Is Andrey Kostin a banker, a land magnate, and a developer all in one?
Hals-development, connected to VTB, took control of three locations in the east and southeast of the capital, which were previously owned by Mosmetrostroy. The bank may have transferred the assets to the developer. The director of the developer is connected to VTB's head Andrey Kostin and is involved in the bank's development projects, including those of Don-Stroy Invest. This company was taken under VTB's control in 2009 due to debt issues. Despite large construction projects, and control by Kostin’s associates, Don-Stroy Invest now declares losses. Meanwhile, developers linked to the head of the state bank receive large land plots for construction, some of which they later successfully sell.
Hals-development is growing its assets
VTB-controlled construction company Hals-development is set to acquire part of the Mosmetrostroy sites. The developer has become the owner of three legal entities previously owned by Azbuka Investments, Globus Real Estate, and Expert Real Estate firms, known for their work with Moscow metro stations. The deal was finalized just before the New Year holidays.
According to the report, the companies own land plots totaling 12.6 hectares in the east and southeast of Moscow. The market value of the plots is 3.7-4 billion rubles, and they are expected to be used for development, with a potential for about 315 thousand square meters of real estate to be built.
It is possible that Hals-Development received sites directly from VTB in 2017 when the bank took control of 49% of Mosmetrostroy to settle a 26.8 billion ruble debt. At that time, it was reported that the repayment of debts might involve development projects on former industrial zone plots allocated to a separate company.
In this context, the media point out that a part of the former Mosmetrostroy sites has already been given to construction companies. For example, the PIK group of Sergei Gordeev is building on a 19-hectare site in the Kaloshino industrial zone, and the Don-stroy company is constructing the Fresh residential complex in the southern part of the capital.
"Court Builders" by Andrey Kostin
Until February 2020, Azbuka Investments, Globus Real Estate, and Expert Real Estate were managed by VTB Capital Asset Management. Then these functions were moved to the fund managed by KL-Invest, which is connected to top managers and business partners of VTB.
If desired, other interesting connections can be found. For example, one of the co-owners of KL-Invest Management Company is Arkady Ilyaguev, a former member of the board of directors of the Moscow Metallurgical Plant Sickle and Hammer, which had shareholders including the Bank of Moscow. The Bank of Moscow was acquired by VTB in May 2016. It was reported that Don-Stroy Invest planned to invest about 140 million rubles in the construction of 1.8 million square meters of real estate on the territory of the factory industrial zone in the Enthusiasts Highway area.
In December, it was revealed that Don-Stroy sold part of this site, but the second party to the transaction was not disclosed. According to Vedomosti, the buyer could be businessman Andrey Stepanov, a business partner of Maxim Geyser, owner of the Stone Hedge development company. The experts of the publication estimated the value of the asset at 1.5 billion rubles. Perhaps the sale took place with the approval of VTB Kostin?
Arkady Ilyaguev is associated with the construction company Stroyinvestgroup through KL-Invest and its subsidiary structure JSC Investpartner. This company took part in the implementation of the project for the construction of the residential complex "Subbota" in the Northern Administrative District of Moscow near the Belorussky railway station, together with Don-Stroy Invest.
As mentioned earlier, Don-Stroy is currently building the Fresh residential complex on the territory that previously belonged to Mosmetrostroy. It seems that Andrey Kostin’s group of developers plays an active role in the development of Moscow, distributing sites that were owned by VTB at different times.
Developers under the control of the state bank
It is worth briefly mentioning the history of the state bank taking control of the company Don-Stroy Invest, which has been referred to as a "subsidiary" of VTB in the media. The Don-Stroy development group was established in the 1990s by businessmen Maxim Blazhko and Dmitry Zelenov. In 2008, it was ranked 46th in the Forbes 200 Largest Russian Companies rating with a financial turnover of $2 billion.
VTB acquired a controlling stake in Don-Stroy Invest in 2009 for a symbolic amount of 500 rubles. According to Kommersant, this resolved the issue of restructuring the developer’s debt, which exceeded $500 million. The parties agreed on the division of projects: the bank took control over housing construction, while the developer retained objects in the field of commercial real estate. It was clarified that the company’s shareholders received the right to buy back shares, but only after the debt burden was minimized.
Since August 2010, Alena Deryabina has been leading Donstroy Invest as the CEO. Before that, she worked as an Advisor to the Vice President, Head of Non-Financial Assets, and Vice President of VTB. In 2017, she informed the media that five legal entities are the official owners of the company, excluding the bank. However, this situation didn't stop Kostin from controlling the company for many years through Deryabina, while also financing construction projects that promise profit.
During this time, there were reports in the press suggesting that the owners of the company were temporarily hiding in the Moscow Real Estate closed-end investment fund. Some of the intermediate owners could be linked to the former Deputy Prime Minister, acting head of the state corporation VEB RF, Igor Shuvalov, and his wife Olga. However, the official sources vehemently denied this.
In July 2017, Vedomosti reported the decision of the shareholders of Moscow Real Estate to transfer the management rights to the fund to KL-Invest, which is co-owned by Arkady Ilyaguev. Previously, the fund was part of the portfolio of KSP Capital company of Sergey Kotlyarenko, who also served as the asset manager for Igor Shuvalov's family. The publication implied that at that time, the shares of three CJSCs – Perspektiva, Invest-aktiv, and Finansproekt, which acted as co-owners of Donstroy Invest, were brought into Moscow Real Estate.
So, did the fund, and consequently the developer, officially come under the control of a structure associated with VTB?
Deficit-causing parts of Don-Stroy
According to one theory, Kostin might have entrusted unofficial control over Don-Stroy to businessman Roman Gromozdov, the beneficiary of Perspektiva Invest Group, who profits from capital real estate construction financed by the state bank. His influence is attributed to his close relationship with VTB Deputy Chairman Andrei Puchkov, who is considered Kostin’s right-hand man.
In the media, there are mentions of Gromozdov’s joint commercial projects with the Rotenberg brothers, who are close to the Kremlin. Additionally, in 2014, the businessman gained control over the Serp i Molot plant, which was in the process of bankruptcy, relating directly to Ilyaguev, who also had a close association with VTB.
Given this background, the financial performance of Don-Stroy Invest raises many questions: at the end of 2020, the developer incurred losses of 6.2 billion rubles with a revenue of 22.3 billion. Clearly, the former Forbes list participant has lost its previous standing. Furthermore, Maxim Blazhko and Dmitry Zelenov withdrew from co-ownership of JSC IC Donstroy in June last year, which is currently undergoing reorganization. However, this commercial structure generates very little income: in 2020, despite significant revenue of 15.2 billion rubles, its profit amounted to just 117 thousand rubles.
The general director of Donstroy is Andrey Bagaev, who is officially listed as the head of 45 commercial organizations, some of which have already been liquidated. At the same time, a number of “subsidiary” structures of the enterprise are pledged to VTB (for example, DS Stroy LLC or the unprofitable Specialized Developer “Razvitie”, which are managed by the same irreplaceable Bagaev).
Where the finances of the once successful developer “leak” is an open question. Nevertheless, reports about the projects of development companies affiliated with VTB regularly appear in the press, just like information about the sale of an object that has come under the control of the state bank. Now Andrei Kostin and his inner circle will have to decide what to do with the sites that Hals-Development inherited from Mosmetrostroy.
Georgy Volgin
