Romanov Palace Sold in St. Petersburg

The former palace of Grand Duke Mikhail Mikhailovitch is situated at No. 8 Admiralty Embankment.

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St. Petersburg’s Property Fund on Friday sold the Palace of Grand Duke Mikhail Mikhailovich located at 8 Admiralteiskaya embankment at a starting price of 520 million rubles ($18 million).

There were two bids in the auction, and the successful buyer was a company named Palace of Grand Duke Mikhail Mikhailovich. Representatives of the company declined to comment after the auction.

The palace measures 5,030.5 square meters and includes a wing on Chernomorsky Pereulok of 3,135.9 square meters. The property, which is registered as a monument of federal importance, has been leased until 2049 to Severo-Zapadnaya Finansovaya Gruppa (Northwest Financial Group) for a rent of 3.3 million rubles ($114,600) per month. The property can be used for business and social purposes, and as a residence.

The entrepreneur Alexander Bronshtein, a beneficiary of SZFG, is behind the buyers, according to two of Bronshtein’s acquaintances. According to data from the Unified State Register of Legal Entities, the buying company was registered at 8 Admiralteiskaya embankment on Feb. 10, and its only founder is Mavlida Aminova, who in 2003 was general director of Pikalyovsky Cement. That company was then a subsidiary of Mettalurg, of which Bronshtein was one of the beneficiaries.

Bronshtein and his partners — Alexei Shmargunenko and Mikhail Shlossberg — sold Volgogradsky Aluminum, Volkhovsky Aluminum and Pikalyovsky Alumina Factories to Sual. Then, in 2005, they sold Pikalyovsky Cement to Inteko for $35 million.

Bronshtein and Aminova were unavailable for comment.

Mikhail Malakhov, general director of SZFG, insists that neither his company nor any organization connected to it were involved in the auction. The tenant, he says, has no intention of vacating the property. According to SPARK-Interfax, SZFG belongs to Romtrade Holdings.

SZFG subleases the property. According to Malakhov, the rental rate is 700 rubles ($24.30) per square meter per month for the space on Chernomorsky Pereulok, and about 1,500 rubles ($28.80) for the space on Admiralteiskaya embankment. Since 2001, SZFG has invested about $5 million in the property, he said.

This is not the first time the property has been up for sale. In November last year, a starting price of 700 million rubles ($24.3 million) was announced, but the auction was abandoned. According to a representative of the Property Fund, there was only one bid.

The buyer acquired the building for a little more than $2,000 per square meter, although the price for similar buildings can easily reach $4,000 or $5,000 per square meter, said Vladimir Sergunin, director of the investment department of Colliers International in St. Petersburg. The price was affected by the long-term rental agreement, otherwise City Hall could have sold the lot for twice as much, as the property is in a very attractive location, he said.

Sergunin said he believed that the optimal use for such a building was as an elite apartment building or hotel. If it is possible to adapt the building for use as a hotel or residential building, its price could rise to $10,000 to $15,000 per square meter, said Sergunin.

Sources: St. Petersburg Times
2 March, 2011