What is your overall assessment of the real estate investment outlook in Russia? The short-term Real Estate investment picture might seem gloomy. Investment activity has declined, there was a time period when we heard little about any new major deals. Some foreign investors froze their activities in Russia if they could... Others called Russia a “closed market for international investment”. There was a lot of uncertainty, specifically during the end of 2014 - beginning of 2015. However, local players (and foreign investors long-established in Russia) had more optimism in them. Whoever was brave enough to invest in Russia during the shock, is likely to get noticeable returns, no matter the scale of investment. The decline of the rouble has made buying a lot cheaper; this is one of the reasons why deals are happening, despite the difficult economic situation and remaining instability. The long-term picture looks brighter; Russia currently is a truly “golden opportunity” for the brave. The country will remain an attractive market for investment despite all, due to its geographical position, natural resource-driven economy and government efforts, such as the public exposure achieved by the previous Winter Olympics, the upcoming 2018 World Cup and promotion of investment attractiveness… But time is of the essence; there is lot of interest, both domestic and international and the profit margins for projects will not remain as high as they are now for long.

1. Q A&
AN OUTLOOK ON THE FUTURE
OF RUSSIAN REAL ESTATE INVESTMENT
RUSLAN ILYAZOV
Producer, Russia GRI GLOBAL REAL ESTATE INSTITUTE
RUSSIA
GRI2015

2. Q A&
RUSLAN ILYAZOV
Producer, Russia GRI GLOBAL REAL ESTATE INSTITUTE
Q: What is your overall assessment of the real
estate investment outlook in Russia?
R.I.: The short-term Real Estate investment
picture might seem gloomy. Investment activity
has declined, there was a time period when we
heard little about any new major deals.
Some foreign investors froze their activities
in Russia if they could... Others called Russia a
“closed market for international investment”.
There was a lot of uncertainty, specifically during
the end of 2014 - beginning of 2015. However,
local players (and foreign investors
long-established in Russia) had more optimism in
them.
Whoever was brave enough to invest in Russia
during the shock, is likely to get noticeable
returns, no matter the scale of investment. The
decline of the rouble has made buying a lot
cheaper; this is one of the reasons why deals are
happening, despite the difficult economic
situation and remaining instability.
The long-term picture looks brighter; Russia
currently is a truly “golden opportunity” for the
brave. The country will remain an attractive
market for investment despite all, due to its
geographical position, natural resource-driven
economy and government efforts, such as the
public exposure achieved by the previous
Winter Olympics, the upcoming 2018 World Cup
and promotion of investment attractiveness…
But time is of the essence; there is lot of interest,
both domestic and international and the profit
margins for projects will not remain as high as
they are now for long.
Q: What do you think about international
investors’ current view of the Russian real estate
market? Will there be a shift from “West” to “East”?
R.I.: In a nutshell: when the rouble collapsed,
some foreign investors became concerned, to
say the least, especially when it seemed that the
political instability will worsen. The situation has
stabilised since then.
There is strong evidence that Russia’s ties with the
“East” are strengthening. RDIF are signing deals
with the Chinese, the St. Petersburg Economic
forum attracted many potential investors from the
Middle East...
However the “new” players might be cautious at
first (although the government is offering
guarantees and partial financing) and, despite the
fact that we regularly hear of new projects, the
investments might not be flooding in in the
immediate future.
It is important to realise, however, that
traditionally, major Western investors feel
comfortable in Russia. Morgan Stanley,
Immofinanz, Hines are long-established here,
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3. Q A&
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have local partners, know the market, know all
the pitfalls and downsides. This is one of the
reasons we heard about “Westerm” deals even
during the hardest times.
Will we see more Western investment? Perhaps, a
few names, but, personally, I am looking forward
to hearing more Eastern names who will enter the
market on their own, without “guidance”. It could
possibly as soon as 2016.
But both Western and Eastern investors face a
new challenge: local investors have rapidly taken
“charge” and have partly filled the gap. For them,
this was one of the “every crisis is an opportunity”
cases.
Q: Do you think local investors will play a leading
role in Russian real estate market in the coming
years?
R.I.: Local investors already play a major, if not a
leading, role in Russian Real Estate. Russia is still a
rich country overall. There is a lot of capital, even
though not evenly distributed.
There are privately-owned conglomerates, which
buy-buy-buy... If you have a look at the annual
Forbes “Kings of Russian Real Estate“ list, you will
get a feel of the global picture.
The long-awaited “de-offshorisation” - a financial
amnesty - will bring even more Russian capital
back to the market. Where will this capital be
invested? Green technology? Government bonds?
Yes, but Real Estate will be amongst the obvious
choices.
Q: Where is the biggest opportunity for Russian
real estate?
R.I.: There are opportunities in every sector of
Russian Real Estate.
Internal tourism is on the rise and there is an
undersupply of apart-hotels and modern lower
price-range range hospitality options. On the
other hand, there still is an undersupply of Five-
Star hotels in some cities hosting major interna-
tional events (political summits, sports, economic
forums). 2018 World Cup is a good example - if
2014 Winter Olympics “built” Sochi, what will
happen to the cities hosting the Cup? Are the
necessary infrastructure and accommodation
projects built? Not yet. Is the government ready
to offer a helping hand and provide land,
co-investment, legal support? Absolutely.
A longer-term opportunity could be logistics.
Considering Russia’s geographical position and
keeping in mind the upcoming New Silk Road
Project, warehouses and infrastructure projects
are worth a closer look.
There are numerous niche opportunities, such
as Student Housing. Key cities’ universities are
gaining rankings in global educational charts and
attract local and foreign (BRICS countries,
ex-USSR…) student migration. Yet, the student
housing market is terra incognita even in Moscow
and St. Petersburg. Unless foreign student
housing developers will enter the market soon,
the local players will wake up and take over.
Russian Real Estate could be the most exciting
Real Estate investment opportunity overall (at
least Europe-wide), the ever-present question is
how to assess and manage the risks attached to
operating in the country.
Q: In a nutshell, what is Russia GRI?
R.I.: Russia GRI is a meeting for senior

4. Q A&
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decision-makers in the Russian Real Estate Market,
specifically domestic and international investors,
developers and lenders. Behind closed doors, in
an informal setting, key executives of the leading
companies working in, or interested in entering
Russia will gather and discuss the current
situation on the market. The purpose of the
attendees is to get to know, connect and build
relations especially as in Russia of all places,
personal relations are key in business.
It’s a very high quality gathering where
opportunities can be explored in small, informal
and direct discussions.
Q: What is the key characteristics that
differentiate Russia GRI from other events?
R.I.: Russia GRI is an event that takes place in a
Five-Star hotel; with a private networking dinner
the night before. It will attract the players who are
active today (and will be tomorrow!),
decision-makers, peers; people whose opinions
might differ, but whose level of seniority is equal.
This unique format, exclusivity and close
interaction is what separates Russia GRI from any
other Real Estate meeting.
Q: Who will come to Russia GRI?
R.I.: The most important thing for us is seniority.
We are very focused on bringing investors,
developers and lenders with business in or
perspective on Russia. There will be a wide range
of discussions, all informal and interactive, so
everybody gets the chance to get involved, speak
up and get to know others. AIG, Ghelamco,
Morgan Stanley, ECE Russland, Sberbank, NPF
“Blagosostoyanie” and so on.
Q: What will be different in this Russia GRI in
comparison to previous edition?
R.I.: I believe 2015 will be very different, just
given the fluid market situation. As an industry
club, our mission is to provide the platform for
people to connect, no matter what the
circumstances.
So we are happy to bring together this year’s
addition. There will be a few changes; we took
into consideration the market conditions and
drafted the schedule to allow more space to
address concerns as well as discussing solutions.
We are expecting quite a few new faces, reflecting
on the interest in Russian real estate.
We are extending our reach; i.e. including a
discussion about Kazakhstan to the programme;
an attractive, and, for many, - yet unexplored
market for Real Estate investment. There are
opportunities in the regions that might not be on
everybody’s radar.