Hines' Russia & Poland Fund has joined forces with PPF Real Estate Holding to acquire Buildings I and III in the Metropolis office complex in Moscow in one of the largest property deals in Russia this year.
Hines' Russia & Poland Fund has joined forces with PPF Real Estate Holding to acquire Buildings I and III in the Metropolis office complex in Moscow in one of the largest property deals in Russia this year.
The investment fund of the US developer-investor and PPF Real Estate Holding, part of Czech billionaire Petr Kellner's Amsterdam-based privately-held financial firm PPF Real Estate, are buying over 56,000 m2 of almost fully-let office space in the Russian capital from Kazakh private developer Capital Partners.
Financial details were not disclosed. However, well-informed market sources put the deal price of the euro-denominated deal at around €330 mln, of which roughly €175 mln for Building III and €155 mln for Building I.
'We view this transaction as a first step in establishing a long-term partnership between PPF Real Estate and Hines, and exploring other investment opportunities within the Russian real estate sector,' said Jiri Tosek, CEO PPF Real Estate Holding.
Simon Shen, Hines' senior managing director and fund manager, added, 'We are excited about the opportunity to increase our fund's exposure to this sector of the economy, especially with a leading partner like PPF Real Estate. Our firm remains significantly committed to the Russian property market and anticipates continued investment through our various international funds into Russia.'
Hines and Capital Partners had been in advanced negotiations on the assets for over a year but the transaction was put on hold last summer due to the devaluation of the rouble. At the time, local paper Vedomosti reported the deal valued the towers at around $500 mln.
JLL advised on the transaction.
The buildings are part of the 311,000-m2 Metropolis complex, which encompasses three office buildings and a shopping centre in the office corridor connecting Moscow city centre with Sheremtyevo Airport. Completed in 2009, the asset is now fully leased to 40 multinational corporate tenants.
Heitman's fourth value-added fund, Heitman European Property Partners IV (HEPP IV), bought one of the three office buildings in July 2011. The $120 mln acquisition was Heitman's first ever in the Russian property market.
The huge Metropolis shopping centre was bought in early 2013 by a fund managed by Morgan Stanley Real Estate Investing (MSREI) for $1.2 bn. Six months later the fund sold half share in the 205,000-m2 Metropolis Shopping and Entertainment Mall to the Hines CalPERS Russia Long Term Hold Fund.
Russian market
Hines and PPF's acquisition is an exception in Russia both in terms of size of the deal as well as in terms of the origin of the buyers. Financings remain scarse and expensive in the country, making the closing of large-ticket transactions very difficult.
In addition, the investment market has increasingly been dominated by Russian investors with the share of foreign capital falling from 29% in Q1 2015 to 4% in Q2 2015.
Russian office investment amounted to $579 mln in the first half of 2015, an increase of 70% year-on-year. Retail transactions fell to a record low of $208 mln in the same period, according to research from Colliers International.