The FINANCIAL — Our society has been witnessing Tbilisi Municipality trying to somehow revive the external appearance of the City, which has dilapidated starting from the Soviet times and continued thereafter up until the Rose Revolution.
Therefore, the objective of the government in general and of Tbilisi Municipality in particular, was simply saying – to make our environment more beautiful in order not to scare visitors, make life more pleasant so that everybody could enjoy it. Perhaps, you will agree that the goal was sincere and worth of pursuing.
To reach its objective, the government, following the applicable tendering rules and regulations, has selected and contracted the companies which would paint the existing buildings. Terms and conditions of the painting job were naturally agreed with the municipality and money has been allocated from central as well as from the local budgets. So, the work has heated up and within 2-3 years, mostly all buildings on the central avenues and streets were painted.
The purpose of this article is not to evaluate the color and the quality of painting, neither to challenge the tendering process, as I do not possess information regarding the foregoing. Rather it is a try to seek alternative ways of financing city development projects that would be self-sustaining and more durable.
So, how can we interest investors in financing the city renovation projects? Of course, majority of the readers would agree, that investor is a business person or a company that is seeking to profit from any activity he/she invests in. Naturally, nobody will invest into the City renovation unless they have very clear objective of making profit out of it.
Solution can be found in developing the attic floors (mansard) of the existing buildings. Please note that, development of attic floors is an approved practice in the West. Currently, in Vienna and Prague and other most beautiful European cities you can find a lot of on-going projects of developing the attic floors on the existing buildings in the city center. Please also note that in some cases, attic floors are developed on very prestigious and historical buildings, as illustrated in these photos. Interestingly, attic floors are not a novelty for Tbilisi too. Few of the most beautiful buildings in Tbilisi, such as Rustaveli Theatre and Ministry of Justice, have attic floors of the most proper western standards. So, why don’t we develop attic floors on the existing buildings in the center of the town?
Majority of the foreign and local investors, construction companies and developers will be interested to participate in the projects of developing attic floors and then, naturally, selling them. Why would one deny the opportunity of getting selling spaces constructed in the most prestigious areas of the town? It is most interesting and lucrative piece of business for small and medium size construction companies and developers.
Everybody will agree that construction companies have been receiving at least 300% profit from their activities lately, whereas the profit margin in the western countries has been in arrears of 20-25% only. In other words, the ratio of expense to profit in Georgia was minimum 1:3, which was unbelievably high. There are plenty of construction companies and developers that would agree to make rather modest profit than it was practiced before, i.e., to make profit as in the West.
Therefore, we shall ask the developers and construction companies that would be selected for developing the attic floors to invest about 50% of the tentative profit in the renovation of already existing buildings. Naturally, terms and conditions of their involvement in this process shall be defined in advance, which will entail the following necessary requirements: a) contractor will be liable to construct attic floor according to the project selected and approved by the Municipality; b) contractor will be obligated to develop existing building, especially the façade, also according to the project approved by the Municipality, which will detail the work to be performed: painting, adding cornices and fittings, developing common areas such as: entrance hall, parking, play ground, etc; c) contractor shall be responsible for setting up the legal structure of co-ownership, so that the neighbors would agree to take care of the common areas thereafter. This will allow the property to be maintained in good shape for rather long period of time.
It is very important to ensure public participation and transparency of the above project. As discussed in the previous paragraph, contractor will follow the project selected and approved by the Municipality. So, the point here is that Contractor shall not be in charge of preparing the project but rather implementing it, which will save his time and expenses. The projects shall be prepared by national and local architectural associations, urban planning institutions and associations and in collaboration with Tbilisi Academy of Arts. The latter will be able to provide projects for free as a part of student’s creative activity.
This process allows us to save public money as well as to ensure more proper and durable development of the city’s architecture. In the forthcoming articles, I will evaluate other aspects of proper city development planning, which, I hope, eventually would be taken into consideration.
By Alexander Bolkvadze, Partner, BLC (Professional Legal Services)