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. Last Updated: 07/27/2016

Moscow to Sell Belgrade Hotel to Fund Project

Moscow will put the three-star Belgrade Hotel on the auction block in a bid to raise at least $20 million for a real estate project, city officials said Tuesday.

Despite Moscow's shortage of mid-priced hotels, it is doubtful that many takers will turn up, real estate experts said. The 430-room Belgrade does not measure up to international standards and Russia's financial turmoil has made such investments questionable, they said.

The 20-story hotel on Smolenskaya Ploshchad will be auctioned off after May 15, the deadline for setting sale terms, Belgrade director Yury Molodchenko said Tuesday.

He said the starting bid is likely to be set at about $20 million and the winner will be expected to invest millions of dollars more in improving the hotel, built in 1975. Official assessment of the Belgrade is expected to be completed in two weeks.

A Moscow government decree authorizing the sale of up to 100 percent of the city's shares by the Moscow Auction House was signed March 30. The measure said proceeds from the sale will be funneled to the half-finished Gostiny Dvor hotel and shopping complex near Red Square. The order suggests that the city is looking for additional ways to fund the continuing construction of the $371 million center.

Michel Pascalis, partner at the Jones Lang Wootton real estate agency, said the hotel has a lot going for it, but factors such as the crisis and the likely required investment may scare off bidders.

"Its location and visibility are good," Pascalis said. "But whether there will be anyone willing to invest around $20 million, plus so many more millions towards the hotel's refurbishment, is another question."

He added that another barrier to the hotel's sale was its failing to meet international standards.

The Belgrade, which offers a standard two-room suite for $65, saw its 80 percent occupancy rate fall to about 60 percent after the crisis began in August. About 95 percent of its guests are from the West.

But Molodchenko said these days the hotel's business is being even further undercut by guests apprehensive about its name.

About one-third of reservations have been canceled since NATO started bombing Yugoslavia, he said.

"Psychologically, many of our American and European guests appear to try and pick more neutral-sounding names," he said. "The war is the most dreadful thing for our business."