a scale of one to ten, we would rate the location as being eight, and this is only because it is not in the city center,” comments Yulia Nikulicheva, director of the strategic consulting and valuation department at Jones Lang LaSalle. “The shopping center format is fully appropriate for the region, with a good-sized population, a large number of students, so a cinema, a food court and bowling alleys are excellent anchor tenants, and there is also a business and office contingent. Namely, there is virtually a universal target audience. The facility’s recoupment period is expected to be around five years.”

According to the overall opinion of independent analysts, the flow of customers on the upper floors generally gravitates towards Media Markt rather than the hypermarket. Also, many customers also spend time on the first floor which leads to the exits and underground parking.

According to Nikulicheva, any large shopping facility (from 25,000 sqm of leaseable space) today can and should have moderately profitable mini-anchor tenants in the entertainment industry, regardless of what the center’s concept may be. “The developer could not determine the concept at the initial stage, with an aqua park having been planned for the area where the underground parking lot is today,” recalls Nikulicheva. “The idea was good overall, but not highly profitable, especially in the wake of the Tranasvaal tragedy.”

“A definitive tenant structure is only seen on the first floor, with sporting goods and a fitness club,” counters Ilya Shuravin, a partner at S.A. Ricci/King Sturge. “The remaining floors have a mix of brands and goods, such as women’s accessories and men’s clothing. Branded goods are predominantly available at the same time on the first and second floors (with the highest rates), with the first floor housing the most ‘aggressive’ tenants, such as Zara, Holding Center, Shokoladnitsa, Betalink and others. The second floor has mid-priced mass-selling brands which have long been familiar to Muscovites from other retail projects, such as Okhotny Ryad. Of course, the main attraction is Media Markt, which generates serious customer flows even during the weekdays. On the third floor, there are some low-frequented stores during the weekdays, although TJ Collection, Kuda.ru and Ecco are visited by shoppers.”

The Cosmic Capitol bowling club operates from noon to five in the morning, with 22 alleys and 10 lanes of virtual bowling. There is also the Goroshek family restaurant, a children’s entertainment center and a sports bar. Cosmic has signed a 10-year lease agreement, as has the cinema.

Several locations in the center, which has been open for six months, are still under construction. “Until mid-June, the bowling alley was having some technical difficulties with design and operation,” notes Shuravin. “In any case, two thirds of the club’s area was screened off, while a ‘Help Wanted’ sign was hanging closer to the entrance.”

In terms of direct competitors, experts agree that these will appear in the future. “There are no similarly large competitors in the immediate vicinity today,” says Marukhlenko. “Possible risks could be the constantly growing market in terms of concepts and designs, which, in turn, could lead to a drop in lease rates.”

To date, the Festival shopping center operates on Michurinsky Prospect, in the Olympic Village, which is located rather far away, while the brands on sale here are also more expensive.

Pleasant Views

The qualitative design, fountains and artificial palm trees, the expensive finishing and picturesque bridge with an incline on the first floor brought instant increased interest to the complex. Shortly before the complex’s grand opening, the owner carried out a rather aggressive advertising campaign on television and outside billboards, plus the natural heightened interest generated by the opening of Moscow’s first Media Markt.

An analysis of the plot’s topographical specifics was conducted at the design stage, while the construction site’s borders and geometrical parameters were determined. As a result, the developer decided to construct a complex of several individual, yet interconnected buildings as one whole.

Taking into consideration the specifics of the construction site, separate entranceways to two of the complex’s facades were included. Indeed, the narrow central facade was joined with Prospect Vernadskogo by a direct pedestrian crosswalk. The entrance to the parking lot and the main entrance to the office building are located on the side of the entranceway, separating the complex’s wide facade from the neighboring area.

The retail premises are located along the central section of the complex, which also runs along the central section of the office premises, around the atrium which is illuminated by the building’s glass ceiling. The monitored and unmonitored areas of the shopping and entertainment center are designed to assist security to the utmost. The cinema is designed to host 1,800 filmgoers simultaneously and is connected with the shopping center’s first and second floors. The outdoor and indoor parking lots are located to assure open passage to them at all times. Karo Film invested more than $3 million in opening the multiplex in Ramstore Capitol.

The islets between the travelators and other locations intersecting with the customer flows are clearly indicated with signs, such as Restaurant Avenue, Musical Lane, Bank Crossing and Shoes Highway, written in elegant print, and they do not seem to go too well with the fake palms trees and the signs warning visitors not to eat and drink what they have brought themselves. During the evening hours, it is worth looking at the area of the transparent floor, punctuated by impressive, wide illuminated arcs.

“The shopping center is well-equipped with six escalators per floor, as well as with an elevator in the center of the atrium, built many months after the center opened,” notes Shuravin.

“The large atrium offers a good view onto all of the stores, and there is a solid lineup of tenants in addition to the attractive architecture, guaranteeing that there are no dead areas,” comments Nikulicheva. “The owner’s management team is doing well operating the complex overall.”

Bottlenecks upon Approach

When approaching Ramstore Capitol from the center, along Prospect Vernadskogo, one should turn onto the small side road, following the intersection with Lomonosovsky Prospect, and, after having passed the filling station, turn to the right. The center’s territory has free surface and underground parking for 1,500 vehicles, which is definitely an advantage.

All the same, several specialists note that there are problems with the entrances and exits. “The two narrow entrances only provide access from the Prospect Vernadskogo. The building seems to have been built on a limited territory with a squeezed traffic way, to increase the shopping center’s premises,” says Shuravin. “There are two street parking areas right after the entrance, with no more than 100 parking spaces for the Karo Film cinema, while there is one entrance and one isolated exit to and from the indoor parking area, with the entrance and exit located on opposite sides from each other. There is no circular flow of traffic around the building, as the complex is located in an empty area. There are private garages to the right of the shopping center, separated from the area by a tall fence. However, the developer was very attentive, as there is already a built, although not open, indoor entrance on the side of the neighboring street, clearly taking into consideration the MSU residential blocks under con struction. Let’s say that the owner will finish building a road around the complex, but only in one or two years. The location was chosen very strategically, and the size of the center gives the project longevity, although the developer cut corners a bit on the parking area, so there will clearly be a shortage of 300-500 spaces once the complex has been fully constructed and is in complete operation.”

Marukhlenko also comments on the less than advantageous parking area: “The approach from Prospect Vernadskogo and Lomonosovsky Prospect are rather convenient; however, there are complications with entering and exiting the facility.”

In terms of food court and other eating areas, everything is fine. The main area is on the third floor, with cafes familiar to and liked by all patrons, from Yolki-Palki to Khomyak, Barbeque, Teremok, Sbarro, Rostik’s, Pizza di Roma, McDonald’s, Sultan Kroshka Kartoshka, etc, with McDonald’s being the clear favorite among patrons. Peking Duck is located separately, set off by a tinted-glass wall. Directly in front of the service areas, under the glass roof, is a seating area, which is one third full during the weekdays, following lunch.

Additionally, each floor has its own small area serving food, with some even offering visitors hookahs, for example, on the second and third floors, in a glass hall, under the central entrances. On the first floor, at the intersection of customer traffic from the central entranceway and the underground parking lot, there is a coffeehouse. The Karo Film food court is separately located on the second floor, with four small cafes with their own seating area, while the third floor offers moviegoers popcorn and other snacks. The first floor of the center houses the Fashion TV Cafe, while another small restaurant is located in the central passageway directly in front of the hypermarket.

Tomorrow Will Be Clear

Ramenka was founded in Moscow in 1997 to construct the Ramstore chain of shopping centers in Moscow. The founders were Enka Turkish development company, Migros Turkish retailer (with more than 700 hypermarkets and supermarkets in Turkey’s Koc Holding) and Ram Foreign Trade Company (the external subsidiary of Koc Holiding, with 20% of its Ramenka assets subsequently going to Migros). According to Migros’ financial reports, Ramenka’s net revenues in 2006 increased by 30% to $626 million.

Migros’ management had planned to open 40-50 new Ramstores annually; however, since the end of 2006, Ramstore has had to close 10 stores in Moscow and the regions, while opening 12 new ones. Koc Holding recently confirmed in the mass media its intentions to sell its retail business, instead concentrating on energy, automobile manufacturing and appliances, as well as the financial sector. Koc Holding owns 50.83% of Migros, with the remaining shares being freely traded. Migros owns 50% of Ramenka (50% more in the Turkish construction company Enka), which operates the Ramstore chain with 11 shopping centers and 53 supermarkets.

Ramenka today is looking for a party to purchase the supermarkets located in Moscow and the regions, and has already approached the management of several large retail chains. As Reuters reports, Koc Holding has officially confirmed its plans to sell its retail business. According to a number of experts, the principles according to which the supermarkets operate prevent the chain from being competitive, and several suppliers even refuse to collaborate with the Ramstore chain. Accordingly, only hypermarkets and shopping centers similar to Capitol, ones that generate lease payments in addition to profits from retail activities, can remain profitable in the current situation