One of the fundamental issues for a foreign investor or businessman is that of a Russian partner. The bank is ready to be that partner. I‘ll illustrate what I mean with each non-core asset separately.
For example, we own three hotels in Ekaterinburg. But we are not experts in hotel business – we are bankers. So we are prepared to either sell these hotels or hand over the managing of them. We would look upon a partnership with a strategic investor entering the business with a blocking stake as an equal partner quite calmly. We agree to the strategy of developing and restructuring of the business and would not interfere any further. And, naturally, we hope to share the same goal with the potential partner, that in time we’ll be selling the hotels at a greater profit...
We understand well the particulars of the hotel business. It‘s very much standardised, and professionals are able to easily see the nuances of its profitability. The hotel business is a long-term investment where the profits are not huge but they are stable and regular. And if one of the hotel chains was interested in these hotels, we would even be prepared to extend them credit for the purchase on a long-term basis. Or we could look at the possibility of them managing the hotels.
I‘ll continue with hotels. Amongst the bank‘s assets is a small inn in the suburbs of Sochi. The 2014 Olympic Games will be perfect for putting it on the map. In the western conception, it is more of a family business. However, it may be of interest to a chain. The great thing about this object is that it is offered as a rough-finished piece of property. A hotel can be created practically from scratch, according to the required standard, with interiors, configuration and furniture to match.
Another non-core asset is the “Planet of Parquet” factory in Apsheronsk. We are, of course, interested in selling this business. The main advantage of this factory is that it is located in an area with the best raw material for wooden flooring production in Russia. It is no coincidence that the leaders in the European flooring market like Karelia, Upofloor, Tarkett and Barlinek are interested in this factory. Our bank acquired this business as the result of a leasing deal. The factory was built in 2002 but in 2007, the owner at the time decided to introduce another production line equipped with the latest Italian machinery. Unfortunately, he was unlucky. He launched the line at the peak of the economic crisis in 2008. And the time to make the biggest leasing payments came around 2008-2009. We restructured his loan, granted deferments but, at some point, other, smaller creditors began to put pressure on the owner... We negotiated with him, restructured his debt and bought the entire complex. Now we own not only the equipment but also 4.5 hectares (over 11,000 acres) of land and the real estate.We simply believe in this object! And our faith is based on sensible calculations. As I have said, there are fantastic raw material resources there. Wooden flooring manufacturers care about what this region can provide: either simply timber (which is not smart!) or the half-finished product. Some proposals from a number of manufacturers have already been received. They are destined to cooperate with the “Planet of Parquet”.But it is possible that someone will be interested in putting their own brand of wooden flooring on the market. We are ready to discuss various types of cooperation and so we wouldn‘t rule out the idea of a partnership.Let‘s return to Ekaterinburg. We are building a business center in the city. It will be put into operation at the end of the year already with leaseholders. In essence, the rental business is ready. By the way, there are premises on the ground floor with separate entrances, suitable for separate businesses. There are special units for a bank, restaurant, barber‘s shop, fitness club... They also do not share entrances with the main business section but on the plus side, potential customers are right next door. As regards to the business center itself, there are several parts of it and we can sell them all at once or as individual units.Let me elaborate on why it is profitable for investors to cooperate precisely with a bank that sells non-core assets. We completely hand over the managing, we do not want to remain in the business itself. Furthermore, we offer due diligence and a transparent sale history of the object guaranteed by the bank. In all dealings, following the classic model of western M&A, we are prepared to give the appropriate representations and warranties. And in the event of any claims or lawsuits by a third party, the bank will take full responsibility for the duration of the period agreed with the buyer.And another thing. We are in banking business. By passing on the burden of managing a business we act really as an investor. Usually it happens differently: first there is an idea, then something to manage, then the search for an investor. With us, the object is sold with a willing investor. An object with a warranty and a willing investor! More than that, in contrast to many sellers who are unable to sell an object in instalments, we are in a position to offer credit for its purchase. This means that we can act in any capacity or in all of them together: lender, investor, co-founder. Plus we will give the bank‘s guarantee regarding the legitimacy of the ownership of the object. Where else would you find that?