MLP Leningradskii Terminal

Developers first conceived of the ILP Leningradskii Terminal in 2004. This same period was marked by rapid retail development and the active construction of shopping centers, but also by an almost total lack of high-quality warehousing areas. The ILP, or International Logistical Partnership, was one of the first companies to take advantage of this sector of the market, announcing the construction of a new warehousing complex, and ground was broken on the Leningradskii Terminal project on the 30th of June, 2005.

“When construction began on the terminal, nobody was in a hurry to assess the real class A warehousing demand in Moscow,” explains Dmitri Gerastovskii, deputy director of warehousing, industrial real estate, and land development for Knight Frank. “MLP became the first developer who accurately understood the situation – many companies from a variety of business spheres needed high-quality warehousing areas and there was simply nothing out there to satisfy them.” It is worth noting that the MLP Leningradskii Terminal is being constructed in phases. The first two segments are already completed, in fact, and the construction of the third and last phase is now underway. The opening of the entire complex is scheduled for October of this year.

A Strategic Route

The warehousing complex on Leningradskoe Shosse, 13 km from the MKAD and 5 km from Sheremetevo Airport, has already been the subject of a great deal of discussion. It is probably the most heavily loaded transport artery in Moscow and more than likely the most important from a logistics perspective – a huge segment of exports pass along this highway.

“Despite the traffic, this route continues to be the most strategically viable for both logistical operators as well as for the clientele,” says Maxim Shakirov, director of warehousing and industrial real estate for Colliers International. Indeed, all shipping traveling from Finland to Moscow and to the southern and eastern reaches of Russia must pass through Leningradskii. According to Dmitri Gerastovsky, this route carries 70-80% of Moscow’s shipping. Olga Petrova, head of marketing and public relations for one of the terminal’s larger tenants, YuniTrans Logistik, admits that, “The Leningradskii terminal suits us most of all for its location: we believe that this route has the most potential.”

The testimony of the experts is confirmed by the facts. Not long ago, there was only one company constructing warehousing complexes in Moscow – the Parkridge Group. And the activities of YuniTrans Logistik, which has rented supplementary areas within the ILP project, clarify to a certain extent why the traffic on Leningradskii doesn’t bother the complex’s tenants one bit. “It’s certainly overloaded,” agrees Olga Petrova, “But we are trying to plan for an optimal mode of shipping – this is one of the major tasks of any logistical operator. Additionally, the terminal is situated ideally to take advantage of all the shipping from St. Petersburg to Moscow.”

Leningradskoe Shosse’s investment appeal might also be explained by the project’s proximity to Sheremetevo and a number of large populated areas, (Sxodnya, Zelenograd, and Khimki,) which may ultimately provide the complex with a work force. Also, up and down the route there are already a number of large projects already in use, such as MEGA, ASHAN, the auto-salon Rolf, Metro Cash and Carry, and so on. “The demand along this route is growing in connection with the plans to construct a backup highway, which will help to carry the load on Leningradskoe,” asserts Dmitri Gerastovskii. “This is ultimately why the transportation situation plays almost no role in the ultimate investment appeal of this project.”

An Unusual Form
One of the warehousing complex’s key features is the elongated, curving geometrical form of the lot, which, as experts at MLP have acknowledged, has complicated the realization of the project to a certain extent. Developers were required to devote a lot of energy to this aspect of the property during the planning and design phase. Four-cornered forms are generally considered optimal for this sort of real estate, but developers in Russia are not spoiled by a lot of choice: they often are forced to use what facilities are at hand, regardless of what may in fact be optimal. No matter how strange the form of the lot may be, however, the entire area of the project’s first phase was already reserved before the completion of construction. “The tremendous success of the project has proven the old saying about the early bird and the worm,” says Peter Zaritskii, deputy director of warehousing and industrial facilities for Jones Lang LaSalle. “They were first, and this is why they have found tenants quickly. The lot’s configuration may even be a plus in that nearly all tenants have direct access to the highway. In this way, the scheme of traffic was optimized. There will be no danger of getting lost somewhere on a tremendous lot.” Actually, all experts agree that the arrangement of the real estate in relation to Leningradkoe Shosse is very advantageous – along the highway itself as well as along the entrances and exits. This has allowed developers to avoid constructing supplementary access roads. The construction company, Bamo, once owned this lot. The American investment fund, Prologis, planned to construct a warehousing terminal on this lot, only they were unable to complete the deal. As a result, the land has been sold to Pascalis, Gardner, and Partners, one of the larger member organizations in ILP. The dollar amount of this deal has not been made public.
Credit for the construction and refinancing of the warehousing complex was acquired from Nuro Real Estate International. The $150 million deal drew a great deal of attention on the real estate market – experts believe that it was the largest loan ever given by a western bank for the construction of warehousing property in Russia. “It was a mutual decision: we searched for a dependable partner who would offer the best working conditions, and the bank we chose decided to enter the Russian real estate market with our project,” explains Anna Yakubova, director of marketing and tenant relations for ILP.
According to Anna Yakubovaya, the probably buy back period for the project will be between 6 and 7 years, though the long term financial plans have not been divulged.

A Reliable Strategy
The warehousing complex presents itself as five independent blocks of one story each, situated on a 42 hectare lot. Every block includes an office area and a zone for security services. Within each block is a technical support area: battery charging rooms, repair shops, heating units, and so on.
As experts have pointed out, the warehousing complex in question can easily be considered class A quality. “The warehousing complex was designed and built quite successfully,” says Olga Petrova. “Except for a few small defects, it is indeed a class A property. Its dimensions are ideal for working with standard systems of transporting and protecting cargo.” Maxim Shakirov agrees, “ILP Leningradskii Terminal can be considered one of the first truly successful warehousing properties of class A.”
Market experts often point out the uniformity among such complexes. Though they may be high quality, they all possess a standard design in order to suit all potential tenants. In other words, companies with specific logistical demands are not necessarily the best clients of such warehousing complexes. But this strategy of quickly building a warehouse and renting it out to tenants, is considered by market experts to be ideal for the moment. “This is how the Leningradskii terminal was rented out to operators almost immediately, unlike a number of other areas,” states Peter Zaritskii.
Dmitri Gerastovskii asserts that the complex’s unconventional design was so successful because of the facility’s location. “The shape of the lot has in fact adversely influenced neither the economics of the project, nor the design. Tenants require a balance between the developed areas and the overall area of the lot, especially in a class A project.” This balance is observed at ILP Leningradskii Terminal with about 50% of land being designated for the developed areas. Anna Yakubova points out that, “Thanks to finding the proper approach and reliable solutions, we have successfully avoided losing any useful area and have held on to the favorable 50-50 balance between the vacant and utilized areas of the lot. Much of the space of the lot will be used for the maneuvering of the large vehicles, for loading and unloading work, and for parking lots. It should be noted that a design concept with stricter adherence to the straight-line, four-corner tradition does not guarantee a project’s success, especially under the conditions of land deficit which are affecting every developer. Daring to adapt your design solutions according to unique conditions and international standards is essential.”
Similarly, the organization of traffic within the complex, according to the authors of the project, fully satisfies the accepted requirements for class A warehousing. Dmitri Gerastovskii agrees: “A number of entrances and exits have been designated on the territory of the warehousing complex, where in fact the lot will be broken up into zones with an individual scheme of traffic flow. Until the very last stages of construction, the transportation plan can be fully adapted to meet the demands of tenants.”
Along the 2 km perimeter of the lot, organizers of the project will adhere to a scheme of two-lane movement. Besides the two entrances and exits, developers are planning for yet one more – an emergency exit. The first entrance will permit only those vehicles that are in possession of a pass card. The remaining vehicles will enter in a second proposed checkpoint, where clerks can compile all the necessary documentation. To minimize crowding risks, developers have also made allowances for a large guest parking facility for both passenger and commercial vehicles. Basic movement within the complex will be organized along the building’s main facade. “Organized movement within the complex is essential,” says Olga Petrova, “At the same time it would be splendid if the parking area were a little larger – we occasionally will have some trouble accommodating all the vehicles. Entry into the complex will be quite simple, however – streams of traffic will never cross.”
Olga Petrova also finds fault with certain other technical problems: “More loading docks would of course be ideal.” The standard for developers is generally one loading dock for every 1000 sqm.

Large Tenants
Tenants will reserve portions of Leningradskii Terminal in large blocks, from 5 to 30 thousand sqm. “Considering the dimensions of a warehousing complex, this sort of design is optimal,” asserts Dmitri Gerastovskii. “Many companies are ready to rent 10 thousand sqm and especially if they are planning to expand their business. Generally, the extra space in projects like Leningradskii Terminal will be snapped up quite quickly.”
Thus, the design of the facility simply does not allow for leases of less than 5 thousand sqm. But is this positive or negative, considering the tremendous demand for such facilities? “This was the most rational decision from the point of view of economic effectiveness at the moment,” believes Maxim Shakirov. “From here on, a more flexible approach will be needed – to construct smaller facilities for tenants requiring larger blocks.”
The International Logistics Partnership intends to follow through with its chosen strategy. “Demand for spaces of more than 20 thousand sqm will become especially acute quite soon, considering the number of large international logistics companies planning to develop their business in Russian territory,” says Anna Yakubova. “Additionally, developers of class A warehousing projects will be better situated to construct large-scale properties – the larger the area, the cheaper the operational costs for ever square meter. Utilities will also be cheaper. Also, these developers inevitably streamline the processes of managing their properties: coordination and cooperation with tenants becomes simpler and more concrete.”
Besides YuniTrans Logistik, a number of companies have gathered to lease the 32 thousand sqm of the Leningradskii Terminal – Volvo, Caterpillar, ProBuro Office, Mitsui and Co., Moscow Itella, CargoCare, and Mobis Parts.
It is unlikely that production blocks will be included on the property at any time. “If clients require, they can install this sort of equipment within their own rented areas, but naturally they will have to work out all the details with us,” explains Anna Yakubova.

Ready for Sale!
Experts point out that the ILP Leningradskii Terminal has all the necessary features of an attractive investment sale – high-quality construction, long-term rental agreements with large Russian and western companies, and an advantageous location. “ILP Leningradskii Terminal presents itself as a truly completed project, one of the most ambitious and successful on the market from many points of view,” says Dmitri Gerastovskii. “In acquiring such a property, investors take minimal risks. The western management style and the good technical standards applied to the construction of the complex are yet one more plus, making this project truly attractive for all potential investors.” For now, MLP has not yet revealed when or if the property will be sold.