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. Last Updated: 07/27/2016

One Group to Run 20 City Hotels

Investment company Nafta-Moskva, owned by billionaire Suleiman Kerimov, is to become involved in Moscow's hotel sector, Vedomosti reported last week.

The Moscow city government is setting up the United Hotel Company, OGK, which will incorporate 20 of the cities hotels, including Baltschug, Metropol and National hotels.

"Moscow authorities and Nafta-Moskva have joined up to form a single company to run the hotel industry in the city," Deputy Mayor Iosif Ordzhonikidze said.

A controlling share 51 percent package in OGK will go to Nafta-Moskva, at a cost of $2 billion. These funds will be spent, in part, upgrading the hotels under the joint company's management. Kerimov might have obtained the funds by selling off his 1 percent share in Gazprom, sources in the investment banking sector said .

"We are looking at the hotel business as a profitable sector," said Nafta-Moskva general director Tatyana Bashmakova.

Marina Smirnova, deputy director of the evaluation and consulting department at Collier's International in Moscow, estimated the city's hotel holdings at over $1 billion.

"But Kerimov will not lose out -- the real value of the city's hotels might be considerably higher," Smirnova said.

The Ukraina Hotel was originally valued at $157 million, but was later sold for $273 million, Smirnova said.

Ordzhonikidze was unable to explain the motivation that drew the city to choosing Nafta-Moskva as its partner.

"We undertook several months of talks with high-profile companies, but we could not come to a decision," he said. "We had to choose among the low-profile companies."

"There are two factors at play in this collaboration. First, the historical relations between Nafta-Moskva and the Moscow government, Second, Nafta-Mosvka has significant financial resources at its disposal to carry out this investment project," Ordzhonikidze said.