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The management of MIRAX GROUP Corporation has made a decision to reduce the number of floors from 94 to 64 of the East Tower of the Federation business center in the MIBC.
“We are thankful to government authority representatives for the help they have extended to the corporation over the recent years. However, in the present economic conditions, implementation of such technologically complex and significant projects as the construction of the tallest building in Europe is unprofitable in Russia. The priority for us today is completion of the construction of all our projects besides the Federation Tower, and fulfillment of our obligations to our clients and investors,” said Chairman of the Board of Directors of the MIRAX GROUP Corporation, Sergey Polonsky.
The decision to reduce the number of floors of the Federation Tower is explained, in the first place, by the fact that the rates offered by banks for completing the construction of the business complex are no lower than 25%, which makes the construction of the tower to its previously announced height unprofitable. Similar projects in the world are implemented at a rate that is no higher than 10%. When MIRAX GROUP began construction of the building, the loan interest rate was 9.5% per annum. |
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Presently, if a bank credit is provided at 25 to 40%, the cost of the construction of the Federation Tower will reach 3,500 euros/sq.m. At the same time, the existing selling price per square meter in this complex is about 3,000 euros. It is evident that the completion of the tower on the bank‘s conditions will result in a net loss.
In the case of the reduction of the number of floors, the completion of the Federation Tower construction will require $100 million and 8 months. Thus, the Corporation will be able to quickly sell the remaining floor spaces in the building, settle with creditors, and complete the project.
The MIRAX GROUP management is ready to reconsider their decision to reduce the number of floors of the business complex if, in the next 2 or 3 months, it should become possible to obtain credit at an interest rate of 12%.
Currently, negotiations are underway with the clients who have made preliminary purchase or rent contracts for the premises higher than floor 64 in the East Tower. The MIRAX GROUP will rely on the understanding of these companies.
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