Sovereign wealth funds are turning their attention again to the massive Russian market, spurring the country’s deal machine Anyone who visits Moscow invariably complains about the crippling traffic congestion in the Russian capital. In a recent blog, Christoph Härle, CEO of Jones Lang LaSalle Hotels in Continental Europe, grumbles that a 5 km journey from the Ritz Carlton to the Radisson Royal took two hours on the first day of his stay in the city.
Sovereign wealth funds are turning their attention again to the massive Russian market, spurring the country’s deal machine
Anyone who visits Moscow invariably complains about the crippling traffic congestion in the Russian capital. In a recent blog, Christoph Härle, CEO of Jones Lang LaSalle Hotels in Continental Europe, grumbles that a 5 km journey from the Ritz Carlton to the Radisson Royal took two hours on the first day of his stay in the city.
Fortunately, things got a lot better on day two when the same taxi ride took only eight minutes. There are many more frustrations and obstacles to overcome in Moscow and beyond - but the economic indicators suggest that the effort may well be worth it. While yields for hotel trophy assets may be as low as in many other European cities, average yields range from 9 to 11% and higher yields are the norm for other asset classes as well. In any case, there are signs that the Russian deal machine is revving up again. A number of big-ticket deals are currently in the pipeline in Moscow, according to brokers active in the city. In terms of investment volume, Maxim Karbasnikoff, Cushman & Wakefields’s recently appointed retail agency partner in Moscow, expects the 2012 tally will match last year’s record of $7.5 bn (€5.8 bn) with a number of sales due to come through by the end of this year or the first months of 2013. ‘There’s no lack of appetite for transactions, but the problem is that there aren’t many income-producing quality assets,’ he said. The challenge in the retail sector is to find product, he added. ‘I think we may see more deals in terms of numbers in the next year, but smaller ticket sizes of between $200-400 mln.’ Last year, the acquisition by Morgan Stanley Real Estate Investing of the Galeria shopping and entertainment centre - the largest retail scheme in St Petersburg - for a price tag in the region of $1.1 bn (€0.8 bn) put the Russian market back in the spotlight. Charles Boudet, managing director of Jones Lang LaSalle for Russia & CIS, also expects a flurry of big-ticket shopping centre deals in the coming weeks. A select number may even exceed the size of Galeria, he noted: ‘Retail is the most active segment together with offices.’
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