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. Last Updated: 07/27/2016

Yan-Ron Rejuvenates Capitals Faded Grandeur

Moscow is an old city aging fast.

As a result, Muscovites have grown accustomed to the sight of neglected pre-revolutionary buildings haphazardly draped in green netting crumbling, formerly elegant edifices badly in need of architectural intervention.

In 1993, the Yan-Ron Construction Co. set out to remedy this situation.

The company, which maintains its own self-titled business center and specializes in reconstruction and real estate, embarked on an ambitious reconstruction project with the Moscow government. To date, 10 buildings in the Posledny Pereulok area of central Moscow have been restored to their former grandeur.

Such achievement does not come cheaply and Yan-Rons general director, Vitaly Ostakhov, said Yan-Ron could not have done the work without the financial support of the multinational G. Group.

The group, founded in 1988, is involved in various commercial endeavors in countries as far away as Canada, Scotland, Austria and Israel.

All of the companys local activities, however, are managed by one man: Arie Geler, an Israeli national.

Geler said in a recent interview that the company has invested about $50 million in local projects almost exclusively reconstruction oriented since establishing Ya-Ron in 1992.

G. Group has negotiated a partnership with the European Bank for Reconstruction and Development to supply credits for its local ventures. Other major investors include leading private European banks, which Geler declined to name.

Through Yan-Ron, G. Group has worked out a 50-50 arrangement with the Moscow government for the right to own or rent space in the buildings it has renovated, which are all located between Sretenka Ulitsa and Tsvetnoi Bulvar.

Geler says the countrys precarious political and economic outlook has made him more cautious.

G. Group approached Moscow officials at a time when the city was financially strapped and was looking for outside sources of investment for the renovation of pre-revolutionary buildings.

The holding, through Yan-Ron, agreed to provide 100 percent of the financing for the reconstruction of buildings selected by city officials.

In exchange, it gained the right to rent or lease 50 percent of the office and residential space in each of the buildings, all of which are legally owned by the city.

The company prides itself above all on the quality of its work, and the fact that all of its buildings fall exclusively in the class A category. Apartment space is for sale at prices beginning at $2,600 per square meter, and offices can be rented for $450 to $500 per square meter annually.

Most of all, however, Ostakhov points to the fact that potential buyers and tenants are subject via the companys own security service to thorough background screenings designed to keep out riffraff.

Indeed, the companys clients most are local companies, not large multinationals prefer to keep a low profile.

When pressed however, Ya-Ron directors confirmed that NIKoil brokerage was a tenant until it built its own accommodations, and a branch of former banking powerhouse Menatep was located in one of Yan-Rons buildings before the financial meltdown in August 1998.

Ostakhov said that its "a buyers market out there," and that the company has had to fight to hold its market position.

In the current market, Ostakhov said, Yan-Rons real estate sales are "difficult," although, "no worse than for other companies."

While Yan-Ron would obviously like to see growth, the company remains satisfied, "so long as the situation doesnt deteriorate any further," he said, adding that "theres a lot being built, and were trying to carve out a niche by providing quality."

Ostakhov said G. Groups Geler has a penchant for living dangerously. On May 17, 1993, Yan-Ron signed the first major private contract for architectural renovation in the capital.

"It was a very dangerous time to embark on such an endeavor," Ostakhov said, "but our owner loves to take risks, and it looks as though it has worked out."

However, Geler appears to be losing his pluck. A self-described Russophile who often pitched local projects to his skeptical international investors, he said in an interview that he now finds himself in a "holding pattern" given what he describes as the countrys "precarious political and economic outlook."

Gerald Gaige, head of valuation and real estate Services at Arthur Andersen, said in a telephone interview that Geler is "right to be concerned as far as where the next project is going to come from."

"[If Geler is nervous] hes in very good company," said Gaige. "The [real estate] situation in Russia has not yet reached comfort levels."

Nevertheless, Gaige said that as a distributor of class A office and residential space, Yan-Ron should be benefiting from the increased demand caused by falling rents in the wake of the 1998 crisis.

"In general, they should be in a pretty good position," he said.

Engin Colpan, director of Alarko, the Turkish reconstruction company responsible for the renovation of the Aktyor Gallery retail complex on Tverskaya, agreed.

The chief concern of contractors, said Colpan, is getting paid.

This uncertainty alone is often enough to make investors nervous. Giving a general overview of the Moscow reconstruction market, however, Colpan said, "I dont see any major obstacles in terms of sector development."

According to his own extensive international experience, Geler describes the United States as by far the easiest country in which to do business and Israel the best in which to live.

Russia, however, is neither good for business nor easy to live in, he said.

"Theres just something about the people that keeps me here," he said.