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. Last Updated: 07/27/2016

ST Group Sells New Mall To Chinese Government

In what looks like the biggest Moscow real estate deal since the August ruble meltdown, the Chinese government has purchased a large downtown shopping complex from property developer ST Group, ST officials said Wednesday.

ST Group developers had spent two years and $30 million constructing the three-story, 16,000-square-meter shopping complex near the Novoslobodskaya metro station, and it was formally opened by Moscow Mayor Yury Luzhkov at a weekend ribbon-cutting.

The complex is expected to fully open its doors to the public in September, by which time the Chinese government's trade agency will have decorated the interior in a Chinese motif. The first two floors will house shops selling exclusively Chinese goods, while the third will be office space.

There is also talk - some of it pushed by the mayor, an avid tennis player - of putting tennis courts and a Chinese restaurant on the roof.

Full details remained sketchy Wednesday, however, as neither the Chinese trade agency nor the Chinese Embassy was prepared to comment on the deal.

The ST Group's original plan for the complex had been to let out retail space in it. But since the August ruble devaluation, retail space has become a market for choosy buyers. With rents plummeting, ST Group reversed course and opted to sell the building to the Chinese.

"To be honest, we had planned on letting [the building] out, which is our general policy," said Vyacheslav Basati, managing partner with ST Group. "But then we received this offer, and we found it quite acceptable."

Basati denied a report in Kommersant newspaper that the building had been sold for $50 million. He declined to put an exact figure on the deal, but said it was sold for "more than $30 million."

Moscow's real estate developers were cautiously heartened by the news this week of the deal, an arrangement that was quietly struck six weeks ago on Feb. 23.

"It is a good building and well sold," said Michel Pascalis, a partner at real estate firm Jones Lang LaSalle. But Pascalis added that this was a rather unusual deal - one involving a foreign government buying retail space - and so probably said more about Chinese trade policy than it did about the Moscow real estate market.

In its 10 years on the Moscow market, the ST Group has built a total of 14 buildings. It has rented them out to clients ranging from Exxon to Philip Morris to Credit Suisse First Boston. ST also has a joint venture with British Petroleum to develop a chain of Moscow gas stations.