Petroleum House put up for sale On the verge of its liquidation, RAO UES of Russia is preparing its office, the well-known Petroleum House on Vernadsky prospect, for sale. The building which in 2000 cost the energy holding company less than $50 million is now valued by experts at $180-250 million. Yesterday, the board of RAO UES of Russia approved termination of its partnership in OJSC Petroleum House whose major asset is the office building on Vernadsky prospect, 10 - the present headquarters of the company, according to a RAO UES press release. By July 1, 2008 RAO UES will cease to exist as a legal entity; before the date the holding company is to sell all non-core assets, says the RAO UES press-service. The 21-storey business center on Vernadsky prospect was erected in 1995; the total floor area equals 56,000 sq. m, out of which 46,000 sq. m has been allocated for office space. Its construction was financed by several petroleum companies, their names still undisclosed. The center became unofficially known as Petroleum House. In December 2000, RAO UES acquired 75% plus one share of Petroleum House at $35 million. Later, the business center was transferred to accounts of OJSC Power Industry Center where, until recently, RAO UES has held 75.03%. Last week, however, the energy holding company raised its share there up to 84.57%. The remaining shares belong to several individuals and legal entities. The state company, according to the RAO UES press service, plans to buy the remaining minority shares back to raise the stake of Power Industry Center up to 100%. Afterwards, the Petroleum House will be written off the company's accounts and, subsequently, sold. The board of directors intends to consider transaction terms in the 4th quarter; sale of the office will be effected by a project center specialized in sales of UES assets. A respective contract with the center is to be signed before August 15. Maxim Zhulikov, a senior manager at Penny Lane Realty, Dep. of Commercial Real Estate, estimates that 1 sq. m of floor area in the business center may cost $4,000 or 5,500 ($184-253 million for the whole center). Roman Cheptsov, Development Director of Prime City Properties, estimates Petroleum House's value at $230-250 million. It is much less than the sum of the recent sale of the YUKOS office building on Dubininskaya street. In May 2007, a joint stock company named Prana acquired the 22-story business-center with 27,000 sq. m area at 100 bln. rubles. ($3,9 bln) at a starting price of 22 bln. rubles. ($860 million). In early July, the asset was bought from Prana by Rosneft. In opinion of Maxim Zhulikov, the UES office can be purchased by some major mineral production company or financial entity. Roman Cheptsov says that developers or large investment funds may be potential buyers which can make the purchase to later lease the building. Rental rates (VAT and operating expenses excluded) are estimated by Mr. Zhulikov at $600/1 sq. m per annum. Market participants, however, believe that the business center will not change its owner and will belong to an entity incorporated in the course of UES restructuring. |
