March 12, 2019 (kommersant)
The company’s shareholders are implementing a second hotel project in St. Petersburg.
Kommersant has learned that shareholders of the Irkutsk Oil Company (INK) have expressed interest in the reconstruction of the Shagin House on the Fontanka Embankment into a three-star hotel. According to Kommersant’s sources, individuals associated with them last year took ownership of the hotel project, which has been stalled for over ten years. This is the second project in the St. Petersburg hotel industry with ties to INK’s owners.
The construction of a hotel at 145B Fontanka River Embankment, Building A, will be financed by INK shareholders, a source familiar with the situation told Kommersant. This information was confirmed to Kommersant by Philip Apostol, CEO of Apostol’s Architectural Workshop LLC (which is developing the project concept). Mr. Apostol explained to Kommersant that a three-star hotel with up to 150 rooms is planned for the historic building. If the design allows, it could be a four-star hotel, another Kommersant source clarified.
According to Kommersant’s source, entities associated with INK shareholders became owners of the hotel project late last year. Mr. Apostol provided Kommersant with similar information. According to kartoteka.ru , the company implementing the project, Nezhiloy Fond Consult, is owned by Cyprus-based Fraiser Development. A Kommersant source close to the project dismisses this information as incorrect, stating that Nezhiloy Fond Consult is currently owned by a private individual associated with INK. The change in the project’s ownership is indirectly evidenced by the change in the general director of Nezhiloy Fond Consult JSC in November 2018. At that time, Alexandra Serpeneva became the company’s new director, whose last name and patronymic match those of Anna Serpeneva, the general director of IFG-Bazis-Proekt LLC (the investor in the luxury hotel project at 7-9 Nevsky Prospekt, whose primary owner, through a chain of companies, is Nikolay Buinov, founder of INK. INK did not respond to Kommersant’s request.
NK is Russia’s largest independent company, not part of any vertically integrated oil holdings. The company explores and produces hydrocarbons in the Irkutsk Region, Yakutia, and Krasnoyarsk Krai. Last year, the company produced 9 million tons of oil and gas condensate. The company’s main shareholder is Nikolai Buinov, whose net worth is estimated by Forbes at $2.2 billion.
Yunis Teymurkhanly, owner and general manager of the Helvetia Hotel, estimates that investment in the project could reach $10-12 million (660-800 million rubles at the current exchange rate). Ekaterina Teyder, director of development at Becar Asset Management, estimates 670-710 million rubles if the hotel opens under an international brand. Without a foreign operator, the investment would be lower, she notes.
The reconstruction of the Shagin House into a hotel dates back over ten years. According to the first version of the investment agreement, the company “Nezhiloy Fond Consult,” which received the building from the city in 2008, was required to complete the project within 40 months. When it became clear that the work would not be completed on time, Smolny extended the agreement until 2015. During the project’s implementation, the city attempted to terminate the agreement with the investor, citing failure to fulfill its obligations, but lost in court. Market participants linked “Nezhiloy Fond Consult” to former Vice Governor of St. Petersburg Yuri Molchanov, although he denied this information. The maximum area of the hotel after reconstruction is not to exceed 7,300 square meters.
Construction of the hotel hasn’t begun yet; design work is currently underway, according to one of Kommersant’s sources. Another Kommersant source said the project’s parameters will comply with the investment agreement, and the construction phase will take no more than two years. The building is “in a terrible state and contains numerous hazardous elements,” notes Mr. Apostol. The Property Relations Committee told Kommersant that the investment agreement is valid, and the construction permit is scheduled for August 2019, with the occupancy permit scheduled for July 2021. The Investment Committee did not respond to Kommersant’s request for comment.
The interest of INK’s main owner, Nikolai Buinov, and his partners in the hotel business became known in 2017, when they acquired a 68% stake in IFG-Bazis-Proekt, a company developing a luxury hotel at 7-9 Nevsky Prospekt (see Kommersant, November 13, 2018). Prior to this, they had not been known as investors in the hotel business. Their first project also had a troubled history: seven years passed after Smolny handed over the building for the hotel to the investor, but the project was never completed. In 2016, the company was acquired by Sberbank entities. The lending institution still maintains a connection to the project—Sberbank Investments Limited owns 32% of it.
Mr. Teymurkhanly believes the Fontanka location is an excellent location for opening a budget three-star hotel or hostel. There’s steady demand for hotels in this price range, and it will be successful without the international branding required for more premium hotels, he believes. A source at an international hotel chain is more skeptical: “There’s intense competition with hotels of a similar class in this area, so this hotel won’t benefit from it, and given the construction costs, it seems a dubious project.”
Konstantin Kurkin