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. Last Updated: 07/27/2016

Fleming Family Snags Hot Property

VedomostiFF&P's building at 11 Gogolevsky Bulvar is said to be worth more than $25 million.
In the first deal of its kind, the Russian real estate arm of Britain's Fleming Family & Partners said Tuesday it had snapped up a prime office building in downtown Moscow from Credit Suisse First Boston for an undisclosed sum.

FF&P Russian Real Estate's acquisition of the building at 11 Gogolevsky Bulvar, whose tenants include the IMF, General Motors and Delta Airlines, is the first purchase by an international real estate fund in Russia and the first major investment-oriented deal in Moscow since 2001.

The nine-story, 10,900 square meter office building is considered to be one of the top properties in the city and is estimated to be worth more than $25 million. It was built in 1998 by Zurich-based CSFB, the investment banking arm of Credit Suisse Group, which has been working in Russia since 1993.

CSFB put the building up for sale in October 2002, and the FF&P Russian Real Estate investment fund, the first and only such fund in the country, had reportedly been in talks for months to acquire it.

FF&P, a private group owned by Scotland's Fleming banking dynasty, formed a $60 million fund for investing Western pensions in class A office buildings in Moscow in May. GE Pension Trust, which manages U.S. conglomerate General Electric's pension money, is a major investor.

"This is the first instance when an institutional buyer is buying from an institutional seller in Russia," said Maxim Kunin, head of real estate at FF&P.

Kunin said the fund plans to acquire two more buildings in the capital by the end of the year, but he refused to elaborate. He did say, however, that his company would set up another real estate investment fund in the second quarter of 2004 that will be "more diversified and opportunistic."

FF&P's other interests in Russia include a 23 percent stake in SUAL, the country's No. 2 aluminum producer, and a stake in Highland Gold Mining, the nation's fourth-largest producer of the precious metal.

"This deal is a landmark," said Oleg Myshkin, head of investments at Colliers International, which advised FF&P on the purchase. "This heralds the arrival of Western institutional funds into the Russian real estate market and shows the improving political and economic environment in the country."

Kim Pisklova, an associate with law firm CMS Cameron McKenna, called the deal "an extremely good start -- it shows confidence in the Moscow market."

A number of other investment funds -- namely, UBS Brunswick, Sun Capital and Commerzbank -- have expressed an interest in investing in Russian real estate. But FF&P is the only closed fund aimed at acquiring property in Moscow that has completed a deal.

Kunin said the virtual absence of institutional investment in the Moscow real estate market is due to the "very complicated" legal environment in Russia and the lack of quality property.

But the successful completion of the deal may mean that other foreign investor will soon follow in FF&P's footsteps, said Michael Lange, managing director of Jones Lang LaSalle. "It brings Moscow to a new level of confidence," he said.

"The fact that we could do it is a clear signal to other funds that it is possible," FF&P's Kunin said.