Russian real estate investment company 01 Properties formed in 2012, is one of the largest office owners and managers in Moscow. The company recently revealed that it is putting in place a RUB6bn (€140m) company bond which would float on the Moscow stock exchange. In March 01 properties completed its purchase of the 76,0000m² White Square office complex, home to PwC, Deloitte, McKinsey & Co and Microsoft, for a rumoured $1bn (€770M) in what was thought to be the largest single-asset office real estate investement transaction ever completed in the Russian market.
While in Moscow EuroProperty’s Davis Sands asked 01 Properties’ chairman Dmitry Mints about market conditions in the city and prospects for 01 Properties.
What do your company assets amount to and where is your business focused?
DMITY MINTS: Since 01 Properties was formed in 2010 we own and manage a portfolio of ten class A and B+/B office buildings in prime business areas of Moscow, covering a rentable area of some 426,000m². We also have one development project, Sheremetyevskaya, and we expect to start construction on this by the end of the year. In sum, the asstes are valued at $3.7bn.
How have office rents in Moscow performed over the past few years since the financial crisis?
DMITRY MINTS: Mostly rents have recovered from crisis levels but are still lower than their peak levels in 2007-2008. Rents are now stable and growing slightly and we expect them to grow more or less at the rate of inflation. Retail property might perform better because the concept of shopping for Russians is growing at more than the rate of GDP growth.
How has the investment market been over that period?
DMITRY MINTS: It has been liquid for three years now with about $8bn of real estate volume being transacted in 2012, 2011, and 2012. There were two large deals done in St. Petersburg but most were done in Moscow and there was limited activity apart from these two cities.
How foreign investors been buying property in Russia?
DMITY MINTS: The Moscow market is driven by Russian investors. But there are also some western European companies that have traditionally been active here, including Hines, Morgan Stanley Real Estate Funds, Heitman, Fleming Family & Partners and Sponda Oy. This year we saw CALPERS from the US make a direct investment in commercial real estate in Moscow.
How do you see the market developing as far as foreign investors are concerned?
DMITRY MINTS: We hope there has been a fundamental shift. CalPERS, the largest US pension fund, is said to be buying a 25% stake in Moscow’s Metropolis shopping mall for a reported $1.2bn some months ago in the biggest commercial real estate deal in Russia to date. I hope that more people focusing on core property will come into our market now. This would boost liquidity and valuations.
How do you see the Russian economy in the future?
DMITRY MINTS: We are very positive about the future. It’s obvious that the economy needs diversification away from the oil and mineral sectors but a recent survey found that the rate of technology venture capital start-ups in Moscow is the highest in Europe. The Russian people are highly educated, there is almost zero sovereign debt and a total debt in the economy compared with GDP is very low, ensuring that the government has ample money to invest in the future. In Moscow you can drive around and see the massive investments in infrastructure, with new roads, bridges and metro stations under construction.
To read the rest of this segment, please check out the July issue of EuroProperty Trends in association with Estates Gazette.
Image credit : Photobank gallery