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Appeals to Continue: Fight for Rossiya Site

ai Adelaja / Staff Writer Hope is fading fast that a sprawling expanse of land near the Kremlin, once home to the Hotel Rossiya, will be rebuilt anytime soon.


On a far-reaching ruling last week, Moscow Arbitration Appeal Court No. 9 nullified contractual agreements between City Hall and ST Development, which was awarded the rights to develop the $800 million Zaryadye project, where Rossiya, formerly Europe's largest low-cost hotel, once stood.

/VLADIMIR FILONOV / MT/ The residential, 24-story Parus project, developed by Inteko, was named Building of the Year by Internet voters. The voting is organized by web site and magazine Made in Future, with the site choosing 12 candidates.

The contracts, won in a tender in 2004, covered the demolition of Rossiya, the development of the new Zaryadye hotel complex and the transfer of a 51 percent stake in the property from City Hall to ST Development. Another bidder successfully challenged the tenders in 2006, however, and the arbitration appeal court's ruling was a refusal to overturn the lower court's decision to declare the tender illegal. ST Development, owned by billionaire Shalva Chigirinsky, said Friday that the ruling would mean a setback for the redevelopment work, which was planned to take off this year. "We are losing time and money, and we are missing our deadline," Ilya Levitov, a representative of STT Group, the developer's parent company, said by telephone Friday. "We have already invested more than $200 million in this project, and now we cannot proceed because of the court's decision," he said. ST Development trumped three other bidders with an $830 million plan, which, originally, was to turn the 13-hectare site into a 400,000-square-meter multifunctional trade and entertainment complex with 2,000 hotel rooms. The complex, dubbed Zaryadye and designed by British architect Norman Foster, was to replace its 3,000-room predecessor, which was completed in 1967 to accommodate visiting delegations to Communist Party congresses. ST Development has since said Zaryadye will total 360,000-square-meters, with four hotels offering 900 five-star rooms and 195 serviced apartments. A 18,000-square-meter shopping complex will be built underground along with parking for more than 1,400 cars. Foster and Partners has estimated that the project will be done by 2011. The decision on March 31, however, means that ST Development has lost the right to start the ambitious project. The nub of the dispute was how ST Development was initially selected. Monab, the real estate arm of Evrofinance Mosnarbank and the plaintiff in the case, said Chigirinsky's STT Group, believed to have strong links to City Hall, was selected despite being dramatically outbid by two other companies. Austrian builder Strabag, then backed by the royal family of Dubai, was ready to invest $2 billion, while Monab offered to invest $1.45 billion. ST Development's tender offer was $830 million. In papers filed at the arbitration court, Monab called the committee's preference for STT Group inexplicable. It also alleged that the group had inside knowledge of the tender process, said Grigory Chernyshov, a lawyer with Egorov Puginsky Afanasiev & Partners, which represented City Hall's tender committee in the proceedings. In October 2006, the Supreme Arbitration Court overturned the decision of the tender committee and in January the following year, the same court declared the conduct of the tender illegal, in what appeared to be a victory for Monab. STT Group's appeal of those rulings was quashed March 31. But Levitov, of STT Group, insisted on Friday that the company would appeal the latest decision. "We have no plans whatsoever to relinquish the project," he said. "We are going to appeal ... right to the country's highest court." City Hall lawyer Chernyshov was also defiant, saying, "The court's decision is not the end of the matter." Levitov was unabashed about his company's hopes to find support in City Hall, saying the municipal government "owns the Rossiya company and could eventually make a final decision on the issue." He declined to elaborate. Gennady Sorokin, spokesman for Evrofinance Mosnarbank, said Monday that Monab was preparing an "adequate response" to all issues surrounding the construction dispute and would make its position known in future. City Hall's department of development and architecture declined to comment Friday, saying it was not yet in possession of copies of the court's ruling. ?A real estate developer, who requested anonymity to speak frankly about the case, said Levitov's statement could mean that City Hall is considering signing a direct agreement with STT Group to redevelop the property.