Own and operate a Moscow mansion for 1 ruble

Today’s edition of Vedomosti writes about a proposal by the Russian Ministry of Culture to lease and/or sell real estate categorized as historical heritage for a symbolic price and a commitment from the lesee or purchaser to finance its full reconstruction. There are concerns that the scheme will be tested on selected Moscow mansions that are currently not in need of reconstruction.

Already in July 2012, the new Minister of Culture Vladimir Medinskiy suggested three models for reconstruction of historic and cultural objects in the Russian Federation: a 49-year lease for 1 ruble per square meter, with a requirement to fully reconstruct the real estate within four years; sale of real estate for a symbolic price (presumably through an auction with a starting price of 1 ruble), with the requirement to fully reconstruct the real estate in question before registering ownership; lastly, transfering all of the real estate categorized as historic and/or cultural heritage to the Agency for Management of Historic and Cultural Heritage with the Ministry of Culture (http://www.auipik.ru/). The First Vice-President of the Government Igor Shuvalov approved the idea and asked the Ministry of Culture and the Federal Agency for Asset Management to put together a list of real estate to be leased and sold. With all involved agencies being in favor of the scheme, there is only one administrative obstacle in the way – the Parliament needs to remove existing restrictions for the privatization of cultural heritage objects, which could take up to a year. In the meanwhile, the Agency for Management of Historic and Cultural Heritage already put together a wish list containing objects it would like to manage. According to the article, this is where Russian peculiarities started to appear: although there are thousands of such objects in Russia, the Agency listed no more than 111 buildings in Moscow, some of which are in decent condition. Vedomosti features photographs of some of the real estate from the list, which apparently includes the famous shopping center GUM, located on the Red Square.

A real estate expert from Jones Lang LaSalle Tatyana Klyuchinskaya stated that the demand for retail locations in GUM is extremely high – she estimates that the minimum rental price per square meter in GUM is no less than USD 1,500 per year. The center leases around 30.000 square meters of retail space, which generated revenues of USD 63 million for the managing company in 2011. Consequently, the average annual rental price per square meter in 2011 was USD 2.129. The list contains other similar examples, such as the business-center „Goncharnaya“ (metro station Taganskaya, 30 minutes of walking distance from the Red Square), which currently rents office space for approximately USD 700 per square meter per year, plus VAT and maintenance.

Vedomosti were unable to confirm the exact contents of the list, as no government office or agency was available for comments. The authors did, however, check the performance of the Agency for Management of Historic and Cultural Heritage and found it wanting – of between 2344 and 2381 (not clear how many exactly) objects of historical and cultural importance that it manages, the Agency leased only 75 of them, of which 16 are located in Moscow. Some buildings seem to be rented by legal entities without the appropriate contract, while others were rented at well below the prevailing market rate. According to the authors, the Agency generated an average revenue of 350-400 million rubles per year during the last three years, but it spent only 477 million rubles on reconstruction during the last five years.


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