Two massive investment deals in Q1 put Russian real estate firmly back in the international limelight Everyone has heard of Red Square, the epicentre of political life in Russia. In recent weeks, though, talk in the real estate world has shifted to the business centre White Square - a landmark symbol for Russia’s connection to international commerce.
Two massive investment deals in Q1 put Russian real estate firmly back in the international limelight
Everyone has heard of Red Square, the epicentre of political life in Russia. In recent weeks, though, talk in the real estate world has shifted to the business centre White Square - a landmark symbol for Russia’s connection to international commerce.
In March 01 Properties, a local player with big plans, confirmed it had acquired the 76,000 m2 business centre in the largest single office asset transaction ever in the Russian market. The vendors were a consortium of international developer AIG/Lincoln, Russian investment bank VTB Capital and global private investment firm TPG Holdings. The parties and their legions of advisers - including various teams from Sberbank CIB (see also page 67) who helped originate the transaction and arranged the financing - remained tight-lipped on the financial details, but market sources put the investment at $1 bn (€770 mln). The transaction was actually completed in late 2012, testifying further to the level of secrecy surrounding the deal. Completed in 2009, the scheme has won several awards and its tenant roster includes global heavyweights PricewaterhouseCoopers, Deloitte, McKinsey and Microsoft. The deal should help revive 01 Properties’ plans for a $420 mln IPO which had to be shelved in 2012 due to ‘adverse market conditions’. Now may be the time to reactivate the public offering as international investors are keen on Russia again thanks to its elatively strong economic performance. Tapping into this sentiment, 01 chairman Dmitry Mints described the White Square deal as an ‘important milestone’ in the further development of the company. ‘This property will take its justified place among other trophy assets in our portfolio and raise its Gross Asset Value to almost $4 bn’. The confirmation of the White Square transaction - the largest single office deal ever in Russia - came about a month after the largest retail property transaction in the country’s history. A fund managed by MSREI purchased the 205,000-m2 Metropolis Shopping and Entertainment Mall from Kazakh developer Capital Partners. Again buyer and seller refused to disclose the price but market sources put it at $1.2 bn (€1 bn). The clear message from both the White Square and Metropolis transactions is that investors - both domestic and international - feel the time is right to obtain the crown jewels of Russian real estate. And they are willing to pay big bucks to do so. In the first quarter of last year Morgan Stanley Real Estate Fund VII acquired Galeria mall in St Petersburg for $1.1 bn. This year Morgan Stanley added Metropolis to its nascent Russian portfolio. Metropolis is one of the most visited shopping centres in Moscow with 55,000 customers per day in 2012. ‘The acquisition is consistent with our strategy of investing in high quality assets in Russia, a market that should continue to benefit from strong growth in consumer demand,’
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