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. Last Updated: 07/27/2016

Russian Realtors Travel to Woo Overseas Money

Moscow's realtors turned out in force to woo potential investors at the annual conference for international real estate professionals earlier this month in Cannes, France.

When Marche International des Professionels de l'Immobilier started six years ago, about 4,000 visitors attended. This year nearly 15,000 people browsed the displays and almost 6,000 firms from 58 nations participated.

Many representatives of Moscow firms said they were disappointed at the Moscow city government's booth, which they said was unattended for most of the conference. These realtors said St. Petersburg marketed itself much better.

Sergei Venediktov, general director of Moskva-Kurs a property firm owned by City Hall, said investors had expressed an interest in Moscow, but no top city officials were present.

Boris Frolov, president of the Moscow Investors Association, which organized the city's stand, said Moscow had been well received and the mayor of Cannes had hosted a welcome for Muscovites.

He said those who thought St. Petersburg did a better job promoting itself should understand that the northern capital is preparing for its 300th anniversary. When Moscow was readying for its 850th anniversary in 1997, it also commanded a lot of visible interest, Frolov said.

In addition, the Property 2001 trade fair in Moscow last week was timed so close to the French conference that fewer firms traveled to France, he said.

Michael Lange, managing director of realtors Jones Lang LaSalle, said the focus of the MIPIM conference was on investment-related issues.

"Investors are becoming more and more interested in Moscow, but are still cautious in regards to making final commitments to this market," he said.

The conference offered an opportunity to meet many people in several days that it would otherwise take months to meet, Lange said.

As in previous years, his firm made several contacts that he expected would result in business deals this year or next, he said, adding that it was too early to reveal the nature of the projects.

Chris King, director of business development at Colliers International, said he used the conference as an opportunity to meet with real estate managers and to develop relations with government officials and developers. He also reported making prospective deals.

"I believe we have made a breakthrough this year with a couple of deals," King said. He declined to name the companies involved.

Jack Kelleher, managing director at Noble Gibbons/CB Richard Ellis, said he had spoken to many industry players from Central and Eastern Europe and Russian investors.

While he did not report any deals, he said CB Richard Ellis gave a dinner for U.S. and European developers and investment fund managers. For the first time since the 1998 financial crisis, such investors are interested in Russia, he said.

Interest was greater, though, in the Central European countries. "I would say that Russia is still considered a distinct, different risk profile compared with the Czech Republic, Hungary or Poland," Kelleher said.

The regulatory environment in those countries has been reformed more quickly than in Russia, Kelleher said. "They are five, six, seven to 10 years ahead of Russia."

He said their reforms were related to those countries' plans to join the European Union, and had given clear signals to investors what to expect.

Russia had to make a lot more changes before investors in those markets would consider shifting into the country, he said.

New people at the conference were curious to see which multinationals were in Russia and if there were low-risk, high-yield investments, he said.

Kelleher said he replied that Russia had very few such investments and was a high-risk, high-yield market.

Investors are interested in buildings with multinational tenants, with the tenancy agreements protected by very strong covenants, he said. There were only about 10 to 12 of these buildings in the marketplace, he added.

"Funds want to buy some of these profile buildings on the cheap and they can't,'' Kelleher said. "There are no distressed sellers,"

Dennis Mahon, vice president of Skanska East Europe, said the French gathering offered a chance to network with many investors.

"Everybody who was there had benefits, even if it's just us talking to each other on an informal basis," Mahon said.

Mahon said investors already in Russia had told him they intended to stay and that he had encouraged representatives of big financial institutions who had said they were "only looking" to enter the market.

"Russia will be a very hot market for these investors if the decline continues in the United States and Europe," he said. "I think that Russia could shine in the years 2002 and 2003. The capital has to go somewhere."