Since the beginning of the year SU-155 signed contracts with the Ministry of Defense for selling apartments for 14 billion rubles. Partnership with the military is profitable: prices are low but amounts are substantial, and demand is guaranteed, which makes banks offer lower rates on loans.

According to Mr. Fedor Sarokvasha, a representative of the company, last week SU-155 was awarded with government contracts for selling 1,476 apartments (over 79,200 sq.m.) to the Ministry of Defense in the Moscow Area, Tver and Tula for 2.82 billion rubles. A source in the central office of the Ministry of Defense confirmed the information. Prices are close to the average market prices set by the Regional Development Ministry. In the Moscow Area one squarer meter will cost the Ministry of Defense 40,000 rubles, in Tver – 33,300 rubles, and in Tula – 27,500 rubles. The Ministry of Defense will pay after receiving apartment ownership certificates. The housing is in the final construction stage, according to a SU-155 representative. SU-155 won the bid of the Ministry of Defense for 407,000 sq.m. of housing for 14 billion rubles. According to Mr. Sarokvasha, SU-155 was the only bidder in most cases.

In 2010 the Ministry of Defense intends to purchase 45,000 apartments, according to Mr. Nikolay Pankov, Deputy Minister of Defense. A source in the Ministry of Defense says that by the end of the year the Ministry intends to buy 25,000 apartments all over Russia. Most of those apartments will be supplied by two companies -SU-155 and Renova StroyGroup which, according to its own information, this year signed contracts with the Ministry of Defense for 3,310 apartments (6.9 billion rubles).

“Not too many companies are willing to bid as the Ministry of Defense is buying housing at a low price. We realize major projects, and large sale agreements are a significant benefit for us”, explains Mr. Veniamin Golubitsky, President of Renova StroyGroup. “Only large companies can afford taking orders at such prices as they get profit primarily due to large volumes”, agrees Mr. Sarokvasha.
According to the Managing Director of the company, working with the Ministry of Defense is profitable for developers. “Profitability of its own equity increases. When the company gets a state order, it can benefit from more favorable lending terms. Banks usually request 50% of their own funds, but for such developers it is only 20-30%. The loan rate is 10-12% instead of 14-16%. Sberbank granted a 13 billion rubles credit line to Renova StroyGroup. According to Mr. Golubitsky, it is convenient to Sberbank as it understands who the buyer is.

According to Mr. Sarokvasha, SU-155 is turning toward government projects. The share of budget financed orders is approaching 90%. This year the company intends to build 1.65 million sq.m. (last year 1.51 million sq.m. was commissioned).