Developer Loses Rights to Rossiya Site

MTBillionaire Shalva Chigirinsky was to build an $800 million development on the former site of the Rossiya Hotel.
After a protracted legal battle, ST Development, a property developer owned by billionaire Shalva Chigirinsky, on Wednesday lost its rights to build an $800 million project on the site of the demolished Rossiya Hotel.

The Moscow District Federal Arbitration Court upheld a lower court's ruling that nullified contractual agreements between City Hall and ST Development to develop the now-empty lot.

The decision came the same day as a report in Kommersant saying a developer controlled by Chigirinsky had lost the rights to participate in another major project in Moscow.

The Rossiya contract, won in a tender held in November 2004, covered the demolition of the hotel, the development of the ambitious Zaradye project and the transfer of a 51 percent stake in the property from City Hall to ST Development.

Demolition of the Rossiya, a massive 1960s hotel overlooking Red Square, was completed in 2006.

The Zaradye project, which was selected by City Hall over three competing proposals, was to turn the 13-hectare lot into a trade and entertainment site including four hotels with 900 five-star rooms and 195 serviced apartments, an underground shopping complex and parking for more than 1,400 cars.

Designed by British architect Norman Foster, it was slated for completion in 2011.

Another bidder successfully challenged the tender in 2006, however, and that ruling was upheld by Moscow's Ninth Arbitration Appeals Court in March.

Wednesday's decision means that Chigirinsky's company has lost the right to begin construction.

"It's highly unlikely that ST Development will ever build anything on this site now," said Semyon Fomin, a real estate analyst at Troika Dialog. "This is probably the end of the line for them here."

The dispute over the site began when Monab, the real estate arm of Evrofinance Mosnarbank and the plaintiff in the case, said STT Group, the developer's parent company, was selected despite being outbid by two other companies.

Austrian builder Strabag, then backed by the royal family of Dubai, was ready to invest $2 billion, while Monab offered a bid of $1.45 billion. ST Development's tender offer was $830 million.

In papers filed at the arbitration court, Monab called the committee's preference for STT Group, now known as Russian Land, inexplicable and alleged that the company had inside knowledge of the tender process.

The Moscow city government was also challenging the ruling that overturned the tender results.

Representatives of ST Development or Monab did not respond to repeated calls for comment. A lawyer for City Hall declined immediate comment.

The news comes at a bad time for Chigirinsky, who was removed from a joint project with City Hall, Kommersant reported Wednesday, citing a city government order from Oct. 9.

The $3 billion Crystal Island development, also designed by Foster, involved erecting a complex of 2.5 million square meters in southern Moscow. Upon completion, the tent-like, crystalline superstructure was planned to be one of the largest buildings on Earth.

City Hall said it would instead use the funds it planned to invest in Crystal Island toward social programs and that it would look for new investors to foot most of the bill.