Moscow Draws Foreign Investment Dollars

Large foreign investors have returned to Moscow’s commercial real estate market, according to The Moscow Times. Two major class A office sales to foreign buyers, valued at $250 million and $270 million respectively, were expected to close by the end of June.

Maxim Gasiyev, general director of Colliers International, confirmed the resurgence of inbound foreign investor interest in Russia. "We have had talks for quite a while," he said.

In May, a consortium of VTB and Texas Pacific Group purchased Coalco's stake in the White Square business center. This was the first significant deal involving foreign investors since the market downturn. Tom Devonshire-Griffin, Jones Lang LaSalle’s director for Russia and the Commonwealth of Independent States, explained that, although the formal buyer was VTB, the deal was funded by U.S. investors among others. The asset could be worth more than $900 million to $1 billion, according to JLL estimates.

"Class A office complexes are what's currently being sold [as investment targets]," said Andrei Postnikov, a JLL board member. "These transactions confirm a [capitalization rate] level of 9 percent for quality business centers in Moscow."

Before the downturn, foreign investors accounted for more than 50 percent of the total Russian real estate investment volume, according to JLL data. JLL forecasts total investment volume to reach $6.4 billion in 2011 and $8.3 billion in 2012, and foreign investors are expected to drive a significant portion of that activity. Devonshire-Griffin noted that Russian real estate attracts investors from the U.S., U.K., Scandinavia, China, Middle East, and Singapore. "The money may also be invested indirectly via a Russian partner," he added.