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. Last Updated: 07/27/2016

IKEA Ironing Out Presidential Property Deal

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Swedish furniture retailer IKEA is negotiating a deal with the presidential property department to build its third Moscow store on a site occupied by a departmental service center in return for building the department another center nearby.

The store, due to open in 2003 and predicted to cost up to $300 million to build, will be located on a 7-hectare site near the Kutuzovskaya metro station on the corner of Kutuzovsky Prospekt and the yet-to-be completed Third Ring Road, Lennart Dahlgren, head of IKEA Russia, said in a telephone interview.

The store is to cover 30,000 square meters, and another 40,000 square meters will be used for a business center and shopping center that will host well-known Western chains.

In earlier interviews, Dahlgren said the new store is expected to be the company's third-largest in terms of sales volume for its entire global network.

Asked if IKEA had decided to make a deal with the powerful presidential property department because the department would ensure IKEA had few bureaucratic problems constructing its store, he said that the involvement of the department was "pure coincidence."

Although some of its products are made locally, IKEA has also fought a long battle over import tariffs, which the firm says are too high. The influential property department, where President Vladimir Putin once worked, might be able to help out.

IKEA said the involvement of the department was 'pure coincidence.'

But Dahlgren denied that IKEA was playing any political games in seeking the deal with the department.

"We have not searched for the owner, we have searched for this piece of land. In our imagination, this is absolutely the best site in Moscow for doing such a thing," Dahlgren said.

"For us, they are more or less just a landowner that gave us the possibility to acquire this land, and because they have some activities there, we had to replace it on another site," he added.

Dahlgren declined to say how much the deal was worth and said many factors relating to the store had yet to be decided. He said the presidential property department also owned the land where the new service center will be built.

The Vedomosti newspaper reported that the service center used to serve the Central Committee of the Communist Party. The newspaper, citing an unnamed source in the presidential property department, said the present service center has a beauty center, a laundry service and a shoe-repair shop for Kremlin officials and those associated with them.

No comment was available from the presidential property department, which holds 6.2 million square meters of federal real estate, including medical clinics, hotels, apartment blocks and cottage developments. In addition, it also owns tourism businesses, farms, grocery stores and transport fleets.

Dahlgren said he expected tenders to be called for construction of the store and the new service center at the end of this year or beginning of next year. Construction could start in spring of next year, he added.

"We have, of course, to present this idea to a lot of people and different authorities like the prefecture, like the different government departments responsible for it. It looks like they are positive to the idea. But there are many steps yet to go," Dahlgren said.

IKEA would like to operate five stores in Moscow, Dahlgren said. The first one opened in March of last year just north of the city limits in Khimki. A second is being built to the south of the city. The Kutuzovsky store is more or less in the city center and two more stores will be built to the east and the west of the city, Dahlgren said.

As to reports that IKEA was still in a dispute with the Moscow city government over a half-built road bridge on Leningradskoye Shosse, Dahlgren said his company and city officials were having constructive talks on the issue.

City Hall had been concerned that the road bridge near IKEA's Khimki store would block the view of the Protivotankoviye Yezhi, or Tank Trap, memorial that marks the spot where the German advance on the Soviet capital was brought to a halt in World War II.

Dahlgren said repair work on Leningradskoye Shosse had exacerbated traffic congestion near the store and made the need for the bridge even clearer.

"I believe that the authorities will let us settle this now," he said.

All the parts for the bridge have been ready for assembly for a year and completing the bridge would take only a couple of months, he added.

No one in the Moscow city government could be reached for comment.