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. Last Updated: 07/27/2016

Nafta-Moskva's Hotel Deal Collapses Over Evaluation

A proposed partnership between Suleiman Kerimov's Nafta-Moskva investment company and the Moscow City Government to control some of the city's leading hotels has collapsed after the most attractive assets were withdrawn from the package and city officials raised their valuation for the remaining hotels.

Nafta-Moskva was set to buy a controlling 51 percent share package in the United Hotel Company at a cost of about $1 billion after a deal announced Nov. 20 by Deputy Mayor Iosif Ordzhonikidze.

But the deal was derailed Tuesday, when Ordzhonikidze announced that the city had more than tripled its initial valuation for the available hotel assets, Kommersant reported.

By putting a value of $7 billion on the hotel group's assets, Ordzhonikidze has overstated the real worth for the city-held shares, said Tatyana Bashmakova, general director of Nafta Co., the property arm of Kerimov's investment group.

"With this evaluation of the hotel shares, Nafta Co. does not see the economic viability of the project," Bashmakova said.

Bashmakova did not rule out, however, that Nafta Co. could be interested in revisiting the project if the valuation changed at a later date.

The $7 billion figure put forward is way off the mark, analysts say. Ordzhonikidze may have confused dollars with rubles, said Marina Smirnova, deputy director for the evaluation and consulting department at Colliers International.

A spokesman from Ordzhonikidze's office could not be reached for comment.

The United Hotel Company was initially meant to incorporate approximately 20 of the city's hotels, including the Baltschug Kempinski, Metropol and National hotels.

However, as conservation restrictions determined that the National could not be privatized and investors exercised their right to buy stakes in several of the other hotels, many of the most attractive assets slipped from the package and Nafta-Moskva began reconsidering its options, Kommersant reported.

Elsewhere, Interfax reported Wednesday that Suleiman Kerimov had returned to Russia after almost completely recovering from the injuries he suffered in a car accident in the south of France in November. He has returned to his usual schedule and is working at full capacity, Interfax reported, citing a source close to Kerimov.