TNK-BP to Quit Office On Arbat to Lower Rent

TNK-BP, the troubled oil company torn by infighting between BP and its billionaire Russian partners, is going ahead with plans to relocate its downtown head office on Arbat to a business park on the outskirts of the city.

The relocation could cut the company's annual rent by two-thirds and follows similar moves out of the city center by several leading companies.

TNK-BP signed a deal to rent 50,000 square meters of space at the Western Gate business park in southwest Moscow from March 2009, real estate broker Jones Lang LaSalle said late Wednesday. The amount of space would rank the agreement as Russia's biggest commercial real estate deal, the broker said in a statement.

TNK-BP will be the anchor lessee at the park, close to where Mozhaiskoye Shosse intersects with the Moscow Ring Road, Jones Lang LaSalle said.

Calls to TNK-BP spokespeople went unanswered Thursday afternoon.

The country's third-biggest oil firm has been torn apart by the dispute, which BP has described as "corporate raiding" reminiscent of the 1990s, but the Russian shareholders have argued is over BP trying to run the company as its own subsidiary.

Chief executive Robert Dudley left the country last month to run the company from abroad after authorities questioned the validity of his labor contract and he failed to obtain a new visa. Chief financial officer James Owen resigned this week, saying the shareholders' dispute was hampering his work.

The Arbat office is owned by Alfa Group, a source close to TNK-BP said, Interfax reported. Alfa Group is headed by Mikhail Fridman, one of the four billionaires who together own 50 percent of TNK-BP.

TNK-BP is seeking to pay a lower rent compared with what it now forks over for the city center building, the source said, Interfax reported.

Yulia Turukhina, a spokeswoman for Jones Lang LaSalle in Moscow, declined to say how high the rent would be for the Western Gate property.

Konstantin Losyukov, director of Knight Frank's corporate client group in Moscow, said the Western Gate office would likely cost about $23 million per year. TNK-BP now rents most of the building on the Arbat, which measures 47,225 square meters. That amount of office space in the Arbat area would typically cost about 52 million euros ($80 million) this year, Losyukov said.

Natalya Moskalenko, deputy director for office real estate at Colliers International, said office space at the Western Gate business park would cost one-third of city center rates.

As another reason for the move, TNK-BP is also hoping to bring together employees from its other offices scattered across Moscow, Simon Bennett, the company's executive vice president for business support, said in a statement when the company first announced its intention to swap landlords in March.

Charles Boudet, a European director for Jones Lang LaSalle in Moscow, said TNK-BP was one of many companies looking at lease opportunities on the edge of the city.

"We are seeing today definitely a trend of companies wanting to move out of the city center," he said.