City to Get New 5-Star Hotel

City to Get New 5-Star Hotel

Instead of a 206-room three-star hotel, a five-star hotel will be built on the Fontanka River.

Published: July 6, 2011 (Issue # 1664)

The South Korean hotel firm Lotte plans to build a first-class hotel on the Fontanka River embankment.

Lotte Hotels Resorts, part of South Korea’s Lotte Group, will open a hotel at 23 Naberezhnaya Reki Fontanki, a real estate consultant close to City Hall said.

Jendok Son, the company’s representative in Russia and the general director of its subsidiary Lotte Rus, confirmed that negotiations on the construction of the business-hotel on the site are underway.

City Hall is negotiating with Lotte Group on the construction of a new hotel, Governor Valentina Matviyenko confirmed in a meeting with Lee Ensu, South Korea’s consul general in St. Petersburg last week.

At the end of 2007, City Hall terminated an agreement with Tyazhpromexport, the former owner of the building slated for reconstruction, awarding it to the Fontanka-Hotel corporation, which was to reconstruct the building by the beginning of 2011 and then transfer 79.4 million rubles ($2.85 million) to the city budget.

Fontanka-Hotel planned to create a 206-room, three-star hotel complex with a total area of 11,150 square meters. City Hall is to discuss extending the construction period to February 2013 in the near future, a representative of the city’s Investment Committee said.

Lotte plans on buying the Fontanka-Hotel corporation in order to build a five-star hotel independently, a source close to Fontanka-Hotel said.

According to SPARK-Interfax, Alexei Parshin is Fontaka-Hotel’s general director, as well as the director of FOR-Peterburg, which is owned by Nikolai Ulyanov (66.68 percent) and Dmitry Kozharsky (33.32 percent). FOR-Peterburg owns 50 percent of the Kaliningrad fishing company Rybflot-FOR.

Representatives of Fontanka-Hotel and Colliers International St. Petersburg, the broker for the deal, refused to comment.

Investment in such a project by a hotel operator is something of an exception, but Lotte is not only a hotel operator, said Nikolai Pashkov, general director of Knight Frank St. Petersburg. Lotte opened its first hotel outside South Korea in Moscow in 2010, investing about $300 million in the project. The company has also built a shopping center in Moscow, Lotte Plaza, valued at $400 million.

Investment in the hotel’s construction could amount to $10 million, whilst acquiring the necessary investment rights could cost $5-7 million, making it cheaper than the purchase of a new site, estimated Sergei Fyodorov, general director of Praktis CB.

According to Pashkov, $30 million to $40 million will be needed for the construction of a four-star hotel.

Lotte is a brand that is not widely recognized, making it difficult for the firm to compete with other first-class operators in the city, Fyodorov said. The operator’s hotel in Moscow will provide a circle of potential guests, said Dmitry Vorobyov, developer of the W St. Petersburg hotel.

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