Magnates prefer minerals

Iron, nickel, copper, gas and oil –quite apotent mix. And if you add tothis combination anamenable state and thegood favour of decision-makers, you can set up companies with incomes comparable totheGDP of many countries. This is theRussian way, down which most of theoligarchs have gone. And some of them also believe in thereal estate and construction industries

Emil Górecki

T                            

As arule, thefortunes of Russian and Ukrainian moguls grew out of themetal and mining industries. Real estate is asecondary business that they turned tolater, in order todiversify their portfolios. Esta Holding, part of theSystem Capital Management (SCM) group owned byUkraine   football club. Real estate is one of many activities of SCM, after theraw material, telecommunication and power industries. Initially, internal company SCM Estate dealt with servicing thereal estate that belonged totheholding; however, at theend of 2007, it grew in prominence. Nowadays, it is the sort offirm that in theEast used tobe called ‘afull-cycle company’. It deals with the acquisition of land, thepreparation of documents, theacquisition of permits, theconstruction of infrastructure and thebuildings themselves, as well as their administration. Its activities relate tooffice buildings, warehouses, shopping centres and suburban houses. Esta Property Management administers afew office buildings in Donetsk and Kyiv, and in thecapital thebuildings include (among others) theLeonardo Business Centre, owned byQuinn Property Home. Mr Akhmetov’s hotel business activities are theapple of his eye. He is theowner of two 5-star establishments (the Donbass Palace Hotel in Donetsk and theboutique-style Opera Hotel in Kyiv), as well as alogistic complex in Dnepropetrovsk, and afew other projects under development, such as thePushkinsky () mixed-use complex, also in Donetsk. Moreover, thecompany owns an80-ha land bank. With consolidation and savings in mind, Akhmetov transferred 100pct of Esta Holding’s shares toESPV Limited, aCypriot subsidiary, at theend of January. Esta Holding invested app. USD 500mlnin real estate in 2005-2008 and theestimated value of all its projects was at least USD 3mln. Not so long ago,     is supposed toprevent such ascenario as “thecompany folding up”, according to Denis Sokolov. “Wedonot intend tolimit our activities. On thecontrary, wehave quite ambitious plans for thefuture. Even faced with thecrisis, themanagement of thecompany has decided tocontinue themost important projects in Kyiv and Donetsk. The fact that westarted theconstruction of thePushkinskiy complex in H1 2009, and leased 5,500sqm of office space and 16,000sqm of warehousing space, shows that Esta is in agood condition,” argues Anton Glivinskiy from Esta Holding.

Arich person, but no oligarch    Ђссоциаци  ). This second position is one of prestige only, because theorganization, despite all its efforts, does not have much clout when it comes tomaking thelaw and lobbying. Mr Polonsky made acomment for one of thetelevision stations recently that caused a stir, when he said that he expected 70-80pct of construction companies in Russia togo bankrupt within only 1-1.5years. “Iwouldn’t rate Polonsky among theoligarchs. He is young, his empire was created much later and in acompletely different way than therest of therichest Russians. What is more, his main sources of income are not raw materials but high technology and real estate,” opines Denis Sokolov.

Mirax Group consists of anumber of companies, including aconstruction firm, adeveloper, anadministration company, aninvestment firm and one dealing exclusively with theorganization of tenders for thegroup. Its flagship project is theFederation Business Complex, anoffice development with two towers: Zapad and Vostok. The second tower is designed tobe thetallest building in Europe –509m in height including themast. So far theconstruction work has had tobe put on hold due tothecredit crunch. The construction of theskyscraper was halted when it had reached theheight of   

The owner of Open Investments ( )  €). Interros is itself owned byVladimir Potanin; however, only ayear ago he shared it with Mikhail Prokhorov, theextravagant number one on thecurrent list of therichest Russians, according to‘Finans’ magazine. The biggest investment in real estate by thelatter gentleman was thepurchase of themost expensive house on theFrench Riviera –theformer residence of theBelgian king Leopold II near Monaco and Nice, which cost him half abillion euro.

Mr Prokhorov, however, has since relinquished his stake in Open Investments. The co