Nice Work If You Can Get It

Oleg Derispaska
Oleg Deripaska. Photo courtesy of deripaska.com

“I believe that it takes just 100 people to change a country for the better provided that these people are driven professionals capable of creating something new. I am sure that in Russia there are far more than 100 such people, so let’s join forces and work together.”
Oleg Deripaska

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Deripaska’s Company Releases Sales Figures for “Olympic” Apartments
Natalya Derbysheva
RBC
May 27, 2016

sochi-olympic village marina
Mockup of the Sochi Olympic Village’s Coastal Cluster. Photo: Andrei Golovanov and Sergei Kivrin/TASS

Oleg Deripaska’s company RogSibAl has sold 20% of the luxury apartments it built on the Black Sea coast in Sochi for the Winter Olympics. The company believes this is a good result. 

RogSibAl, a subsidiary of Oleg Deripaska’s Basic Element, built 2,700 luxury  apartments on the Black Sea coast for the 2014 Winter Olympics in Sochi. Athletes lived in the apartments during the competition. According to Vnesheconombank, the project’s budget was 25.3 billion rubles, 22.3 billion rubles of which RogSibAl borrowed from Vnesheconombank.

The coastal Olympic Village is now known as the Imereti Resort District. It consists of four quarters, the Coastal Quarter, the Maritime Quarter, the Park Quarter, and the Reserve Quarter. Apartments are available for purchase in all four quarters. The price per square meter ranges from 152,000 rubles to 195,00 rubles [approx. 2,070 euro to 2,650 euros per square meter—TRR].

Since the apartments went on sale in 2013, 20% of them have been sold, a Basic Element spokesman told RBC, meaning that over 500 apartments in all have been sold. Basic Element’s spokesman added that the company had sold 118 apartments from January to May 2016.  The company plans to have sold 350 apartments for a total area of 25,000 square meters on the year.

Basic Element has been renting out the unsold apartments. According to the company’s spokesperson, the rental demand for the 2016 summer season is 97–100%.

The sales figures are worse than what Basic Element had planned in 2011. Igor Yevtushevsky, RogSibAl’s general director, had then told Vedomosti that the company was planning to sell 50% of the apartments before the start of the Olympics, and the other half in 2014–2015.

Basic Element’s spokesman said it would be unfair to compare current sales figures with projections made in 2011.

“The project has undergone big changes,” he explained.

The company cites data from the MACON Realty Group, according to which 387 business- and luxury-class real estate transactions were concluded in Sochi from January to May 2016, meaning that the Imereti District’s share of this business was 23%.

The government has discussed the conditions of restructuring the loans issued by Vnesheconombank for building Olympic sites, RBC’s sources told it earlier this week. A federal official explained that Deripaska’s companies were in the most complicated circumstances in terms of loans, since the demand for apartments was not great.

Sochi Olympic Village. Photo courtesy of Nikita Kulachenkov
Sochi Olympic Village. Photo courtesy of Nikita Kulachenkov

Basic Element has not disclosed the figures of the income from its sales of the properties. Its spokesman did say, however, that all the proceeds were being wholly turned over to Vnesheconombank in repayment of the loan and that RogSibAl had been fulfilling all its obligations to the bank.

Given that sales usually begin at the design and construction stage of a property, 20% sales in the second year after a property has been operation is hardly satisfactory, argues Marina Udachina, director of the Institute for Innovations, Infrastructure and Investments. According to her, the situation is partly due to a slowdown in economic growth and a reduction in the demand for luxury properties.

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Nikita Kulachenkov
Facebook
May 27, 2016

Only 20% of the apartments in the Olympic Village have been sold in two years.

Here is what we wrote about this a month before the Games:

“The site is being built by oligarch Oleg Deripaska, one of the few private investors in the Olympics. Only he is building with public money. Twenty-two of the twenty-five billion rubles in the project’s budget has been secured with a loan from state-owned Vnesheconombank. Derispaska’s company is planning to pay back this money by selling the village as a residential complex after the Games. It will be hard for them to find buyers. A single bed in the village costs as much as a two-room flat in Moscow.”

Of course, the crisis, sanctions, and being “surrounded by enemies” have inevitably led to a drop in demand for fairly pricey holiday apartments. On the other hand, this was offset by the fact that demand was supposed to shift to the domestic market from Greece, Cyprus, Turkey, and other countries where housing had become almost twice as expensive for Russians.

As a result, sales did not take off, which is a pity. I know that after the Games a good person, familiar to a lot of my people on my wall, worked on the project.

We can also add to this news the latest about Sberbank, which after agonizing for a long time has today finally sold the Mountain Carousel ski resort on the installment plan to the former governor and current minister Tkachyov* and his young but quite talented son-in-law. The joke there is that Sberbank invested 25 billion rubles into Mountain Carousel, while Vnesheconombank loaned it 55 billion rubles. Vnesheconombank fiercely resisted the sale, because it is one thing when Sberbank is in hock to you to the tune of 55 billion rubles, and quite another when it is Tkachyov and family. Apparently, Gref is tougher and stronger than the moribund Vnesheconombank, although it does not make our lives any easier.

Since for some reason business has not been booming at nearly all the former Olympic sites, the government has authorized the repayment of Olympic loans over a period of 25 years at a reduced 5% interest rate. And to keep Vnesheconombank from kicking the bucket altogether, the Finance Ministry will give it another 150 billion rubles straight from our pockets.

I probably do not need to remind you of the total amount that we, the taxpayers of the Russian Federation, paid for the construction of all these “great power” bells and whistles.

P.S. I’m going to do a little populism practice. Anyone in Russia want a twenty-five-year mortgage at five-percent interest? Ask Tkachyov, Potanin, Deripaska, and Vekselberg “how.” )))

Translated by the Russian Reader. Thanks to Alexei Navalny for the heads-up. This post should be read in tandem with my post for May 25, 2016, “The Decline Has Gone Uphill.”

* On August 2, 2012, Tkachyov announced plans to deploy a paramilitary force of Cossacks in Krasnodar Krai, beginning September 2012, as vigilantes to discourage internal immigration by Muslim Russians. In a speech to police, he stated, “What you can’t do, the Cossacks can. We have no other way—we shall stamp it out, instill order; we shall demand paperwork and enforce migration policies.”

Source: Wikipedia, New York Times

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