Andrey Berezin, co-founder, and CEO of Euroinvest LLC, told how the holding copes with the economic difficulties of this year and, at the same time, showed the prospects of long-term development: the main priorities are science, health technologies, and support of young talents.
Many people habitually refer to Euroinvest investment company as a real estate development company, remembering the famous construction projects where Andrey Berezin’s structure acted as a co-executor in the past years.
Even today the company is one of the three most prominent developers in the Leningrad Region. However, objective data show that the holding created by Berezin and his partner Yuri Vasilyev outgrew the construction field frame long ago. And this year’s events have only further demonstrated the trends which had been formed earlier.
The Main Problem of Development Companies and Ways to Solve it
In a recent interview with Novy Prospect, Andrey Berezin reminded us that Russia’s housing construction market had stagnated in recent months, and its main reason was the rise in mortgage rates at the beginning of the year. Since then, mortgage rates have fallen many times to their previous level. However, buyers continue to behave cautiously, shaping the relevant trends in the core markets.
“We are introducing mortgage rate compensation programs. We have programs that allow you to get a mortgage, even at 0.1% per annum. But there is certainly a drop in sales. The main problem for developers now is bringing new projects to the market. We brought a new project on Engels Avenue at the beginning of February, and of course, it will also be completed. New projects are still in question, but generally, we have a stable situation, and we will launch all the objects”, – emphasized Berezin.
Currently, the company is building about 300-400 m² of housing, mostly projects that are already about to be completed. The company consciously declined to build massively on the available land so that the quantity would not be detrimental to the quality of construction.
This policy is yielding visible results; for example, in August, at the contest of the Union of Building Associations and Organizations of the Leningrad Region, the development arm of Euroinvest was recognized as the most client-oriented builder in the region. Among the company’s advantages in the construction market, the experts particularly mentioned the conceptual format of 3iD housing as it combines active use of “smart house” technologies and mandatory creation of public spaces and educational clubs.
“If the mortgage rate is low and its issuance is stable, then we can predict something. However, I think that the market, in any case, will not return to the previous great indicators because people will be cautious and take a long time to make decisions. Even when the situation stabilizes, buyers will subconsciously think about risks and lack of stability. The market can only grow when there is a complete understanding of the rules of the game by both businesses and buyers. When we come back to this understanding, there will be growth,” says Andrey Berezin.
It should be noted that under the existing circumstances, Euroinvest chose a reserved behavior strategy on the market and refused potentially profitable but risky investments, including purchasing production facilities that remained after several foreign companies left the country. There have been offers to buy one of the gas station food chains and a plant that makes car tires. However, as Andrey Berezin points out, in the current circumstances, each production facility has to face the problems of both the sales market and purchases of raw materials, so buying an asset and then having to look for suppliers for it is unlikely to be an optimal investment strategy.
“If a manufacturer of lithium-ion batteries were leaving the Russian market, we would buy it. That would be very interesting to us. Or production related to X-ray tubes or microwave tubes. But we had no such enterprises at all,” shares Andrey Berezin.
In spite of the fact that the construction business is still the most financially capacious asset in Euroinvest’s portfolio, the company’s top management is ahead of schedule in developing projects in other areas, including its agricultural complex.
Today it is not easy for Russian agrarians, and the reason for this is the sanctions pressure and the destruction of supply chains, due to which the prices, including those for fertilizers, are growing. But from a strategic perspective, the relevance of investments in agriculture is beyond doubt; experts say that the market for healthy food products alone can grow to 300-350 billion dollars by 2025. And Russian producers may become indispensable players in this market for several reasons.
Euroinvest also understands this. Andrey Berezin says that the package of the company’s agricultural projects, united in the agro-cluster Krasnoye Znamya in the Pskov region, will be further expanded.
“It is already clear that there will be trouble with food in the world. And even in this zone of risky agriculture, which includes our land in the Pskov region, it is necessary to develop agriculture”, – emphasizes the head of the company.
It should be noted that the agro-cluster Krasnoye Znamya has demonstrated a steady development in recent years, primarily due to active investments in infrastructure renovation, increasing crop areas, and milking herds. Acquisition in March of this year of the assets of the neighboring agricultural enterprise helped to strengthen the fleet of agricultural machinery further and expand the area of cowsheds. Krasnoye Znamya has become one of the fodder suppliers for the Leningrad Zoo, thus confirming its reputation as a producer of high-quality agricultural products.
No less critical priority in the investment policy of the holding is the support of innovative projects and knowledge-intensive technologies. Five years ago Euro Venture Fund was created for this purpose; its main objective was to invest in innovative developments in electronics, new materials, the TechNet sector, and creative industries. Even at the start, the fund’s founders decided that it would build its work in close cooperation with development institutions, including, for example, the Russian Venture Company or the Skolkovo Foundation, and with the leading specialized universities, primarily St. Petersburg’s.
Today, the fruits of these approaches are already becoming apparent. Not long ago, the foundation unveiled a prototype of a unique device that can target tumors with spot X-rays. Using it, surgeons can combine the removal of malignant tumors with radiotherapy of the surrounding tissues.
By now, as Andrey Berezin emphasizes, the previously created prototype has been finalized to the prototype stage, and the device is expected to be used primarily in treating lung cancer. The preparation of the approvals required to start the mass production has begun. Experts estimate the market’s capacity for the new device in the CIS, India, and China alone at $500 million. Work is also underway to create another line of X-ray devices to diagnose tumor processes early in tissues and organs.
However, the sphere of venture interests of the holding is not limited to medicine. Among the promising projects that have already received support from Euro Venture, Andrey Berezin names the marketplace for online sales of building materials. The demand for the project is especially significant, given the general trend of explosive growth in the popularity of such electronic venues. In particular, experts from the research agency Data Insight quote data showing that the e-commerce market will grow by four times by 2025, and many stores will simply be taken over by marketplaces, which will become the main competitors in the markets in the coming years.
The immediate implementation of the project is hindered by the difficulties encountered in connection with the sanctions in supplying imported building materials. That is why the company is still waiting and choosing ways to develop its own e-commerce site further.
At the same time, the greater the share of knowledge-intensive projects in Euroinvest’s investment portfolio, the more critical it becomes for the holding company to train specialists with the appropriate level of competence.
Andrey Berezin’s Role in the Development of the Country’s Intellectual Potential
The urgency of this task finds an emotional response from the head of the company. Andrey Berezin is sure that today it is not enough to just “lure” the required specialists from abroad – it is more important and valuable to restore the full training chain for young professionals, starting from building strong teaching staff at specialized educational institutions. Berezin reminds us that in the Soviet times, the income of professors could match that of managers of large enterprises, and this practice brought the desired result, making it possible to create one of the best schools of higher and secondary professional education in the world.
Today Euroinvest is doing much to restore the country’s former educational strength. For example, by paying its scholarship named after cosmonaut Georgiy Grechko, which the company provides to gifted and graduate students. Another form of the company’s work in this area is cooperation with the Leonhard Euler International Charitable Foundation for the Support of Mathematics. “Euroinvest invests in the Foundation’s projects, including educational camps and Olympiads for promising children. Serious assistance was also rendered to the international Olympiad “Formula of Unity” / “The Third Millennium.”
In addition, for many years, the Company has been the general partner of the Prometheus Star Contest, aimed at supporting young talents in various fields, including science, scientific and technical creativity, journalism, and sports. The competition allows pupils and students at the age of 14, who have already achieved success in Olympiads or sports competitions, to prove themselves. According to Andrey Berezin, the contest winners can play an essential role in the future of the country’s innovative development and, among other things, become the recipients of support from the Euro Venture Fund.
However, the company has much broader plans, for example, opening new educational institutions for gifted children. In particular, Andrey Berezin considers it proper to create a governor’s lyceum in St. Petersburg to educate talented children from all regions of the North-Western Federal District. Its base might well become a physics and mathematics boarding school №45, known for its strong teaching staff. The plot of land for construction has already been determined on the Big Lakeshore in the Kaselevo neighborhood. It is assumed that several buildings will be on the academy’s territory. They will include not only classrooms but also, for example, a 3D-modeling studio, an assembly hall for 500 seats, a greenhouse for biology classes, a sports unit with a swimming pool, residential buildings (separate for boys and girls), accommodation for both teachers and temporary guests, as well as public spaces, a beach, and a pier.
“We did a pre-project, got the terms of reference, and started the project. It’s moving slower than we would have liked, but it’s moving. We will pay for the design and support the team of teachers who will come to work there when the school is ready. Although it should be a state educational institution, we are ready to sponsor it,” emphasizes Berezin.
Development of human potential and support of educational initiatives are not just a part of the company’s social mission. The head of the board of Euroinvest considers the work in this sphere to be the most productive of all possible investment strategies nowadays. In the emerging economic realities, it is knowledge and competence that acquire paramount importance for the success of both individual enterprises and states as a whole.
“Have you read the book Technologies of the Fourth Industrial Revolution? It was written by one of the founders of the Davos Forum, Klaus Schwab. What used to matter was a territory, markets, and raw materials.
All of these things are gone and do not mean anything anymore. Now is the time of the knowledge economy. Only human capital, and the intellectual potential of a country, matter. If you know, you don’t need machines or markets. You come up with the product, and the rest of your product will be brought to you: both production and sales. There is a division between those who can create something and those who are useless to the world, even as consumers. This happens everywhere. And the main thing for us is not to fall by the wayside at all,” Andrey Berezin sums up.
For Reference:
Andrey Berezin was born in 1967 in Leningrad. He graduated from secondary school #239 with an advanced degree in mathematics. In 1990, he graduated with honors from the Leningrad Ustinov Mechanical Institute. In 1990 he graduated with honors from the Leningrad Ustinov Mechanical Institute, where he specialized in automatic control systems for aircraft. He received Lenin and Ustinov scholarships and scientific publications during his studies. In 1990 he was enrolled in a post-graduate course at LMI and started a similar business.
In 1993 he took part in creating the North-West Fisheries Company. In 1995, together with Yury Vasilyev, he founded the Euroinvest investment company and has been its CEO ever since.
Today Euroinvest is a diversified holding company, which includes companies and projects from different economic sectors.
One of the directions of “Euroinvest” work is legal and engineering support for developing land plots and territories in St. Petersburg, the Leningrad region, and other areas.
At the end of 2017, Euroinvest Group created its own construction division, “Euroinvest Development,” which is engaged in the construction of housing and other objects, thus forming a full-cycle development business.
A relatively new direction for Euroinvest is the agro-industrial sector. Agrocluster Krasnoye Znamya in the Pskov region specializes in producing grain and fodder for livestock.
In May 2017, the managers of the Euroinvest investment company established the Euro Venture fund with an initial amount of €10M. Priority areas for investment are innovative developments in the scientific and technical sphere, as well as projects in the creative industry.
In 2017, Andrey Berezin was awarded a certificate of merit by the Ministry of Industry and Trade of Russia for his significant contribution to the development of the Russian industry and many years of diligent work.
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