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. Last Updated: 07/27/2016

Historic Deal Near for St. Pete Hotel

ST. PETERSBURG -- The Nevsky Hotel Co. is nearing a $29 million deal to open a St. Petersburg hotel in a project that breaks ground by being the first to be financed solely through private funds.

Nevsky Hotel officials said that despite Russia's economic crisis f which scared several foreign investors away from the project f funding is in place to start work in December and the as-yet unnamed hotel will open in June 2000.

A final agreement will be signed during the week of Nov. 14, they said Monday.

Under the landmark financing deal, a loan from the European Bank for Reconstruction and Development will cover $15 million of the development costs for the 164-room, four-star hotel, and the remainder will be paid for by joint-stock company Nevsky Hotel, project officials said.

The Nevsky Hotel Co. is composed of Russian company Moscow-America, international hotel operator SAS Radisson, Turkish construction firm Ucgen and the U.S.-Russia Investment Fund.

In its project summary, the EBRD lauded the hotel's financing arrangement, pointing out that the project would be the first in Russia to be developed without funding from federal, regional or city governments.

"The project will be the first fully privately financed new hotel construction in Russia, and will introduce a new competitor into the St. Petersburg hotel market," the summary said.

Government bodies hold stakes in all hotels in Russia, including St. Petersburg's Astoria and Nevskij Palace and Moscow's Metropol and National hotels.

St. Petersburg leaders added their praise to the project, calling new high quality rooms a welcome addition to a market in which tourist demand is surpassing supply by some 100 percent.

"St. Petersburg doesn't have enough hotels of that class yet," said City Hall official Tamara Gavrilova.

The capacity of St. Petersburg hotels is 13,500 rooms. Only 1,020 of those rooms are considered luxurious, which is about half the number needed to meet tourist demands.

Analysts said a main reason the proposed hotel is getting good word of mouth is because of Radisson's involvement. The hotelier operates more than 300 hotels around the world and plans to invest about $4 million in the St. Petersburg project. This would be the third hotel in Russia managed by Radisson, after the Radisson Slavjanskaja in Moscow and the Radisson Lazurnaya on the shores of the Black Sea in Sochi.

Moscow-America general director Nikolai Chirkov said the participation of an international hotel operator was required by the EBRD before it would approve project funds.

He added that Moscow-America had held negotiations with other operators such as Holiday Inn, Marriott and Rocco Forte before picking Radisson.

Moscow-America owns 80 percent of the building on 49/2 Nevsky Prospekt, Chirkov said. The remaining 20 percent is leased from the city.

The building, which measures 6,500 square meters, is expected to double in size after constructors expand the structure to include two adjacent courtyard buildings. It was built in the 19th century to house city residents and has been mostly vacant during the past year.

Chirkov said that the hotel should pay for itself in eight years.