St. Pete Sells Building Rights for 3 Federal Landmarks

ST. PETERSBURG — St. Petersburg City Hall has earmarked 161 million rubles ($5.2 million) for work to reconstruct three federal monuments as hotels, which will be done by companies close to co-owners of Ilim Group, the brothers Boris and Mikhail Zingarevich.

The city adopted three orders, copies of which have been obtained by Vedomosti, during a closed session on May 4.

The company Lotos Hotels paid 30 million rubles ($960,000) to the city for the rights to develop the 24,756-square-meter building at 1 Marsovo Pole. The development contract includes obligatory investments of 3.2 billion rubles ($103 million), of which 2.7 billion rubles must be for restoration work, according to the city's investment and strategic projects committee. Work on the project should be completed in four years and 10 months.

The building is being rented by the Northwest Energy Management Company under a contract until 2013. That deal will be canceled, according to the government order. City Hall has the right to prematurely cancel the rent contract if construction work on the building is started, a spokesman for the city's property management committee said.

The company Orange Development paid 19.9 million rubles ($640,000) for the rights to rebuild the 13,530-square-meter building at 1 Konyushennaya Ploshchad, with work to be completed within 5 1/2 years. The project's investment volume, including reconstruction, amounts to about $120 million, chief executive Sergei Rusakov said.

The St. Petersburg diocese of the Russian Orthodox Church and the Spas charity fund are using part of the building for free, but that agreement also will be canceled, the property management committee said.

A third firm, IFG-Bazis-Proyekt, received the 9,100-square-meter building at 7-9 Nevsky Prospekt for 111.3 million rubles ($3.6 million). The project's total investment volume is about $40 million, chief executive Danat Bulavko said. The building has about 10 tenants currently, but the rental agreements are either expiring soon or will be canceled, he said. The property management committee said this project's investor would be responsible for making arrangements with the current occupants so that work can begin.

Bulavko also heads the company Aditum, which is managing a development near Ploshchad Vosstania. Lotos Hotels, Orange Development and Aditum are all part of Plaza Lotos Group, whose co-owners include Mikhail and Boris Zingarevich, the group's press service said.

IFG-Bazis-Proyekt is not connected to Plaza Lotos Group, a company spokesperson and Bulavko said. According to Interfax's SPARK database, IFG-Bazis-Proyekt belongs to the Cyprus-registered group Aplerson Holding Limited. Bulavko would not disclose its beneficiaries, saying only that it was an international investment fund. Last summer, Aplerson signed its memorandum with the city on the same day as Plaza Lotus Group.

Governor Valentina Matviyenko said at a news conference last week that the city planned to auction off as much property as possible, although the administration currently does not have enough staff to prepare all of the documentation.

All three buildings are in magnificent locations, said Nikolai Kazansky, director of Colliers' St. Petersburg office. The buildings are suitable for five-star hotels, and if tenders had been held for them, they would have caused a frenzy, said Igor Luchkov, director of consulting and valuation at NAI Becar.

These sorts of properties aren't simply handed over to ordinary companies, Luchkov said, although in practice, investors do not always fulfill their investment obligations.