Singapore Invests in Moscow Region

Pik GroupThe planned design for the 114-hectare Yaroslavsky housing development in the Moscow region town of Mytishchi.
The Singapore government's real estate investment fund on Monday announced it was taking the plunge into the Russian market, putting $233 million into a project with leading developer PIK Group to build a self-contained neighborhood in the Moscow region.

GIC Real Estate, part of the Government of Singapore Investment Corporation, said in a statement that an affiliate company had acquired a 25 percent stake in the mammoth, 114-hectare Yaroslavsky development in the town of Mytishchi, northeast of Moscow.

The project will see the construction of an entire neighborhood, including 50 high-rise apartment blocks, 13 commercial buildings, five elementary schools, seven kindergartens and two hospitals.

The development will be completed by 2013 and should eventually offer housing for about 50,000 residents, statements by the two companies said.

According to an appraisal conducted by CB Richard Ellis at the start of the year, the site, one of PIK's largest development locations, currently has a pretax market value of over $1.3 billion.

The move into the Russian market by GIC Real Estate comes amid a rapid growth in trade between Singapore and Russia. According to International Enterprise Singapore, bilateral trade increased 43% to Singapore $1.89billion from S$1.32billion in 2005.

Singaporean business involvement in Russia ranges from real estate to food and consumer electronics. Last year, Singapore real estate firm City Developments teamed up with firm Soft Proyekt to launch a $125 million joint project to invest in hotels in Moscow.

Since its inception in 1981, the Government of Singapore Investment Corporation, which manages the Southeast Asian country's foreign currency reserves, has swollen to well over $100 billion, making it one of the world's largest investment management funds.

GIC Real Estate's current portfolio stretches from Shanghai to Chicago and includes a shopping center outside London, office blocks in South Korea and tower blocks in Germany. The firm is among the top 10 global real estate investment funds, with more than 200 investments in 30 countries.

"This investment provides GIC Real Estate with a strong entry into the Russian real estate market," Seek Ngee Huat, president of GIC Real Estate, said in a statement.

"We believe in the potential of the market," he said.

Talks between PIK and GIC started last spring and were unaffected by the summer's credit crunch, said Viktor Szalkay, head of investor relations at PIK.

"We believe that Russia is a safe haven," Szalkay said.

In June, PIK listed on the London Stock Exchange, in what was Europe's biggest real estate flotation last year. The deal to link up with a giant such as GIC represents a leap forward for the Russian firm, Szalkay said. "This sets a new level for the company internationally," he said. "These guys are really solid."