Europe's tallest tower project 'mothballed' due to crisis

The construction of the 612-metre Russia Tower, which would be the tallest structure in Europe, has been suspended because of the severe effect of the global financial crisis on the real estate development sector in Russia.

Billionaire Shalva Chigirinsky told Russian Interfax news agency on Friday that his development company, RussianLand, was halting work on a number of projects, including the company's flag ship Russia Tower mixed-use scheme in Moscow. 'The project is frozen,' he confirmed during an interview with the news agency.

The Russian Tower would on completion be the tallest building in Europe and the second tallest in the world. The design by renowned British architect Norman Foster is for ' three Towers in one' with a central atrium forming the heart to the building. The scheme is to comprise an office centre, a five-star hotel, residential apartments, a luxury spa, observation platform, restaurants and retail. The project covers a gross development area of 525,000 m².

The ground-breaking ceremony took place in the third quarter of 2007 when the Russian economy was booming. At the time Russia was generally assumed to be shielded from the worst effects of the credit crisis. But the country has now found itself among the main casualties. Since Russia's short war with Georgia last summer, many foreign investors have pulled out, appalled at what was portrayed as the government's reversion to Soviet-style militarism. The Moscow Stock Exchange has shed two thirds of its value and many companies have experienced liquidity problems.


Fitch Ratings warned in October that Russian property development companies are likely to be among the worst hit by the deteriorating financing environment. 'This is because of a large share of short-term debt in their liquidity profiles, their often significant operational cash outflows, limited cash-on-balance sheet and a virtual absence of meaningful committed un-drawn facility headroom,' the rating agency said in a report.

Several major property developers in Russia have moved to cut back on their project pipelines and begun the process of selling some buildings in response to the shortage of funding.