Russian Luxury Property Developer Seeks Government Aid

Yelena Baturina, Russia's Richest Woman

Just a year ago, Yelena Baturina was riding high on Russia’s property bubble. Ms. Baturina is (or was) Russia’s richest woman. It did help to have friends in high places and her husband just happens to be Mayor of Moscow – Yuri M. Luzhkov, who has spent billions of roubles on infrastructure and building projects in the capital, many of which contracts’ were won by Ms. Baturina’s construction company, Intenko.

The most recent project the company announced was “Project Orange,” another Norman Foster designed monument to Russia’s commodity-driven wealth. Some time ago I wondered if Mr. Foster had some sort of monopoly on futuristic buildings in Moscow. “Project Orange,” was to be a multi-use building circular in plan, five “segments” rising to 15 floors, creating a compact cluster of volumes in the shape of, you guessed it, an Orange.

Like most of Mr. Foster’s grandiose plans, this one has also come to a screeching halt and Ms. Baturina has applied to the government for a $1.4 billion loan guarantee. Ms. Baturina, along with a number of other Russian property developers dropped off of Forbes “The Worlds’s Billionaires” list as the credit crunch hit. A number of oligarchs have been bailed out by the state and it looks as though the construction industry will be nationalized along with the mining and telecoms. The terms of the loan guarantees issued recently are considerably more stringent that the equivalent British and American bailouts and are almost certain to end up with the companies concerned being fully state-owned unless the market turns around pretty dramatically.

Project Orange gets peeled

Russia has been hard hit by the financial crisis, and the construction industry particularly so. Massive over-supply in the luxury real estate market and up-scale office space sectors and dropping prices  are causing the local banks to shy away from debt for equity swaps as the European and US banks are being forced to do.Having said that, a bailout seems inevitable and some analysts are suggesting the construction industry in Russia will collapse completely unless the government steps in to prevent some major bankruptcies, including  The wife of the Mayor of Moscow’s construction firm.