Hotel National sold for almost half the price

On December 22 the Russian auction house held the bidding for 100% of Hotel National Ltd. stock, which before then was the property of Moscow city. Note that National is one of the oldest hotels in the city, has a status of a historical monument and is part of architectural heritage on a federal level. Reconstruction and renovation were finished in 2009, and now the hotel offers 201 rooms, including 56 luxury suites.

National’s assets include a unique collection of antiques – furniture and art from Tsarskoselsky and Anichkov museums, which once belonged to the royal family. Hotel National owns 387 out of a total of 427 items, accounted by the government.

The sale was initiated by the Property Department of Moscow City.

Ultimately, the whole package was sold for 4 billion 674 million 660 thousand roubles, which is only 99.66 million (2%) higher than the starting bid. It was an English auction – open for bidders and submission of bids.

Hotel National was bought by Smart finance group JSC, which was operating on account of banker Mikhail Shishkhanov and was representing his uncle Sait-Salam Gutseriev. Trade Group TG LLC was also interested in buying the stock.

Mikhail Shishkhanov and Sait-Salam Gutseriev are co-owners of BIN group, which is #4 beneficiary in Russia, according to Forbes magazine, and its income in 2010 from renting out real estate was $280 million. According to Forbes, these businessmen’s realty portfolio includes a dozen A-class offices (under Chaika Plaza brand), three shopping centers (Petrovsky arcade, Smolensky arcade, and Festival Mall on the south-west of Moscow) and many smaller business objects. The BIN group also controls a construction company Mospromstroy, which itself owns three Marriott hotels and two Holiday Inn hotels.

Overall the realty of the BIN group is estimated to be about 700 thousand square meters of offices, hotels and shopping centers.

According to Andrey Stepanenko, general manager of Russian auction house, Hotel National is one of the most desirable assets of the hotel market in the 5-star segment. “It is of course one of the most interesting lots we’ve sold recently. It’s always a big event when something like that is being auctioned off. We had no doubt the lot would sell and we’re happy with the way the bidding went down”, - said Mr. Stepanenko.

In 2010, while Yury Luzhkov was mayor, Hotel National’s price was estimated to be one billion roubles. Then the appraisal was made in order to sign the hotel off to Hotel Company Ltd. which was created by the city in partnership with Ronald Lauder, co-owner of Estee Lauder. Experts said at the time that the market value of Hotel National might be 1.5-2 billion roubles, if not more.

Marina Usenko, executive vice-president of Jones Lang LaSalle Hotels, commented on the deal: “The hotel was sold for a good price – 560 thousand euro per room. But the final price could have been much higher, because objects like this – with unique location and history – are never sold for less than one million euro per room, regardless of the economic situation. They do not lose value over time. In my opinion, the bidding lacked competitive environment, and thus the starting price did not really go up. Objects like this one should not be sold on auctions at all, because many potential buyers distrust that method of sale. There’s no need to hurry when selling a hotel like this”.