The Litmus Paper of Quality

Demand for quality warehouse space is still the talk of the day on the Moscow market, which is still far from the point of saturation. Being aware of attractiveness of this segment, many developers started building warehouses, though very few succeeded. The agricultural firm Belaya Dacha exemplifies a successful start-up in this business who managed to create a professional team and deliver a quality project.

Belaya Dacha Co. was originally known as a large agricultural holding engaged only in foods, clean vegetables, flowers, roll lawns and large-size trees. Holding plenty of vacant land near to the sprawling megalopolis, it was impelled to contemplate other land uses. Now the company’s portfolio includes the successful project Mega — Belaya Dacha with IKEA being the anchor tenant. However the company’s interests include both retail and warehouse segments. In 1998 it launched construction on a 5,000-sqm built-to-suit storage facility functioning as a fruit-and-vegetable distribution center. In view of the dearth of quality warehouse space on the market, the company put together a professional team in order to develop this line of business and came out with Belaya Dacha Logopark complex. Now real estate development is the main driving force for the company’s business and a reference point in the adoption of international business-running standards.

Having no powerful financial leverage used by western developers but holding ample land resources instead and making the best use of effective communications with local authorities, the company aptly circumvents bureaucratic hurdles and delivers its project without delays.

Belaya Dacha Logopark comprises five Class A warehouse terminals. Like any large-scale development, this is a phased project delivered in a piecemeal fashion.

The 115,600-sqm development land is owned by Belaya Dacha agricultural holding. Engineering lines had already been laid on the site, which is of no minor importance, and they are also owned by the company. “The logopark was developed on operative industrial grounds, so infrastructure had already been tuned and technical problems did not cause extra headache. The complex has autonomous engineering lines owned and exploited by Belaya Dacha Group, such as a diversion unit, a boiler-house and a cluster of electric power substations, providing for the terminal’s power needs,” points out Dmitry Yevteev, Belaya Dacha Logopark project director. There were no urban-planning restraints either, as the nearest multistory residential development is more than one kilometer and a half away.

Construction on the first phase began in January 2003 and already by September 2005 the first and second phases with 60,000 sqm of storage space had been completed under the overarching name Belaya Dacha Market. The project is managed by a joint venture between Belaya Dacha and Hines, one of the leading players on the real estate market. This venture called Belaya Dacha Logopark Ltd. is also the project owner and investor. As stated by Aleksei Bondarenko, aide of CEO Belaya Dacha Market Ltd and Belaya Dacha Logopark Ltd, “throughout the entire implementation of warehouse terminals Belaya Dacha Group was interested in Hines both as an experienced development partner and as a co-investor.”

Construction on the third phase commenced in January 2006, while the fourth phase started earlier in November 2005. These two phases cover the aggregate floor area of 48,000 sqm and bear the overarching name Belaya Dacha Logopark. Originally it was assumed that construction activities will follow the numerical order, and yet construction on the third phase began later than on the fourth phase because of bulky preparation works at the site. Belaya Dacha Logopark is a joint venture between Belaya Dacha Holding, Hines and EBRD Bank.

The project marketing is supervised by Hines.

“Hines began looking closely on warehousing business several years ago, when we got acquainted with Belaya Dacha Group and its real estate development plans,” comments Andrew Muzzelwhite, associate development manager with Hines. “Now Hines is an investment-financial partner, and we also take active part in property management. Our company manages the given real property through on-site specialists. We also capitalize on the experience and professional skill of Belaya Dacha’s numerous technology personnel to promptly respond to tenants’ requests.” Four out of five phases of the terminal now function in the complex.”

At the present time design documents for the fifth 29,800-sqm phase called Belaya Dacha Hines Logopark are being prepared.

 Short-cut to Downtown
Belaya Dacha Logopark lies at Novoryazanskoe motorway in Kotelniki, Moscow region, just about 15 miles from Moscow downtown, 2.5 miles to the nearest large highway, which is MKAD, and only 0.7 mile to M-5 Urals motorway.
“The project is properly located from logistic perspectives,” thinks Yegor Dorofeev, industrial warehouse real estate department director at Сushman&Wakefield&Stiles&Ryabokobylko. “There is little quality warehouse space to the east of Moscow at present. Nevertheless the eastern districts are interesting in terms of logistics, since they’ve traditionally been industrial areas; for this very reason industrial projects along this route usually face no manpower problems. Furthermore the eastern route is notable for a heavy commodity traffic heading for regions — Nizhny Novgorod, Kazan, Ural cities etc. The road infrastructure is underdeveloped and overtaxed east of Moscow, which complicates the transport situation. Nevertheless Belaya Dacha warehouse complex is located just within three miles from MKAD, which is a definite advantage.”
However the warehouse complex is largely oriented towards distribution FMCG companies, whose business is closely related to Moscow, rather than regional distributors. “The close proximity of this property to Moscow is an indisputable benefit as far as catering to Moscow-oriented freight flows is concerned,” opines Nikolai Gvozdev, marketing expert at NLC. “However the current congestion of Novoryazanskoe motorway and adjacent roads will impede further development of the given project. Unless the problem of approach ways is solved, the logopark’s effectiveness may not be very high.”
On the other hand, as noted by Vadim Pozorov, industrial, warehousing and land director at Knight Frank, “this is a unique project in terms of its location and closeness to MKAD. This is the shortest arm from the downtown. Moscow is known to be an ellipse flattened on the eastern side, and this is the only high-end logistic complex at such a short distance from the city center, allowing the fastest possible distribution over Moscow retail chains.”
“Construction works at several sections of Novo-Yegoryevsk motorway in the direction of MKAD – M-5 Urals are carried forward, and the first length linking MKAD to Dzerzhinsky motorway has already been completed. When this project is brought to ultimate completion, the transport situation on the Eastern route of near-Moscow suburbs will significantly improve, and the distance from MKAD to the territory of the warehouse complex will become much shorter. This will provide for individual exits both to MKAD and the federal route M-5 Urals. A separate branch railway line to the Logopark integrated into the general railway network of the Moscow region is also contemplated,” adds Mr. Yevteev.

Immediate Occupancy
From structural perspectives the building is a storage facility with built-in administrative-amenity units. “Universal warehouse schemes enable a flexible approach to space division,” comments Aleksei Bondarenko.
Panels with mineral fillers are used as the walling in facade systems. The floor depth of 120×84 m and the column grid of 12×24 m allow maximum use of warehouse space. The floor load of 8 ton/sqm enables installation of the 6-tier pallet racking. The selection of a structural solution for the warehouse space floor was made proceeding from the requirements to storage floors in Class A warehouses. Thus durable, dust-repellent and non-toxic flooring excluding industrial injuries and necessitating wet cleaning is used here.
According to Mr. Bondarenko, “each warehouse terminal has an integrated office unit with an exit to the warehouse space. The problem of separate exits to the warehousing area for each of the occupants arose only in the fourth terminal delivery because of three different tenants; the problem was quickly solved, though. Now all tenants have an autonomous exit to leased spaces from office premises. Service premises (server room, air-ventilation chambers, fire-pumps etc.) are partly located on the territory leased to the occupants on a pro rata basis.”
It should be noted that, unlike the first and second phases complete with interior fit-out, the third and fourth phases were delivered shell & core for tenants to adapt them to their specific needs. On the whole, the management company adheres to a rather flexible approach. “All premises of the third, fourth and fifth phases can be accommodated to the needs of the occupants,” points out Mr. Bondarenko. “In case a tenant is found for the fifth phase before it is put into operation, the outfit can be adjusted to meet the occupant’s requirements. It’s not quite rational to offer a turn-key storage facility to tenants, because different companies may lay different demands on premises and have different views on the arrangement of logistic activities. The project is based on a universal approach, allowing for requisite alterations and optimization of the warehouse to suit various needs without painstaking effort.”
As an example, Mr. Bondarenko refers to signing contracts of lease for the fourth phase when the company suddenly encountered a problem with dividing the single storage facility between three occupants with intricately configured boundaries. Likewise additional accumulator rooms are created for the tenants, and the parking area is enlarged in view of cargo transport specificity. Originally there was enough ground only for heavy haulers, whereas one of the tenants uses road-trains instead, requiring more space for maneuvering.
“Originally the complex was a speculative development, because vacant space had long been available after the building completion,” comments Petr Zaritsky, alternate director of the industrial and warehouse department at Jones Lang LaSalle. “However the fact that this is the only project allowing for immediate occupancy by tenants, leaving out conventional waiting for four or five months upon signing the Lease, is a definite advantage.”

Engineering Systems
As the market experts assume, Belaya Dacha Logopark complies with all Class A standards. The premises are outfitted with automatic round-the-clock control, fire alarm and firefighting systems. Also installed is the adjusted temperature mode and ribbon heating systems while Volkano EUROHEAT fan heaters are provided to make up for thermal losses. The project allows for independent combined extract and input ventilation systems with mechanically and naturally induced draft and air-conditioning with proper regard for the functional purpose of any particular premise. Also provided are warm air curtains to prevent cold air penetration to the warehousing area: handling gates are equipped with automated warm air curtains REMAK. The dock-type automatic gates manufactured by Loading Systems (Netherlands) are installed by Dominant-ST.
One loading dock is provided per 1,000 sqm of warehouse space. Altogether 20 docks are installed at the third phase and 30 docks at the fourth phase. All phases of the warehouse terminals are provided with fiber-optic communications and the Internet by Corbina Telecom.

Financial Success
Belaya Dacha is a transparent company keeping financial accounts in line with international standards annually audited by Ernst&Young. “The involvement of foreign companies, such as Hines and EBRD, is the litmus paper testifying to business transparency, perfect management and project success,” says Mr. Yevteev. Overall investment in the project amounted to $100 million, of which $34 million went into the third and fourth phases. The planned payback period is 7 years. The initial rental rates are $120 per sqm for warehouse space and $95 per sqm for mezzanine space (less operating expenses and taxes). The average term for contracts of lease is 7-10 years. “Similar rental rates originally apply to the entire space; however they may be changed in the course of negotiations depending on numerous factors, such as a company’s reputation, financial stability, different warranty types etc.; therefore we take a differentiated approach to each occupant,” comments Aleksei Bondarenko.
All four phases have already been leased to seven companies, both national and foreign. Five of the seven are self-operating firms. Also present on the terminal’s territory are such operators as DHL and Monblan. Mr. Muzzelwhite points to the interest of tenants and to the attractiveness of the complex: “The Logopark is let to different Russian and multinational companies on the basis of institutional quality leases. Good access for motor vehicles to be further improved in the future thanks to road repair is also noteworthy. This complex will also become more attractive after adjacent grounds are built up with related properties. These are professionally managed Class A storage facilities in close proximity to MKAD.”