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Russian developers slash staff as projects on hold

Published 11/20/2008, 12:35 PM
Updated 11/20/2008, 12:36 PM

By Yuliya Komleva

MOSCOW, Nov 20 (Reuters) - Russia's real estate developers have started slashing staff as funding for their construction projects has dried up and their shares have lost much of their value, industry sources and headhunters said on Thursday.

Personnel agencies said that, in several cases, up to half of company staff were shown the door, though the developers themselves said sackings had not yet reached that scale.

"We are falling and falling, and we can't see the bottom," the vice president of one Moscow developer said. "So it's hard to get a fix on the situation."

Several of Russia's developers have seen their share price fall more than 90 percent from peaks in late May, when Russia's stock market hit its all-time high.

Losses have been led by PIK Group's London-listed Global Depositary Receipts, which fell 22 percent on Thursday to 50 cents apiece, more than 98 percent off their peak.

PIK, one of Russia's largest mass market housing developers, which also operates a mortgage business and manufactures construction panels, is cutting staff by 15-35 percent, depending on the region and business line, spokeswoman Natalya Konovalova said.

Sistema Hals, the real estate unit of Russian billionaire Vladimir Yevtushenkov's Sistema services conglomerate, has already slashed staff, a source at a large local headhunter said.

"In the middle of October the company already had the first wave of sackings, mainly of mid- and low-ranking personnel in all departments. About half the employees left the company," the source said.

Sistema Hals declined official comment, but two sources close to the management of the company confirmed it had enforced a significant staff cut.

"For now it isn't 50 percent," one of the sources said.

AFI Development, controlled by billionaire diamond dealer Lev Leviev's Africa-Israel Investments, is also reducing staff.

It announced on Wednesday it would halt construction on most of its portfolio to focus on a handful of Moscow projects which are already near completion.

"Our staff was a bit inflated," AFI press secretary Natalya Ivanova said, adding it was unclear how many staff would be cut.

RTM Group said last week it could not maintain its staff levels because of its reduced construction schedule, rising financing costs and short-term debt obligations.

Peresvet-Region, a smaller, unlisted developer operating in Western Russia's large and mid-sized cities, cut its staff by over 50 percent, from 150 to 70 people, a spokesman said. (Reporting by Yuliya Komleva and Maria Plis; writing by Melissa Akin; editing by Simon Jessop)

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