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. Last Updated: 07/27/2016

American Firm to Take Over Moskva

MTU.S.-based Decorum is paying $350 million to demolish the Moskva hotel and rebuild it using a plan based on its original design.
An icon of Soviet architecture beside Red Square, the Moskva hotel, is to be demolished and then restored and controlled by an American firm, Deputy Moscow Mayor Iosif Ordzhonikidze said.

The obscure Decorum Corp., which won a tender to restore the hotel in 2001, is to solely finance a $350 million demolition and reconstruction of the Stalin-era hotel, after which the corporation will hold a 51 percent controlling stake, Interfax quoted Ordzhonikidze as saying last week.

The Moscow Development Co., which is owned in equal shares by developer ST Group and the Moscow city government, will hold the remaining 49 percent stake, the report said.

Neither Ordzhonikidze's office, the Moscow Tender Center, the hotel's management nor ST Group were able to provide contact details for Decorum. The American Chamber of Commerce has no information on Decorum. The U.S.-based company does not have an Internet site.

Some market insiders say the company is a front for offshore Russian investors.

The run-down Moskva is still operating, but much of it is closed. The hotel's first stage was built in 1935 under the direction of Soviet architect Alexei Shchusev, and a second stage was added in 1970.

Last year, City Hall announced it intended to demolish the building and build retail, office and first-class hotel space on the site. The plan called for the complex to have an underground parking lot and a link to the Manezh shopping mall and Okhotny Ryad metro station. The reconstruction plan was based on Shchusev's original plans.

The hotel was a haunt of Communist Party bosses who stayed in the Moskva during party congresses and meetings of the Supreme Soviet, and there are some signs of federal interest in the building.

In November, the Itogi magazine reported that the State Construction Committee had been developing a plan to use the hotel for a legislative center that could house both the State Duma and the Federation Council.

Ordzhonikidze said City Hall is preparing a special order "in which the conditions will be specified that will assist the work of investors. We don't want our partners to run into trouble and to create a dolgostroi [a construction site that is stalled for long periods] in the city center," Interfax reported.

Vedomosti quoted Boris Yevseyev, general director of the reconstruction of the hotel, as saying that although Decorum had won a tender in 2001, little has happened because it did not have approval to demolish the building, which has the status of an architectural monument.

The hotel is across from the Kremlin, Red Square, the State Duma and the Bolshoi Theater and is an internationally recognized landmark -- it is on the label of every bottle of Stolichnaya vodka.

Stephane Meyrat, senior consultant at Hotel Consultant & Development Group, said the Moskva's $350 million price tag is enormous and applicable only for a highly exclusive hotel.

By dividing this sum into 1,000 estimated guest room units, the approximate cost comes to $350,000 per room, Meyrat said.

"Under no circumstances would it be possible for the hotel operations alone to reach a payback period short enough to satisfy investors," he said. "Most three-star hotels have guest room costs estimated around $80,000 to $100,000."