Apraksin Dvor Investor Reaches Out to President

Apraksin Dvor Investor Reaches Out to President

Published: June 1, 2011 (Issue # 1658)

The Swedish firm investing in Apraksin Dvor has resorted to appealing to President Dmitry Medvedev via his blog after running into a brick wall in its attempts to develop the inner-city site.

Ruric investment company bought about 18,000 square meters of the historic market complex Apraksin Dvor, located at 28-30 Sadovaya Ulitsa, back in 2004, and was aware then of the risks: Having invested about 350 million dollars into the St. Petersburg economy, the company’s management has already faced many challenging situations.

“It’s the most unusual case to date, but not our first,” said Craig Anderson, general director of Ruric. “We negotiated with many high level government representatives in Moscow and St. Petersburg, we knew the process would be slow and that it would have to be done very carefully, but I’ve never come across a case that’s lasted for years like this.”

Located within five minutes walk of Nevsky Prospekt and Sennaya Ploshchad, “Aprashka,” as it is often referred to by locals, is a potentially lucrative investment. During the past ten years, investors have acquired various sections of the market site, becoming the official owners after completing the necessary renovation work.

Ruric began reconstruction work on the site immediately after signing the contract in 2004, but not long after the agreement with the Committee for City Property Management (KUGI) had been signed and the facilities had been handed over to the investor for reconstruction, a problem arose due to a functioning fire station located in the grounds, and work was called to a halt. According to the investor, the procedure for its relocation wasn’t covered in the agreement, nor had it been mentioned in the technical documentation. KUGI responded by saying that “the investor was familiar with the characteristics of the site when the contract was signed and, according to the transfer and acceptance act, the sale of the grounds included everything within the territory, including the fire station.”

KUGI proceeded to annul Ruric’s contract, and in 2007, Glavstroi, part of Oleg Deripaska’s Basic Element holding, won the tender for the development of Apraksin Dvor, but the latter deal yielded no visible results.

In total, Ruric has spent more than 40 million dollars on the project. The 22 families living there have been relocated, but the investor was unable to find a new site for the fire station.

“We have contacted all the city’s committees regarding the fire station issue, but have so far — in 2 years — received only formal runarounds, so the situation has dragged on,” said Ilya Sharkov, the general director of Inkom, a subsidiary of Ruric.

An open session summoned by Governor Valentina Matviyenko failed to resolve the problem, and an alternative site for the fire station has yet to be found.

The case has since been taken to court by KUGI, which claims that the Swedish investors failed to fulfil the conditions of the agreement in the agreed time.

“The responsibility for resolving all property and legal issues associated with the implementation of the project, including all questions with the owners of the premises in the building was, according to the agreement, entrusted to the investor at its own expense,” said Olga Barashkina, KUGI’s press secretary. “So the investor is responsible for resolving property issues regarding the relocation of the fire station.”

The fire station became a bone of contention in a court trial that lasted for more than two years. Ruric won twice at the arbitration court, and KUGI has appealed each time. In the third instance, the judge ruled that KUGI acted within its rights when it terminated the contract with Ruric. Ruric has since lodged an appeal.

“When the first court case was taken against Ruric, KUGI and Glavstroi seemed to be working together and in a recent court case, Glavstroi was given permission by KUGI and the judge to work in tandem against Ruric — a very unusual state of affairs in any country,” said Anderson. “We have no concrete evidence of any criminal act, but we are working strongly against this ruling.”

Medvedev recently stated that “improving the investment climate is our common task.” In a desperate bid to evoke a response from local officials, RURIC wrote an appeal on Medvedev’s blog that read, “Mr. President! We are Swedish investors who have faced arbitrary rule in St. Petersburg.”

Ruric still hopes to resolve the issue.

“Everything is possible with negotiation, which we would like to get into,” said Anderson. “Businesses work by negotiating and fulfilling agreements. We are open to negotiation.”

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