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EBRD and Russia Fund support first fully privately-financed hotel construction in Russia
Providing St Petersburg with its first entirely privately-owned and financed hotel, the European Bank for Reconstruction and Development (EBRD), together with the U.S. Russia Investment Fund (Russia Fund) and the international hotel company Radisson SAS Hotels Worldwide (Radisson SAS), has extended a financial package totalling approximately US$ 26 million (ECU 23.4 million) to ZAO Hotel Company, a Russian joint-stock company. The 164-room first class international hotel will be built behind the original façade of an existing period building at Nevsky Prospekt 49.
Total EBRD financing, which includes US$ 3.0 million (ECU 2.7 million) in subordinated debt, is US$ 14.5 million (ECU 13.2 million). "Taking on the full senior loan is evidence of the EBRD’s continued commitment to long-term investment in Russia, and to promoting transition," said Edgar Rosenmayr, Director of the EBRD’s Property and Tourism Team. "The project will improve supply in the St Petersburg hotel market, and transfer technology and knowledge to the construction and hotel sectors. That our partners have agreed to a substantial equity commitment, at a time when many private investors and financial institutions are hesitating to make commitments to Russia, is a clear demonstration that they share the EBRD’s long-term view on the market."
The Russia Fund, the principal equity investor in the project, will contribute US$ 7 million (ECU 6.4 million) in equity. "This is a very important project for St Petersburg because it will be the first privately-owned and financed international-quality hotel in the city and it includes a significant equity investment by an experienced international hotel operating company," said Bob Ennis, the Russia Fund’s Senior Vice President responsible for the transaction. "This investment, closing after the onset of Russia’s financial crisis, reaffirms our commitment to St Petersburg, where we maintain an office and have made several private equity investments."
Radisson SAS, which will operate the hotel, will make an equity investment of US$ 4 million (ECU 3.7 million) in the project. Additional funding will come from Uçgen, a Turkish design and construction company, and Moscow-America, a Russian joint-stock company that acquired the site and has since been developing it. Probel s.a. of Belgium acted as development adviser to the equity consortium.
Since 1991, the EBRD has mobilised close to ECU 600 million in investment to the region's property sector, which includes approximately ECU 300 million in hotel projects.
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