A Finnish company to invest €15 M in setting up an industrial park in Russia

Finland's Industry Park East Management intends to allocate about € 15 M by 2014 to set up an industrial park in the Leningrad region. This platform is to become a convenient Russian market entry for Finland’s small and medium-sized businesses (mainly of metal and light engineering). According to experts, supply in the segment of industrial parks exceeds demand so far, but the foreign partners can be lured by additional service.

About 33 hectares near the Morozov village will be leased from the administration of Vsevolozhsk district of Leningrad region for creating the Industrial Park, Martti Huttunen the president and board member of the Industry Park East Management reported to the RBC daily. By the end of 2013 under the first phase of the project about 5000 square meters of production area and necessary infrastructure will be built on the land. By 2016, the project will be increased up to 15000 square meters, but Mr. Huttunen does not exclude that due to great demand the expansion may happen sooner.

The park can accommodate approximately 20 small and medium-sized companies. Grigory Dvas, the Leningrad region Vice-governor noted that residents in accordance with regional legislation will be exempted from property tax for six years, and also there is a possibility to reduce income tax (13.5%) or to receive grant.

First and foremost, the project is designed for Finnish companies of metal and light engineering. They could become suppliers, for example, for automobile cluster of the region, - says Martti Huttunen. Residents of the park will be offered the stores, guarding and cleaning services, advice on doing business in Russia, partner search, evaluation of the prospects of a product on the market.

Morozov industrial Park, an Industry Park East Management subsidiary, will take care of the project realization and running. The founders of Park East Management are Konecranes & Rautaruukki, Finnish Industrial Companies in equal shares. The Russian company’s CEO Dmitry Vokalyuk doesn’t conceal that founders themselves are interested in placing their subcontractors in the industrial park. Investment in the project per 10 thousand square meters of production area comprises € 12-15 M, said Mr. Huttunen, it is supposed to use both the shareholders' equity and borrowed funds in approximately equal proportions. The project should become profitable on the 3d year, states Martti Huttunen. According to him, the trade turnover of the park will comprise € 15 M, while the turnover of customers will reach €100 M.

The services stated by the developer are not exclusive: such a list can be offered by any of the developing parks, says Knight Frank St Petersburg commercial property department director Mikhail Tyunin. He notes that today in St. Petersburg and the Leningrad region there are 16 projects of industrial parks at various stages of development, but no more than five are in-demand. At the same time, according to Andrei Boikov, the Investment Sales department director at NAI Becar in St. Petersburg, this industrial park first and foremost will be interesting to foreign companies as the Russian ones have fewer demands to the structure of services, the level of storage facilities equipment. According to Alexander Voloshin, the Astera Development Director, the payback period of such projects is over ten years.