Problems of the City project

Albert Reichman may leave the Moscow City project
The developer did not fulfill his obligations
The largest Moscow construction project - the international business center "Moscow City" - looks like it will soon part with the investor on whom great hopes were pinned. As Kommersant-Daily learned, the participation of the famous developer Albert Reichman in the project is in question. The reason is Reichman’s failure to fulfill his obligations to attract investment in the construction of the first stage of Moscow City.

The Moscow City project involves the construction of an international business center with an area of 2.5 million square meters. m with office and shopping complexes, hotels and recreational areas on 60 hectares of Krasnopresnenskaya embankment. The required investment volume is $8-9 billion. In 1992, City JSC was created to implement the project. The joint-stock company has more than 15.6 thousand shareholders, of which 15,591 are individuals.

World-scale developer, Canadian Albert Reichman entered the project in mid-1995. This was an important event for Moscow City. Reichman promised to build the first stage of the complex (office and retail complexes, investment volume $98 million) in two years. Reichman is well known in the real estate world as a co-owner of the famous Olympia & York company, which in the late 1980s was the world's largest owner of office space. The arrival of such a famous developer in Moscow was certainly an extraordinary event. JSC City, on a 50-50 basis, created a joint venture with Reichmann Asia, a company controlled by Reichman, and began to wait for investment.
But it didn’t wait. First Vice-President of City JSC Irina Gaaze told a Kommersant-Daily correspondent: “All the deadlines for attracting investments agreed with Reichman have long passed. Reichman did not fulfill his promises. There are both objective and subjective reasons for this. The objective reason is the introduction of VAT for the construction of new facilities. Foreigners simply do not understand this, this is generally one of the main difficulties in the development of the project. One of the subjective reasons is the decline in Reichman’s authority in the world of real estate, associated with the failure of the Canary Wharf office complex project in London. Today, the Moscow government doubts. the need for Reichman's participation in the project."
How City JSC intends to part with its unlucky partner is still kept secret. It is also unknown who will become the new strategic investor of the project. However, the capital's authorities are still optimistic about the prospects of Moscow City and are ready to spend money to support it. On September 2, the first infrastructure facility of the complex, built with money from the capital’s government, will be opened - a covered two-story shopping and pedestrian bridge across the Moscow River (investment volume - about $36 million). The bridge will connect Moscow City with Kutuzovsky Prospekt. The restaurants, shops and bars located there will be rented (the cost of one meter per year is $700-1500).
In addition, JSC City began work on a project to build a water park designed to accommodate 10 thousand visitors per day. According to Irina Gaaze, “large banks are ready to invest funds in the amount of $107 million under guarantees from the Moscow government (their names have not yet been disclosed - Kommersant). Even according to the most pessimistic forecasts, the project will pay off in 3.5 years.”
The commissioning of the bridge will, of course, revitalize the City area. However, it is unclear whether the bridge will attract visitors today. Due to the failure with Albert Reichman, the first stage of the complex was not completed, Moscow City is empty. Tenants of the bridge's retail space (a third of the space has already been leased) can so far only count on visitors to the Expo Center and walking Muscovites.
ELENA Kommersant-NOVOMLINSKAYA

Newspaper "Kommersant" No. 113 dated July 18, 1997, p. 7