According to local media, the main investor is China's Fosun International, a company which had set up a joint-venture in Hong Kong with the Russian company Avica specifically for this deal. The Chinese billionaire behind the deal is 53-year old Guo Guangchang, who has an estimated net worth of $5.8 billion.
The 70,000 square-meter building is located in the historical center of Moscow just a stone's throw from the Kremlin. Through its purchase, Fosun International is adding to its portfolio of landmark buildings around the world.
The Director of Capital Markets Department of the international consulting company Colliers International, Sayan Tsyrenov explained why the Voentorg building drew Fosun’s attention, in an interview with Sputnik China.
“Even today, when the Russian economy is going through a tough period, there are still only a few quality properties which are likely to yield dividends in the long run,” Tsyrenov said.
He stressed that the size of the deal says a lot about the trust in Sino-Russian business relations.
According to the financial expert, this deal has significance for all parties. For China, it is their first major real estate purchase in the Russian market, while for Russia it means getting 2017 off to a flying start.
“The very fact that such big institutional investors as Fosun are entering the Russian market shows clearly that the Russian economy is doing much better than the West says,” Tsyrenov concluded.
The famous building on Vozdvizhenka Street now houses a business center; previously it was state-owned and occupied by Voentorg – one of Soviet Union’s largest and most popular department stores. After the collapse of the USSR, Voentorg began to make losses and was shut down in 1994.
The first private owner of this piece of historic Moscow real estate was Russia's AST Group, run by Telman Ismailov, one of the richest people of the country at the time.
He invested $140 in the reconstruction of the building and turned it into an office and retail center. However, after Cherkizovsky Market, Ismailov's main cash cow, was shut down, his business empire started to fall apart, and Voentorg became one of the first assets he had to sell.
Voentorg then changed hands several times. In 2010 it came into the possession of Dmitry Rybolovlev when the billionaire got it from another Russian magnate, Suleiman Kerimov, in payment for block of stocks of the company Uralkaliy which he bought from Rybolovlev.
In 2014, Rybolovlev took the Voentorg building to auction with an initial estimate of getting $500-$550 million for the property. According to media reports, there have been several potential buyers, but none of them came through.
The deal with Fosun was done for 9-10 billion rubles, by Tsyrenov’s estimate, which is about $150 million at the current exchange rate.
“The Chinese investor chose the best time to get a bargain. The Russian real estate market has been falling for two years already; and probably now it is at its bottom. In addition, the ruble exchange rate has dropped. Fosun has bought it when it was cheap,” the expert concluded.
According to Tsyrenov’s, Voentorg's sale might be the first of many to Chinese purchases.
Never miss a story again — sign up to our Telegram channel and we'll keep you up to speed!
