Money-Growing: Business Centers Helping Theaters Survive

The new centers, where temples of Melpomene happily co-exist with profitable commercial structures, are mushrooming across Moscow. Given the capital’s soaring real estate prices, and even when the construction costs of the theater and general access areas are taken into consideration, such projects are still considered highly profitable.

“The emergence of theaters combined with offices in Moscow is rather a tribute to the contemporary situation in the real estate market,” says Andrei Patrushev, PR director with Paul’s Yard. “This is all about the fight for liquid land plots in the centre of the capital. It is much easier to secure permission for the construction of a cultural centre than for, say, a business centre.”

It is often the case that some legal entity with a “cultural” bias receives the go-ahead from the city or from the federal authorities for construction of a building on a certain land plot. That may be a theater, or a school of arts, or a cultural centre of some ethnic group. They have the permission but they have no money. However, it is much easier to find an investor if a commercial component is incorporated into the project by allowing part of the area to be used for office space, a shopping centre or a residential block. That makes the project profitable and the plot is used to the maximum.

First steps

The early 90s saw the first efforts to combine the interests of business and the arts in Moscow. Several development projects for the construction of theaters enriched with a commercial infrastructure were launched in the capital. It is significant that the work dragged on for a decade and triggered a wide public response. “As regards the controversy that comes with the construction of cultural centers, construction of any new site, be it a residential house or a theater, is a scandal in itself,” says Tatiana Nikolskaya, executive secretary with the magazine Strastnoi Bulvar, 10, and spokeswoman for the prominent actor and theater director Aleksandr Kalyagin.

One of the first examples is the Vsevolod Meyerkhold Theater Centre, for which the Moscow government allocated a site on Novoslobodskaya Ulitsa [Street]. An investor was quick to appear only to disappear just as quickly shortly afterwards. A foreign company that invested money in the project left Russia in a hurry, succumbing to the political turmoil of the early 90s, before the first four stories had been erected. Later the Interros holding took over the project. The construction of the theater centre took five years, whereupon the theater received some 4,000 square meters of space, including a state-of-the-art hall and the stage, while the remaining 25,000sqm were set aside for commercial use.

The building was designed by the eminent architects Vladlen Krasilnikov and Yuri Gnedovsky. The engineering company Astrom-7 was awarded a contract for the actual building work. The Union of Theatrical Figures effectively ordered the construction of the theater, while the Interros holding ordered the construction of the commercial space.

The eight-story class A office building, commissioned in December 2000, is fully owned by OAO Open Investments (Otkrytyye Investitsii), set up by the Interros holding. The 8,083-sqm building includes 5,239sqm of office space, 406sqm of retail space, 2,438sqm for technical facilities and general use. A space of 1,731sqm is being leased. The complex also has a 49-vehicle underground car park.

Space in the business centre was let out by the authorized agent ABN-Realty at $546 per square meter excluding VAT (operating costs amounted to an additional $90). According to Roman Cheptsov, head of the proprietors department with ABN-Realty, 45 percent of the space – most of the office space available – was taken by the Rossgosstrakh insurance company.

Early this year they moved to a new office in Bolshaya Ordynka Ulitsa [Street], and the vacated space was again put up for rent. Nonetheless, the company claims that the complex is 100 percent occupied; at the end of 2003 the receipts amounted to $3.3 million (VAT incl.). The market value of the centre, according to Jones Lang LaSalle, stands at $25.5 million.

In September 2002 the 19-story Novotel Moscow Centre was added to the complex. The leading French firm ACCOR was given the contract to run the 255-room, ‘3-star +’ hotel. Open Investments owns 70.11 per cent of the project, with the remaining 29.89 per cent held by the Moscow city government.

According to Dmitry Barkovets, chief spokesman for Open Investments, the company has invested $35 million in the project, which is expected to pay off within five years. Proceeds amounted to $9.5 million (VAT incl.) by the end of 2003.

The Meyerkhold Center is the most successful cultural and business project, in the opinion of Andrei Patrushev from Paul’s Yard. “The centre was specifically designed to be multifunctional,” agrees Roman Cheptsov. “It is divided into sections with separate entrances to the theater, the office centre and the hotel; the theater-goers, office employees and guests do not mix.”

The transforming theater

In the early 90s construction began on yet another theater that became known as “Na Strastnom” (located at 8-10a Strastnoi Boulevard). The story behind this project is in many ways similar to that of the Meyerkhold Center. “When the Na Strastnom theater centre was being built by the Union of Theatrical Figures, everyone said: ‘How terrible! They’ve built shops and offices near the theater!’” says Tatiana Nikolskaya. “But then, in addition to business there is a highly popular theater. Had there been no such center the Panorama of Russia program would never have seen the light of day and many regional theaters would not have had an opportunity to come to Moscow.”

Much has been written about the multifunctional ‘transformer’ theater. Such sites can be used both as 400-seat theater halls and 200-seat venues for holding dance contests. Moreover, modern equipment makes it possible to show movies, hold live conferences and other events.

A first-class, 10-story residential building situated next door includes 30 apartments of 170 to 340sqm. The ground floor of the building houses the Dr. Loder health club, where annual membership costs about $800. The retail area of the building’s expensive boutiques occupies approximately 2,500sqm; office space in the class A business center is leased at the annual price of $650 per square meter, and as of June this year there was no vacant space there.

The Cultural Centre of the Union of Theatrical Figures JSC ordered the construction of the complex, whereas the Moscow city government financed the construction of the theater. Attracting financing from private investors was not that easy. The residential block was erected “at the expense of the future residents themselves”, says Igor Nesterov, the person in charge of the commercial sector of the center, though he holds no official post. According to Nesterov, “a group of individuals” acted as investors for the construction of the commercial space. As was the case with the Meyerkhold Theater Center, Astrom-7 was contracted to realize the project.

Office music

The next project was launched in July 1995. The Turkish firm Enka began construction of the cultural-business center Krasnyye Kholmy on a 7 hectare spit of the Kremlin island. The Moscow government and the Union of Architects had actually started the project off as early as the beginning of 1992. Shortly afterwards OAO Moskva-Krasnyye Kholmy (Moscow Red Hills) was established, with prominent playwright Mikhail Shatrov taking over the helm of the company in 1994. OAO Moskva-Krasnyye Kholmy refused to disclose the size of the investment citing confidentiality.

Construction began with the erection of the commercial part of the project – the business center Riverside Towers. As of today the complex has over 52,000sqm of office space for rent. In addition to A class office space, the three buildings house a printing office, banks, a caf?, a travel agency, a dry cleaner’s, a car wash, a florist’s, and a 24-hour shop. The list of tenants includes Hewlett Packard, General Electric, Mitsubishi, Nissan and Canon.

Upon completing the first – commercial – phase of the project, Moskva-Krasnyye Kholmy turned to the construction of the cultural center, the Moscow International House of Music. The first brick in its foundation was laid in 2000. The construction work was also carried by Enka – the same firm that had earlier built Riverside Towers. The Moscow city government invested its share of the proceeds from the office space leased out in the commercial part.

The House of Music, opened in December 2002, occupies a total area of 42,000sqm. The main music hall includes 1,800 seats. The chamber music hall can accommodate up to 600 music lovers. The third hall is designed as a venue for a wide range of events, ranging from corporate parties to theater performances. In addition to the musical halls, the House of Music includes a 525sqm exhibition hall, the Allegro restaurant, a flower shop, a recording studio, a hall for rehearsals, as well as technical facilities. The complex also includes an underground car park.

The developer is currently constructing a 26-story hotel with 200 rooms that will be 150 meters high. Moskva-Krasnyye Kholmy refused to specify the projected completion date, claiming it was too early to say. The company said earlier that the construction work would be completed in 2005.

The phantom of the opera

Construction of the Galina Vishnevskaya Opera Center began in 1996 with a major scandal. Originally, in line with a decree of the Moscow city government dated 25 April 1995, a land plot at 25-33 Ostozhenka Ulitsa [Street] was to be allotted for development of the center. Later the territory had to be reduced to exclude the celebrated Shalyapin public garden after local residents were outraged when the felling of the trees began. A full scale war broke out on the site, with activists chaining themselves to the construction equipment.

The dispute was settled but then money problems arose. In the wake of the 1998 financial crisis the opera center found itself on the verge of bankruptcy and the unfinished building was about to be transferred to a different owner. But Vishnevskaya would not give up and began looking for investors. Falcondale Development Ltd, which had earlier taken part in the Meyerkhold Center project, agreed to invest in the center.

The total area of the complex amounted to some 27,000sqm, 4,000sqm of which are occupied by the opera center; 2,000sqm have been leased as office space, while the remaining area comprises top-of-the-range apartments of 3 to 6 rooms with up to 300sqm, an underground car park for 100 vehicles, and the Opera House caf?. The architect of the project was Mikhail Posokhin Jr.

The second coming

Lately the authorities have been issuing numerous decrees for the construction of cultural centers that will bear the names of certain prominent personalities. Admittedly, the developers have been failing to keep up with the officials. Virtually no cultural centre has appeared in the capital before the set deadlines “for reasons beyond the control” of the project managers. The most common reason is the failure to attract investors or a reluctance to transfer a larger share of the project to the investor. Usually, the theater gets a 30-percent stake in the project and the investor receives 70 percent. Otherwise, the construction can drag on and on.

The decision on the development of a group of buildings for the State Children’s Variety Theater was taken in May 2002. An area of 0.8 hectares at 20-26, Spartakovskaya Ulitsa [Street] and 30-36 Baumanskaya Ulitsa [Street] was transferred to the theater for unlimited use. The projected total area of the complex is 9,000sqm. After the construction is completed ownership of 35 percent of the non-residential premises, including those to be occupied by the theater will be transferred to the city and the investor – OOO Stroiholding Stolitsa – will take control of the rest.

The plans to erect a series of buildings of the Russian Chamber Ballet Theater at Krestyanskaya Zastava in Moscow were also announced in 2002. The work was scheduled to begin in 2003-2004 with borrowed funds under an investment contract. The project came to a standstill because there were no investors. Today an investor has been found but officials refuse to name the company, apparently fearing something will scare it off.

“The total space of the center will be 30,000sqm,” says Nikolai Basin, art director and director general of the theater. “As well as the theater there will be restaurants and cafes. Presumably construction will begin early next year. The pre-project papers have already been prepared.”

January 2003 saw the issue of a Moscow government decree “On developing the design of the International Experimental Theater Complex at Taganka and a multifunctional complex”. The idea of building the complex had been around long before the decree emerged. The centre was supposed to house two auditoriums with 600-800 seats and a revolving stage, a health club for the actors, restaurants and cafes for theater-goers, a hotel, a museum of dramatic art, etc.

The area reserved for development is located in Nizhny Pavlovsky Tupik [dead-end]. It took a long time to find an investor, says Galina Petropavlovskaya, deputy director of the theater. An investor was eventually found, according to the theater management, and the initial plot allotted for development has been increased at the expense of the adjacent areas. The public town-planning council is set to discuss the development of the International Experimental Theater Complex in the near future.

On 24 December 2002 the Moscow city government issued decree No.1062-PP “On the construction of the new building of the Moscow Theater ‘Pyotr Fomenko Workshop’”. The theater building is to be built on a site between Naberezhnaya [Embankment] Tarasa Shevchenko and the Third Ring Road on the territory of the Moskva-City International Business Centre. Initially the development was supposed to be completed in 2004, but the actual construction work will only begin this summer and will be completed in the 4th quarter of 2005. An area of 0.53 hectares has been reserved by the land committee of the Moscow city government for the development. Architect Sergei Gnedovsky is in charge of theater building’s design.

The city government will finance the project from the Moscow budget. “For us it is crucial that the building is not burdened with any commercial premises,” says Andrei Vorobyov, director of the Pyotr Fomenko Workshop. At the same time, Aleksandr Kuzmin, the chief architect who presented the project to the public council of architects, noted that the theater will include a two-level 80-space underground parking lot, with yet another parking area to be located in the vicinity. The total area of the theater will be 10,600sqm, of which 2,380sqm will be occupied by the theater itself – two auditoriums with 200 and 450 seats respectively and a large area for rehearsals. The company STD-Developments is in charge of coordinating the project.

In September of the same year the information centre of the Moscow city government announced plans to erect a new building for Aleksandr Kalyagin’s theater Et Cetera. The construction work is being carried out in the vicinity of the Chistyye Prudy metro station, at the intersection of Bobrov Pereulok [lane] and Frolov Pereulok over an area of 0.19 hectares. The development will proceed in two stages. To begin with, a 6-story edifice including a large hall of 650 seats and a smaller one with 150 seats, as well as an underground parking lot, will be built. During the second stage the auxiliary buildings will be erected, and the project will be completed with the development of the adjacent territory.

The Arkanstroi design and construction firm has been chosen as the main designer of the building, and the Astrom-7 company was awarded the general contract for the project. Earlier Astrom-7 carried out the construction work on the theater centers near the Novoslobodskaya metro station and on Strastnoi Bulvar [boulevard]. As was the case with the Pyotr Fomenko theater studio, the project is being overseen by STD-Developments. The total space of the new theater will amount to 8,900sqm. The first part of the building is to be commissioned at the end of 2004, the second – in late 2006.

“I hope,” says Tatiana Nikolskaya, executive secretary with the magazine Strastnoi Bulvar, 10, and spokesperson for the prominent actor and theater director Aleksandr Kalyagin, “we will manage without creating a commercial infrastructure. The new building will house a caf?, which will be not so much a business undertaking but a sort of a club for actors and representatives of cultural elite. I think the new building of Et Cetera [theater] will be used solely for artistic purposes.”

By 2006 the construction of the theater run by Oleg Tabakov in Ulitsa [street] Gilyarovskogo is expected to be completed. A decree to the effect has already been signed by Mayor Yuri Luzhkov. The design of the new building, as well as estimates and permission documents are to be completed by July. “Presumably, the project is to be finalized in late 2005,” says Aleksandr Stulnev, director of the theater. “So far we have received the permission documents, and the design work is due to be completed by the end of summer. OOO Stroibyuro is the project investor. The theater, occupying an area of 5,000sqm above ground, will be a part of a multifunctional center that will house a bank and office premises. As to the size of the investment and the payback period it is still too early to say, since there is no business plan in place yet.”

The development of the A.I.Raikin Centre for Leisure, Culture and Art on Sheremetievskaya Ulitsa [street] will

get under way in the third quarter of this year and is likely to be completed two and a half years later. The project is being coordinated by the Interros-owned Open Investments company (Interros holds a 100-percent stake) and the Raikin Foundation for the Support and Development of Culture.

The foundation plans to build a complex with a total area of 77,863sqm on a site between the Gavana movie theater and the Satirikon Theater. The center will include a drama school (2,780sqm), a hotel, a retail center, a caf? with seating for 300 and an underground parking lot for 720 vehicles.

The Raikin Foundation will have the use of 10,211sqm for theatrical purposes, or 13.1 percent of the total area, including 25 spaces in the underground car park. Open Investments will control 48,770sqm of the premises for commercial use. According to preliminary estimates, the project will require a total investment of $73.2 million. The forecasted payback period is five years from the date the development work is started.

According to Sergei Bachin, the general director of the managing company Open Investments, the non-commercial part of the project is the price for acquiring the site. “On the other hand,” Bachin notes, “combining the theater with the commercial part attaches a certain synergy. The Satirikon Theater and everything connected with it means a large flow of customers who will go to the theater via the retail areas.”

Let’s be friends

“An office centre and a theater can co-exist under the same roof provided the premises are divided and distributed competently,” believes Roman Cheptsov of ABN-Realty. “In that case they won’t get in each other’s way.” Given that areas for the construction of cultural centers are often allotted within or just outside the Garden Ring, realtors believe it is more expedient to open elite caf?s, restaurants and night clubs in these buildings.

“That’s life,” says Tatiana Nikolskaya. “The situation is such that the state cannot afford to finance theaters, while theaters badly need financing. If cultural centers can only be built with a commercial infrastructure, then so be it. It would be worse to see construction suspended merely because we are too proud to accept the rules of the game.”

However, many artists are convinced that even though the proximity to a theater attaches a certain positive tinge to office buildings, theaters do not need such neighbors. “The creation of cultural-business centers is a sign of the times, and a bad sign,” Andrei Vorobyov, director of the Pyotr Fomenko theater studio, believes. “A theater is no place for commerce. The two are incompatible, like the church and business. Both those institutions – the church and the theater – are intended to cure the human soul. People go there seeking answers to the questions torturing them, seeking purification. Commerce destroys that state of spirit in which a human being is able to come into contact with art. It is wrong when upon entering the theater the spectator sees signs for a sauna, a restaurant, and so on. As for building new theater buildings, it is the prerogative of the state. The arts cannot make money, and if at some point they start doing so, they have no future.”

“It would be much better for a theater to be located in a leafy park, and on passing through people would not be confronted with throngs of office clerks, but instead start relaxing even before they produce their tickets,” holds Nadezhda Kot, managing director of the Kirsanova Realty company.

But however heated the debate is between artists and businessmen on whether inspiration can be put up for sale, it is unlikely to affect the current building practice in Moscow. As long as investing in real estate is profitable, cultural-business centers will spring up across the city. And as for Muscovites, it is better to have both theaters and offices than nothing at all.