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Trump Tower Moscow: doomed by cultural divides?

Why We Wrote This

Much is being made about the legality over then-candidate Donald Trump's attempts to put a Trump Tower in Moscow in 2016. But just how close was he to breaking into Moscow's real estate market?

Christian Hartmann/Reuters
The skyscrapers of the region of Russia's capital known as Moscow City – more formally the Moscow International Business Center – are seen just after sunset in Moscow on July 12.

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As the US has been roiled by reports of President Trump’s efforts to have a Trump Tower built in Moscow in 2016, Russian real estate experts have chuckled. Not because of the suggestions of criminality and political collusion. Rather, they are amused by the sheer incomprehension of the way things are done in Putin-era Russia that has been displayed by the Trump organization in its quest to get a deal. The part of Moscow the Trump organization had long targeted for a Trump Tower is the Moscow City development. Nine skyscrapers have been completed there over the past 15 years or so, with at least six more to come. The Moscow City zone includes a huge shopping mall, more than a hundred restaurants, hotels, vast amounts of office space, and some of the most expensive residential space in Europe. And it also features the full minefield of Russian business obstacles, including corruption, bureaucratic interference, dodgy financing, and opaque ownership. “Everything here is complicated,” says Mikhail Loginov, editor of Stroitelnaya Gazeta, a leading construction industry journal. “The circle of companies working in Moscow is limited. It’s really difficult, though not impossible, for someone new to come in and establish themselves.”

In the Moscow suburb of Krylatskoe, within sight of the main road to Russia’s most expensive dacha zone, there is a long, yellow-brick, five-story building that had a moment of fame about 25 years ago, but has since faded into obscurity. Yet, even today, if you try to approach the heavily walled and screened-off property, you will be shooed away by very serious-looking armed guards.

Known as the House on Autumn Street, it was the place where, according to many accounts, then-President Boris Yeltsin decided to establish a residence for himself and his top lieutenants. Orders were given, and a half-finished Soviet-era structure was commandeered and repurposed for Kremlin use. Luxurious flats were constructed. Mr. Yeltsin was given the entire top floor; his prime minister, defense minister, and others were intended to occupy the spaces below.

The idea that the country’s top elite might enjoy living together under one roof has a certain pedigree in Russia. Sixty years previously the Bolsheviks had constructed a vast, rambling apartment complex near the Kremlin, nicknamed The House on the Embankment, intended to concentrate top Soviet officials in one common abode. It became a scene of horror during the Stalinist Great Terror a few years later, as secret police vans carted away high-level victims to their deaths almost nightly.

The recollection of that tragic history may be one reason neither Yeltsin nor any of his cohorts appear to have ever moved into the Autumn House. Nobody in Russia has since floated the notion of putting all the leaders into one big home again.

That is, until Felix Sater, a former Soviet émigré in President Trump’s business circle.

Mr. Sater came up with the idea of convincing the Kremlin to help him and his associate, now disgraced Trump attorney Michael Cohen, navigate the shoals of Moscow’s opaque real estate market by giving a $50 million penthouse in the hoped-for Trump World Tower Moscow to Vladimir Putin. The rest of the units could then be sold for $250 million each to Russia’s elite.

It is not known whether Sater ever informed Mr. Trump of his plan, much less Mr. Putin. But he did seem confident that it should work. “All the oligarchs would line up to live in the same building as Putin,” Sater recently told BuzzFeed News.

The plan appears to have been one misjudgment among many. Whether or not pursuit of the project ran afoul of US law – a topic being hotly debated in American politics and media – the yearslong effort to build a Trump Tower in Moscow has been largely out of its depth over failures to understand how the Russian system works, experts say. Whatever its ambitions, the project ground to a halt in one of the hottest development zones in Moscow – one that features the full minefield of post-Soviet Russian business obstacles, including corruption, bureaucratic interference, dodgy financing, and opaque ownership.

‘Everything here is complicated’

The part of Moscow the Trump organization had long targeted for a Trump Tower is the Moscow City development. The Canary Wharf-like gaggle of wildly shaped and multicolored skyscrapers that now towers above a former industrial zone by the Moscow River has radically altered Moscow’s Soviet-era cityscape.

Nine skyscrapers have been completed over the past 15 years or so, with at least six more to come. The development includes a huge shopping mall, more than a hundred restaurants, hotels, vast amounts of office space, and some of the most expensive residential space in Europe.

One thing that is missing is the 100-story Trump World Tower Moscow, meant to be the tallest building in Europe, with Trump’s name glowing in huge letters from the summit and a penthouse for Putin on top.

Russian real estate experts chuckle at the story being recounted in the US media – not because of the suggestions of criminality and political collusion, which are roiling Americans. Rather, they are amused by the sheer incomprehension of the way things are done in Putin-era Russia that has been displayed by the Trump organization in its quest to get a deal in Moscow City.

“Everything here is complicated,” says Mikhail Loginov, editor of Stroitelnaya Gazeta, a leading construction industry journal. “The circle of companies working in Moscow is limited. It’s really difficult, though not impossible, for someone new to come in and establish themselves. The city government has its own companies, and it is the city that has the final word on any project.”

It’s not impossible to do the things that the Trump organization wanted to accomplish, says Alexander Shevchuk, a real estate insider who now works as an independent journalist.

“About 10 years ago my boss at the time had talks with Trump’s representative in Moscow, and they went through a lot of ideas. At some point Trump visited to test the waters,” he says. But nothing came of it.

“Was it feasible? Yes, of course. In those golden years [before the 2008 crisis] everything was possible. There were a lot of foreign firms here in those days. A few stayed. Many left after their first experiences in Russia,” he says.

No traction for Trump Tower

Under its energetic mayor, Sergei Sobyanin, the Moscow government has since 2010 overseen a vast project of urban renewal and is currently in the process of uprooting thousands of Soviet-era apartment blocs and replacing them with new units on the edge of town. This gives city authorities a stranglehold on valuable downtown real estate, for which the city's favored companies get first pick.

But Trump’s representatives, Sater and Mr. Cohen, apparently chose a second-tier development company called I.C. Expert Investment, headed by a man named Andrei Rozov who had no track record of downtown Moscow development, with whom to do a deal.

The closest they appear to have gotten was a letter of intent, signed between the Trump group and Mr. Rozov in 2015. It outlines a licensing deal, in which Rozov would acquire the land, find the financing, and build the structure, paying about $4 million to the Trump organization plus a cut of condominium sales in return for the use of Trump’s name. It includes details, such as a spa named after Ivanka Trump and run according to her dictates, but there is no mention of a penthouse for Putin.

That deal, which was not legally binding, apparently went nowhere. It is unknown whether Rozov ever acquired rights to a plot of land in hotly contested Moscow City, or nailed down financing from any major Russian bank. The company, I.C. Expert, refuses to answer any questions about the project.

Last week, Kremlin press spokesman Dmitry Peskov revealed that his office received at least two emails from Cohen in January 2016, asking for Kremlin assistance in getting the Trump Tower project restarted. Mr. Peskov suggested that he was baffled as to why such a request would come to his official address for press inquiries.

“My email address is listed publicly. We receive dozens of emails every week from those who want to build something, want to improve relations, and also from ordinary citizens,” he said. He added that his assistant subsequently advised Cohen to attend the annual St. Petersburg Economic Forum, where he might connect with real Russian business people.

Kremlin sponsorship for a deal would definitely be a strong card if it were real, says Oksana Samborskaya, head of the architecture department of Stroitelnaya Gazeta.

“The Kremlin doesn’t have much to do with Moscow development these days. It’s all in the hands of the Moscow government. Of course, if Putin backed a project that would be key to its success,” she says. “But sending an email to the Kremlin press secretary, no, I don’t see how that could work.”

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