BUSINESS OPPORTUNITIES IN THE SOVIET UNION:
LOOK AT REAL ESTATE JOINT VENTURES
Kimberly Ann McKay
B.A. University of California Berkeley
1981
SUBMITTED TO THE DEPARTMENT OF ARCHITECTURE
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS OF THE DEGREE
MASTER OF SCIENCE IN REAL ESTATE DEVELOPMENT AT
THE MASSACHUSETTS INSTITUTE OF TECHNOLOGY
September 1990
Q
Kimberly A.
McKay 1990
The author hereby grants to M.I.T.
permission to reproduce and to distribute publicly copies
of this thesis document in whole or in part.
Signature of the author
Kimberly Ahn MbKay
Depaetment of Architecture
July 31. 4 L990
Certified by
James McKellar
Senior Lecturer, Department of Architecture
Thesis Supervisor
Accepted by
J
Glor\ia Schuck
Chairperson
Interdepartmental Degree Program in Real Estate Development
MASSACHUSFTTS INSTITUTE
OF TECHNOn nGy
SEP 19 1990
LIBRARIES
Rotch
BUSINESS OPPORTUNITIES IN THE SOVIET UNION:
A LOOK AT REAL ESTATE JOINT VENTURES
by
Kimberly McKay
Submitted to the Department of Architecture on July 31, 1990
in partial fulfillment of the requirements for the Degree of
Master of Science in Real Estate Development
ABSTRACT
Political and economic reforms within the Soviet Union appear
to offer new opportunities to western partners considering
An overview of the existing
real estate joint ventures.
building industry with an emphasis on the differences between
Western and Soviet approaches, provides the framework for a
discussion of what real estate joint ventures offer the
Soviet Union, why they have become popular and what a foreign
partner can expect from the existing building industry.
Under Perestroika, many changes have begun to be instituted
that affect the outcome of real estate joint ventures. The
impact of these proposed reforms is evaluated in light of the
Drawing from field
most recent laws that have been passed.
research in the Soviet Union, a study of four joint venture
have
that
difficulties
the
illustrates
partnerships
traditionally been associated with conducting business in the
Soviet Union as well as how foreign partners need to approach
development strategies in the future.
It was found that despite the tremendous number of reforms
proposed under Perestroika, some of the measures intended to
have resulted in more
make investment more attractive
confusion, consequently the emergence of real estate joint
ventures is a reflection of larger political and economic
a new
Union rather than
the Soviet
problems within
Investment in real estate development in the
phenomenon.
Soviet Union will remain a high risk venture due to political
instability, and the resulting lack of effective economic
reforms. However, this will not curb the flow of western
developers interested in the tremendous opportunities that
Adhoc real estate joint ventures will
this market holds.
continue to be negotiated. In the short term, companies that
forming joint ventures will focus on the profit
succeed in
generated by meeting foreign building requirements and in the
long term re-focus on the real estate opportunities offered
by the Soviet market.
Thesis Supervisor: James McKellar
Title: Senior Lecturer,
Department of Architecture
ACKNOWLEDGEMENTS
possible without the
would not have been
This paper
assistance of many people in the Soviet Union. I would like
of
Leningrad Institute
of the
staff
thank the
to
(Lenniitag),
Theory
Urbanistic
and
Architectural
particularily Nikita, Michael, Tanya, and Elena for their
Their
insight into the housing and construction process.
the
in
life
sharing
in
hospitality
and
honesty
generousity,
Soviet Union was beyond the call of duty. I would also like
to thank Anna for her patience and superb translation. For
sharing their personal trials and tribulations regarding how
joint ventures really work I would like to thank Otto Dvorak,
John Reuther, Alan LeBlanc, Nolan Kerschner and Chris Senie.
It is their relentless pursuit of new challenges that has
provided a framework to this unexplored territory. Finally,
I would like to thank Mark for his uncompromising support and
encouragement.
TABLE OF CONTENTS
ABSTRACT
................................................. 2
ACKNOWLEDGEMENT...........................................3
TABLE OF CONTENTS.........................................4
INTRODUCTION.....
......................................... 5
CHAPTER ONE-REAL ESTATE DEVELOPMENT IN A CENTRALIZED
ECONOMY: WHAT ARE REALISTIC EXPECTATIONS...........8
The Developer Defined
Profit As A Motivator
Centrally Produced Shortages
Design and Construction
Labor
What Does This Mean
CHAPTER TWO-CHANGE UNDER PERESTROIKA: THE IMPACT ON REAL
ESTATE JOINT VENTURES...............................21
Proposed Legal Reforms
The Law on Joint Ventures
Leasing, Property And Land Laws
Establishing Land Valuation Techniques
Why Isn't Reform Working
Lack of a Free Market System
Convertibility
Bureaucrats as Lawyers
Centrally Driven Reform
CHAPTER THREE-THE DIFFICULTIES OF CONDUCTING BUSINESS:
A FOCUS ON MOSCOW AND LENGINGRAD....................32
A Profile of Joint Venture Activity
Finding the Right Partner
Structuring the Deal
Financing the Deal
The Evaluation of Risk
CHAPTER FOUR--
CONCLUSIONS AND RECOMMENDATIONS....................41
APPENDICES.................................................49
FOOTNOTES.................................................65
BIBLIOGRAPHY...........................................67
INTRODUCTION
international
"Few topics have become more fashionable in
economic circles than talk about joint ventures in the Soviet
Union. The only thing that is surely more fashionable is
the
to
obstacles
difficulties and
the
about
talk
establishment of joint ventures or to the introduction of any
economic reform in the Soviet Union."
Union
appear to
these opportunities
real
constraints
the
versus
of
an analysis of
will be explored through
development
estate
The validity
ventures.
joint
Soviet
western partners
opportunity to
offer new
real estate
considering
within the
economic reforms
political and
Proposed
of
registration and operation.
This paper provides
subject, focusing on
an overview of the
First, within the framework of
three aspects of this issue.
the existing Soviet development process, why have real estate
become
ventures
Union?
from
what can
And
the
popular?
centrally
a foreign
planned
although many changes have
what
specific changes
estate joint
work?
Third,
study
of four
ventures,
What
do
real estate
Soviet
partner expect
industry?
building
Second,
been proposed under Perestroika 2
the viability
have affected
and
are these reforms
drawing from research
joint
offer the
they
venture
difficulties associated with
of real
structured to
in the Soviet
Union, a
partnerships illustrates
the
establishing and operating real
estate joint ventures in the Soviet Union.
Each chapter
is organized to
estate
joint ventures.
real
look at a different
Chapter
One
aspect of
focuses on
the
in a centrally planned
construction process
between
differences
key
five
and
Soviet
the
Using
economy.
American
development process, the reader will develop an understanding
to understand
will begin
importantly, they
More
industry.
the building
that exist within
fundamental problems
of the
establishing a real estate joint
the constraints involved in
venture.
Perestroika.
Venture
Although amendments have been made to the Joint
Until these issues
for foreign
firms,
system
remain
the
within
issues
economic
fundamental
more attractive
it
law making
unresolved.
legal reform under
Chapter Two is real estate
The thrust of
are resolved, joint ventures
will continue to serve an isolated and limited purpose within
the Soviet Union.
the difficulties of developing real
Chapter Three focuses on
Union.
estate in the Soviet
will
be
used
as
a
Four joint venture partnerships
backdrop
for
explaining
the
major
constraints facing prospective developers.
Several
key
conclusions
have been
reached
regarding
the
viability of real estate joint ventures:
1 .
been
Joint ventures
are not
scattered examples
earlier.
a new
that date
However, real estate as
is symptomatic
of the
phenomenon.
back to
There
the 1950's
have
and
a joint venture is new and
economic and political
problems that
are being faced in the Soviet Union.
2 .
ventures are
Joint
to execute.
approved and
difficult
more
is despite the
This
have been proposed under Perestroika.
oppressive nature of
by the
process, the
approvals
to
than ever
get
changes that
The process is stymied
the central bureaucracy
in the
effective economic
reform
lack
of
measures and the emerging presence of local government.
3 . The risks
Soviet Union
the current
associated with developing real
are too dynamic
to use standard
political climate, projects cannot
on
their
financial and
evaluation
needs
to
solely
market
measures.
In
be evaluated
Risk
feasibility.
political,
address the
estate in the
economic
and
social impacts on project's success.
4 .
Real estate
joint ventures
Union, despite the difficulties
until
sweeping
continue
to be
foreign consumer.
economic
hard
can succeed
of doing business.
reform is
implemented
currency projects
Soviet
in the
However,
they
structured for
will
the
CHAPTER ONE:
REAL ESTATE DEVELOPMENT IN A CENTRALIZED ECONOMY:
WHAT ARE REALISTIC EXPECTATIONS
The
development
economy like the Soviet Union.
in
important.
are
to a free market system
As new policies oriented
recommended
under
more
been
never
has
differences
these
determining
process from
structural system of the building.
demand to deciding on the
Understanding
These differences are evident
the building
of
every aspect
the
planned
in a
different
extremely
process are
players within
of the
responsibilities
roles and
Perestroika,
entire
the
planned economy is in a state of flux.
centrally
Proposed changes have
not solved the economic conditions and the original system is
sub
a
at
functioning
construction
Soviet
existing
determine how
optimal
real estate
level.
Understanding
process
is
joint ventures
the
to
necessary
can work
in this
changing system.
This
chapter
will analyze
economy by exploring five
centrally planned
between the Soviet and
of
the
issues,
materials,
used, and
construction
the
(such
as
venture strategies.
lack
the
of
of
quality
the construction
skilled labor) directly
Others, including
a
key differences
American development processes.
the sophistication
the lack of
process in
Some
building
methods
impact joint
the concept of profit
and the developer as
are
coordinator of the development process,
construction
of the
reflections
fundamental
industry
after seventy years of central planning and allocation.
are
difficulties
These
Along with recognizing the
need to realize that
differences, potential foreign partners
simply superimposing and
importing the standards, techniques
and Western ways is not enough.
will be a
Any success that is achieved
direct result of the foreign
understand and
the
to provide a point of
Soviet construction system, but rather
reference for western developers.
criticize
to
not highlighted
partner's ability to
development process
work within the existing
and adapt to the changes that surfacing in the Soviet Union.
THE DEVELOPER DEFINED
The
someone
developer as
construction of
Soviet
Union.
Appendix A) .
a building is
(See
the
an unfamiliar concept
chart
including the
the
in the
included
as
central planning
supply agency the city
the architect and
within it's own set
of state directed
the contractor, works
Each of
aspects of
all
organization
Each entity,
agency the central
mandates.
who directs
the players is responsible
for his piece
of the construction process and no one assumes responsibility
for making sure
the project makes sense,
will be completed on time or
is cost effective,
is soundly built.
plans are established and directives
As a result,
are issued with no real
or perceived accountability for the end product.
Soviet State committees that
Specifically, there are several
are
construction within
all
planning
responsible for
the
Soviet Union.3 Gosplan (the Central State Planning Committee)
(two
Gosgrazhdanstroi and Gosstroi
built, and works with
construction
program
scientific problems
the field
and
Gosgrahdanstroi
coordinating work
the
building, working
working with Gosplan to
cost
in the field of
with Gosplan
of erecting
of
housing and civil
on standard designs for
average estimated
and
initiating and
Gosplan, including:
construction, developing scientific research
pre-fabricated
range
wide
a
provide
Gosstroi
support of
of construction
construction as an example,
Using residential
architecture.
functions in
in
is
constitutes the main technical
responsible for defining what
and
overall
Gosstroi
Union.
the Soviet
for
the
establish
to
committees)
subordinate
for all
square meters that
determines the number of
building types,
will be
that is available
amount of funding
designates the
to determine
living space,
and
establish the national economic plan
for housing.
Foreign joint
than
rather
process.
venture partners will
directing the
development
developers cannot assume that
there is an
a passive
Foreign
an active
need to take
role
in
existing sets of checks and balances within the Soviet system
that
will ensure
within budget.
Additionally,
the completion
Strict project
the role
of a
project on
oversight will
of developer will be
of the players in the process.
time and
be required.
defined to many
PROFIT AS A MOTIVATOR
profit as
motivation of
The
to produce
an incentive
construction project
to finish a
housing or
more materials
faster, or
to ensure the quality
of what is being
resulted in
than
less
productivity.
In
the Soviet
In Western
Union the
builder and banker,
as pay
more or
dependent
not
is
on
countries demand generates supply.
state, as
the planner,
determines supply, and how
produced, as well as who
the costs.
workers producing nothing
must,
they
what
built is
The traditional
nonexistent in a centrally planned economy.
approach has
more
will be supplied.
producer,
much will be
The state covers
As the supplier of everything from food to homes,
the state has not created incentives to increase production.
lack of
This
fewer
skilled
highly
and
laborers,
building
materials
currency through
internal
for both
With the
international export.
export, the
a
decline
in
the
This had led to a shortage
production of building materials.
of
ramifications:
has severe
motivation
profit
consumption
inability to
technology and
and
generate hard
machinery have
fallen into disrepair.
Foreign partners
address
will need to structure
this severe
may lie in
productivity.
looking for Soviet partners that
material production
lure of
constraint to
business plans that
or are
a construction
hard currency combined with
Solutions
are involved in
enterprise.
The
production quotas would
provide
to
incentive
an additional
A
Soviet enterprise.
costly solution, is the
importation of foreign
building materials and skilled labor.
This has proven to be
second, more
strategy for Finnish
a particularly good
construction firms
due to their geographical location.
CENTRALLY PRODUCED SHORTAGES
There
has
been a
chronic
shortage
produced within the Soviet Union
this
over the last few years due
that results from poor
is overlaid
situation
is based on whether enterprises
rather
than
whether
quality control.
When
prices and
subsidized
with
centralized distribution system, the
products,
materials
materials, the lack of skilled labor,
to the shortage of raw
and the waste
of building
a
result is a system that
and consumers can access the
they
can
afford
the
few
products that are available.
"...It is not the amount of money one earns that decides what
one
can buy,
but the
kind of
friends one
has, what
ones
position is at work, where one lives and other considerations
that have no direct connection with work." 4
In
the construction
industry,
different for state and non
the distinguishing
organizational
factor.
the
material allocation
state enterprises.
Rather,
affiliation, private
is
Price is not
decisions are
versus state
based on
operated,
and state project versus a joint venture with a foreign firm.
For example, a state enterprise involved in the production of
high
technology,
status to
favored
military
obtain building
in
are
export materials
or
materials: requests
a
are
given priority and there is a greater chance of obtaining the
and quality
quantity
state
enterprises
of
established
cooperatives were
ability to
have
official state
building is being
(Gosnab) channels, unless a
constructed for the state.
for private
their
prohibited
secure building materials through
supply agency
contracts
operate as separate
in 1988 authorized to
regulations
building
Although
Gosplan.
by
enterprises,
building
construction
enough to complete the building
materials requested, but not
program
the
of
receive some
will
Non-priority
materials required.
Building cooperatives involved in
entities
are
negotiate
required to
directly with a factory or work through a network of personal
of these
Both
friends.
channels generally
require working
through some element of the black market.
Unlike soviet enterprises that are subject to the dictates of
the state
allocation plan, foreign joint
in the Soviet Union are given
materials
cannot
or
importing
effectively meet
materials,
this
policy
the choice of using Soviet raw
from abroad.
it's own
for
ventures operating
Although
requirement for
foreign
partnerships
another mechanism for generating hard currency.
state
the
building
is
yet
Even
though the
the raw
materials.
First,
potentially available
to foreign
enterprises are
limited to concrete, cement,
amounts
developers considering
internally produced
use of
materials
the
ventures,
foreign joint
to
several constraints facing
there are
the
materials
of raw
distribution
provides for
allocation system
state
importing
lumber.
Therefore,
including
mechanical,
of
materials,
steel, gravel, sand and limited
plumbing
building
other
and
electrical
components as well as finish materials, is required.
of these
the availability
materials are constrained
by the
building materials
problems that affect all
same production
Second,
within the Soviet Union, namely, a lack of skilled workers, a
lack
of
quality
control
and
a
Frequently, the quality of materials
be
used.
Finally,
construction firms
indicates that
constraint adds
of
raw
materials.
is such that they can't
of Finnish
and Swedish
strategy for
a fall back
materials delivered on time
getting the
logistical
the experiences
lack
is mandatory.5 This
project risk
due to
down time,
delays and the costs of contingency planning.
DESIGN AND CONSTRUCTION
Some historical context is required to understand the role of
architectural
design
and
construction in
in real estate
development
joint ventures.
process as
well as
1920's the
Council of People's Commmissars
the extravagant design and
the
In the
complained about
construction costs.
In response,
the government began to issue decrees mandating the reduction
of costs and
the use of standardized designs
as early 1930.
purges.
Stalin's
the combination
As
that
designs
could
events took
of these
manufactured
be
on
and to
the war
standardized
to developing
reduced
architecture was
hold,
resources to both
of human
tremendous loss
experiencing a
Soviet Union was
these decrees, the
to meet
being implemented
administered systems were
While centrally
a
cost
massive
effective scale. 6
this philosophy are still
Manifestations of
in the
development process
of today.
firmly embedded
For example,
in the
Soviet Union, the use of large scale, precast concrete panels
is the
In
sole method
have
countries
other
contrast,
produced housing.
of constructing state
several
residential
construction systems existing side by side.
In the Leningrad
are three factories dedicated
to mass produced
region there
housing.
Under
auspices of
the
the
Gosgrazhdantroi
and
Gosstroi, these factories are each responsible for the design
concrete panels of a particular
and construction of pre-cast
height
and 12-17
stories each).
Each
a staff of architects
and engineers.
Using
10-12
range (4-10,
factory employs
centrally directed guidelines,
"series" of working
for
5-7
designs
years.
drawings that are used
Although
every year
these professionals produce a
to
minor
changes
reflect changes
and site adapted
are made
in current
to
the
housing
technology, the production facility decides when a new series
needs to be
designed.
The last series produced
story factory was in 1983.7
15
in the 4-10
of
industrialization
the
including
has
in
cost
Soviet objectives,
met other
turn has
This in
panels
interest
government's
the
been
traditionally
concrete
scale
large
pre-fabricated,
reduction.
for the use
mentioned, the primary motivation
As previously
the
and
of construction,
production of more residential units than had previously been
built under other systems.
larger units
,8
and
(factories
the
creating fewer
industry by
the building
rationalization of
of high rise
necessitated
trends
These
flats.
of
industrial
and
designs
in hand with the erection
techniques went hand
blocks
standard
of
use
"...The
for
the
this
dates
production
of
to
the
panels) ...
The
period
Kruschev
for
explanation
simplified
when
major
instituted
were
reforms
back
to
eliminate communal living and provide every family with their
own
flat.
footage
To
accomplish
requirement
(9
this objective
square
meters
established and mass production began.
a minimum
per
square
person)
was
The proportion of all
state and state cooperative housing that has been built using
this system has risen from 1.5 percent in 1959 to over 80% in
the early 1980's. 9 There
are currently 650 pre-cast concrete
residential factories throughout the Soviet Union.
There
are four
commitment to
primary reasons
the use
why there
is such a
of pre-fabricated concrete
16
strong
panels in
significantly
the
first is
The
construction.
residential
higher production output that the Soviets have realized using
internal
have
there is
the
over
built
inexpensive
raw
concrete, steel, sand and gravel.
produce
to
has been
infrastructure that
an extensive
years
Additionally,
scale.
relatively
access to
materials, such as cement,
Third,
a mass
quality
minimum
their
meet
can
produce on
and yet
standards
they
they
material:
building
concrete is a more efficient
Second, they feel
this system.
The
product.
this
ramifications of considering a change in construction methods
system.
this
within the Soviet Union, wood
one of their
use
of
is a major export material and
The wide scale
main sources of hard currency.
construction would
wood
resources
significant wood
there are
Although
time.
one
constraining at
is particularly
fourth reason
The
on this
their dependence
due to
be significant
would
this
deplete
potentially
resource.
several design
There are
real
estate
limited
ventures.
joint
the
to
Deviation isn't
and construction
Namely,
of
example
Despite
attempts
construction
necessary
was the
this
the
by
methods,
building
it
design and
to this building system. 10
Rosinka
approvals.
project
in
Moscow.
wooden
partner
to
use
impossible
to
obtain
foreign
was
are
systems.
panel
currently allowed, and therefore
engineering solutions are limited
An
codes
building
concrete
of pre-cast
use
implications for
Foreign
partners
need
the
to
understand the
at the
to concrete, while
Soviet commitment
on ultimately succeeding with creative
same time not give up
alternatives.
LABOR
workers has steadily
level of Soviet construction
The skill
declined over
the last
been a
factor has
This
few years.
major contributor to the state housing shortfall and the poor
buildings.
of existing
quality
articulated for this decline.
industrialization
Soviet
purges.
and Stalin's
Union
the
of
with
a
people as a result of World
loss, combined
This
process,
construction
dearth of
recently, the low prestige
been
From a historical perspective,
the Soviet Union lost 60 million
War II
reasons have
Several
skilled
with the
left
craftsmen.
the
More
associated with manual labor, the
recruitment of unskilled workers from the countryside and the
evolution of
blamed for the
building cooperatives have been
and the poor quality of
lack of skilled construction workers
state construction.
The state solution?
firms.
Increase
reserves, the Soviets have hired
Using hard currency
Finnish
and
Swedish
projects.
Examples
Leningrad
and
Astoria,
construction
companies
of these projects
Moscow, where
Europenska
hiring of foreign construction
and
renovation by foreign firms.
historic
Metropole
for
are in the
hotels
are
priority
cities of
such as
currently
the
under
construction firms have
scale.
projects of any
Two more creative alternatives are the implementation
in
found
is
example
the
Joint
Perestroika
developed
for
employees
of the
Soviet
the General
Manager, both
Venture.
partner.
An
In the opinion
incentives program has also been established.
of
An
training program
improve management skills, a
Structured to
workers.
programs for Soviet
and incentive
of training
was
Foreign
the Soviet Union
been doing work in
and are easily mobilized for
for many years
with the
the Soviet
to follow
construction company.
a foreign
and hire
example
labor, is
finding skilled
dilemma of
joint ventures faced
for real estate
One solution
to improved
have contributed
productivity.
WHAT THIS MEANS
Soviet
enterprise.
directives from
instance, economic
For
pre-requisites to getting
no longer
Gosplan are
built, materials can be
a facility
more easily cleared through customs,
able to
government is
and local
a flexibility to
joint ventures have introduced
Real estate
access hard
currency more
readily.
However, until
major economic reforms are
instituted, these
ventures will be nothing more than a hard currency source for
the Soviet
systems
Union.
will
instituted,
not
private
The
centralized planning
change
until a
enterprise
19
is
free
free
and allocation
market
to
system
prosper,
is
and
building standards become more
in the Soviet
scale required
Economic change of the
open.
Union is
slow and
at best,
,
difficult.
development will remain a
Real estate
high risk investment.
Upfront capital expenditures, significant travel expenses and
extensive
Risk of
Due
to
be
hours will
failure is
the
greatest during the
bureaucracy
consider the
form joint
required to
forming partnerships
registration stage.
joint
involved,
ventures.
ventures
where follow
should
on projects
are possible.
Joint ventures
will have
acquisition strategies.
include
to develop
Under the
extensive contingency
regarding the
Armed
and ethical
role of "blat".1 1 Contingency
externally sourced
labor.
current system, this will
plans
to address problems with internal
for
comprehensive resource
an
with
process, developers
building
materials, technology
seeking to do joint
20
plans will need
resources as well as plans
understanding
successful strategies.
decisions
of
the
and
formidable
ventures can design
CHAPTER TWO:
CHANGE UNDER PERESTROIKA:
THE IMPACT ON REAL ESTATE JOINT VENTURES
Many
isolated economic
policies
have
Perestroika in the last three years.
Joint Ventures, the Law
under
been proposed
For example, the Law on
on Cooperatives, the legalization of
private ownership and the proposed construction of 30 million
12
Talked about,
new apartments and houses by the year 2000.
but unsupported
change, these policies
by economic
are are
not substantially different from other historical attempts at
reform.
This chapter examines the legal real estate reforms that have
been
proposed under
been
made
to
attractive for
the
Perestroika.
Joint
Although
Venture law
amendments have
that
make
foreign firms, fundamental issues
system remain unresolved.
can become more than adhoc
Before
it
more
within the
real estate joint ventures
solutions to the Soviet shortfall
of hard currency, sweeping economic reform is required.
Examining why these isolated reforms are not working includes
discussion
of:
the
lack
of
convertibility issue, the role
a
free
system,
market
the
of lawyers within the system,
the lack of a structural framework to deal with land use, the
role of
a top
driven reform, and
how local
government has
begun to react to ineffective central direction.
21
While these
may seem
reforms
eye, many
the Western
simplistic to
are
revolutionary by Soviet standards.
PROPOSED LEGAL REFORMS
Since the Decree
While
well
provisions, as
and
statutes
current
the
highlight
guidebooks
these
in
have been published on the
January 1987, numerous guidebooks
subject.
issued
was
foreign partners
and
organizations
Soviet
Joint Ventures between
on the Formation of
provide "how
as
to..."
sections,13 none have specifically addressed the positive and
legislation and amendments to
negative ramifications of this
real estate joint ventures.
THE LAW ON JOINT VENTURES
amendments have
Six primary
since
Ventures
been made to
issuance
it's
in
on Joint
the Law
1987. 14
Of
particular
significance is the delegation of approval authority from the
USSR
Republic
and
administrative
Council
body of
of Ministers
the Soviet
to
partner.
superior
the
In
many cases
this body will be the Executive and City Councils of the city
in question.
Another
change
percentage
of
was the
foreign
elimination
of
ownership in
a
legislation limited foreign
a ceiling
on
the
venture.
Previous
It
is now up
ownership to 49%.
to the partners to establish ownership, as long as it is less
than 100%.
22
of the Board
required both the Chairman
Previously, the law
Director to be
amended and
one or the other
has been
This
Soviet citizens.
and General
now be
of these positions can
headed by an appointee of the foreign partner.
The
right
of
was amended
employee compensation
independently
establish
several times.
The most
to
ventures
joint
recent amendment provides flexibility regarding this issue as
long as compensation meets minimum Soviet standards.
As
of
1988,
transferred to
partners.
partner's
a Soviet
in
shares
party upon
a third
Amendments did
priority right
that, approval
of the
joint
may
be
mutual agreement
of all
abolish the
Soviet
however
not
ventures
to acquire
the shares.
Prior to
Commission was
USSR Foreign Economic
required.
Soviet auditing
allowing
requirements have been relaxed.
systems,
accounting
foreign
Soviet
Along with
auditing
is
limited to the assessment of tax payments.
Finally,
foreign employees
entitled to pay
of
ventures are
the joint
for housing and services
now
in roubles instead
of hard currency.
All of
these amended
provisions would appear
the formation and operation of joint ventures.
of
provisions have
contingency
conditions
to facilitate
However,
that limit
many
the
overall
is delegated
authority
control
over the
of joint
formation
retain
still
authorities
central
Yet,
process.
registration
and
approval
in the
delays
time
eliminates
approval
potentially
bodies which
local
to
instance,
For
implications.
positive
strong
ventures through
the
of Finance to register the
requirement for the USSR Misistry
partnership.
To
the
undercut
amendments,
appointee
an
issues"
was
additional amendment
and
passed
the Board of Directors for all
requiring a unanimous vote by
"fundamental
ownership
the
established in
power
to
related
Fundamental Issues have not to
the
Venture.
Joint
date been defined, and should
be given
particular attention by both
both the
by laws
parties when drafting
as well
governing the partnership
the JV
agreement.
The amendment
allowing foreign
in roubles is
and services
partners to pay
a fallacy.
it difficult to access
shortages make
In
for housing
practice, severe
these necessities for
hard currency much less rouble currency.
LEASING, PROPERTY AND LAND LAWS
15
Leasing Law
In January 1990 the formal
USSR Supreme
the
Soviet went into effect.
basic legal
within the
leasing legislation passed by the
structure
Soviet Union.
This law established
for lessor-lessee
The
law does two
relationships
primary things.
It
their
to outlease
City Councils
allows local
it outlines
jurisdiction, and
property within
of property
the types
that are allowed to be outleased.
land,
states
specifically
organizations,
foreign
individuals
and
organizations,
and
Soviet
both
that
individuals and
It
outleased.
be
to
equipment
and
buildings
It also establishes
joint ventures may be potential lessees.
that the
law provides for
real estate transactions, the
Important to
the "fundamental document
Lease Agreement shall be
that shall govern relations between a lessor and a lessee".
Property Law
It provides
in March 1990.
The property law was established
joint ventures the right to own the assets required for their
activities
the
right
to own
to
limited
is
ownership
limited
is
land
and
is generally considered property,
Although land
Agreements.
by laws
venture
the joint
in
as outlined
by
personal,
the Land
Law
agricultural
and
and
residential use.
Land Law
Established in February 1990, the
use
regulation.
delegated
to
enables them
The
power
the Soviets
to outlease
of
Land Law provides for land
to
regulate
People's
land
Deputies.
land to organizations,
has
The
been
law
and handle
"the registration of ownership and usage rights over land and
of agreements
on leasing
of land."
25
This law
establishes a
governments have
that local
land rights
system for
formal
been assuming in an adhoc manner until now.
ESTABLISHING LAND VALUATION TECHNIQUES
by
unsophisticated
attempts
at
the
within
level
government
are
techniques
valuation
Land
emerging
Soviet
standards,
Western
a
establishing
formal
the
at
local
Although
Union.
first
these
are
value
structure.
Promulgated in Moscow, two directives have been issued.
Issued in
first directive
1988, the
divides the
Every zone
five concentric zones radiating from the Kremlin.
has
been
assigned
irrespective of the
existing
50% surcharge
value per
the property.
value is
value
station.
or subway
a lease basis,
only transferred on
distinction
that mandates a
of a
Although
the
the established
perpetuity concept.
rights in
is
parcel, or the
located within 500 meters
for all sites
based on
This
The only
the addition of a clause
urban thoroughfare
land is
hectare.
specific location of the
condition of
regarding value is
large
a
city into
The same
value applies to the property regardless of the length of the
lease.
A second
directive
was
issued
established an annual rental
within the City.
in
1989.
This
decree
payment for all property leased
The payment is
"lease payment" discussed above.
26
in addition to the one time
WHY ISN'T REFORM WORKING?
The
Joint
on
Law
the Soviet
investment in
The
not
law was
the Soviet economy.
of real estate
witnessed by the limited number
registered, the lack
ventures that have been
of projects that
to
effect on
has had minimal
The law
This is
hard currency.
reforms structured
of
a set
part of
economy.
revitalize the
Union and generate
promote
to
introduced
was
Ventures
the Soviet market,
have been developed for
and the adhoc nature of forming real estate joint ventures.
LACK OF A FREE MARKET SYSTEM
Fundamental reform of the Soviet centrally planned economy is
required before real estate joint ventures will begin to meet
the building requirements of
As currently
the Soviet Union.
structured, the
Soviet planned economy provides
opportunity for
free market
toward
enterprise
private
in
introduced
building
1988.
This
cooperatives that
state building enterprises.
as
trade.
cover their costs,
internal move
on
Cooperatives,
Law
formation
of
operate independently
of
law allowed
would
the
These cooperatives would operate
self-financing enterprises,
have to
The only
the
was
very little
meaning their
revenue would
would be
and no state subsidies
They would be required
to pay "fair market rates"
for raw materials and components.
And they would be able to
provided.
market prices.
charge fair
law,
the apparet16
making it
However, soon after
established
a 90%
prohibitive to form one.
cooperatives
have
been
17
prohibited
tax on
being made
cooperatives
More recently, building
from
buying
state
building materials
controlled
unless
they
are building
a
state project.
Until prices are allowed to fluctuate with supply and demand,
is no incentive
market system is in place, there
and a free
for developer's to satisfy the Soviet demand for space.
CONVERTIBILITY
The lack of rouble convertibility is a significant constraint
to
Soviet real
like Pepsi 1 8
estate joint venture partners,
have structured
real estate does
export Soviet products,
deals to
real
Although non
joint ventures.
estate
not lend
itself to these import/ export strategies.
To
work around
focused on
have
currency, which
served
two
expatriate
estate market
a real
is anything built for
purposes.
profits,
foreign
The
and
the
joint ventures
real estate
this constraint
Soviet
hard
that generates
foreigners.
partner
partner
is
This has
able
earns
to
hard
currency.
However, the viability
of this strategy is
limited.
It has
worked to date because of the limited supply of hotel, office
and
residential space
for
foreign occupancy
and the
high
rents that can be generated.
The introduction of a joint venture law without the necessary
financial instruments
to interact
in a global
marketing is
counterproductive.
Before long term investment in the Soviet
convertibility will need to be
Union can implemented, rouble
addressed
by the
be implemented
that can
Unlike many
central government.
grass roots
from a
reforms
movement, this
issue will require fundamental economic reform at the central
level.
BUREAUCRATS AS LAWYERS
One of
the flaws built
under Perestroika
is the
to reform
into the current approach
continuing role of
bureaucrats in
The legal system in the
establishing the laws and policies.
Soviet Union has traditionally been based on laws established
by political bodies rather than by a formal legal system.
example
of this
is the
Initially
Joint Ventures.
Law on
An
drafted in 1987, it has been amended numerous times and still
contains many
the
law
vague, ill-defined clauses.
to be
manipulated
suit
to
has enabled
This
the purposes
of
the
bureaucrats involved in each specific deal.
"...In the old system bureaucrats made all the decisions...
lawyers were the people who had to make laws from what had
Theirs was not to take part in the decision
been decided.
making ... it is easy to see in our new rules and regulations,
for example the ones referring to the organization of joint
enterprises that lawyers weren't involved.. .the wording is
often imprecise and capable of several interpretationswhile
some articles even contradict others... this is of immense
advantage to those bureaucrats of thgg apparet who wish to
retain their powers and privledges..."
Foreign joint venture partners are frustrated working without
strict
legal
assessment and
guidance.
Each
the nuances of
the foreign partner.
new
amendment
the system can
requires
easily escape
CENTRALLY DRIVEN REFORM
Unlike Poland,
been
driven from
bodies have
proposed under
the changes
the
involved.
not until recently, been
reforms are
Thus, there
or commitment to a common cause.
is no sense of contribution
The
political
and satellite
Local
top.
Perestroika have
considered largely
to the
ineffective due
lack of substantive social change.
Local and satellite leader's are now taking reform into their
own hands.
Newly elected
are grappling
in
city council members
with solutions to local
Leningrad the
City Council
develop a land valuation system.
and mayor's
problems.For example,
is looking
at how
they can
The Moscow City Council has
established a legal office to negotiate joint ventures.
real estate joint ventures?
What does this mean to
laws combined
the national
with ineffective
level have
This has resulted
been juxtaposed with
in confusion for everyone
establishment of joint ventures.
have a clear
economic reform
politically instable
policies at
local action.
involved in the
Foreign partners no longer
understanding of who is
state agencies are unsure
Isolated
responsible and Soviet
of their approval authority.
period has
resulted in many
This
delays in
getting projects underway and approved.
The lack of a
local infrastructure overlaid with ineffective
continue to create problems for
central economic reform will
those interested in establishing
30
real estate joint ventures.
government
are
things
several
However,
will become
clear.
larger rather
The
role
local
of
Local
than smaller.
City Councils are empowered and are assuming control from the
planned
centrally
administration.
Decentralization
of
authority will continue, as local governments determine their
establish city specific guidelines
requirements and begin to
for working with foreign joint venture partners.
Additionally, the lack of strong central economic reform will
continue to make the execution
difficult.
The
process
bureaucratic pot holes.
is
of real estate joint ventures
complicated,
replete
with
Until real estate joint ventures are
able to charge fair market rents and repatriate roubles, real
estate joint ventures will continue
foreign
market.
Isolated
to be structured for the
policy changes,
like the
Law on
Joint Ventures, will not lead to economic reform on the scale
required for the Soviet Union.
31
CHAPTER THREE
THE DIFFICULTIES OF CONDUCTING BUSINESS:
A FOCUS ON MOSCOW AND LENINGRAD
There
are operating
registered and
major
reason
venture.
The
estate joint
real
are few
is
Law on
in
The
Leningrad.
in Moscow and
difficulty
the
been
that have
ventures
registering
Joint Ventures outlines
a
joint
the following
sequence of steps for project initiation and registration:
-select an appropriate Soviet partner.
This is one of the
most critical steps and must include an examination of the
superior authorized agency.
-prepare a letter of intent (protocol) between Soviet and
foreign partner.
-prepare the joint feasibility study.
-negotiate the terms of the statues and joint venture
agreement.
-submit study and joint venture documents to the Soviet
partner's authorizing agency for approval.
-forward to Ministry of Finance for approval and
registration.
There
is
a tremendous
ventures proceed through
Although no two
amount
of
variation in
how
the bureaucratic registration maze.
projects are alike, there
are some valuable
lessons learned by analyzing their individual processes.
following chapter will focus on
project development
these
in the
The
the four primary barriers to
Soviet Union: Finding
the Right
Deal, Financing the Project,
Soviet Partner, Structuring the
and
cases
provides four
Appendix A
Risk.
Evaluating the
studies depicting these challenges.
A PROFILE OF JOINT VENTURE ACTIVITY
below, two are registered and
Of the case studies summarized
The other
operating.
and joint
approved by-laws
registration
are awaiting
and
agreements
venture
two have
by
the
Ministry of Finance.
Perestroika
joint venture in the City of
Touted as the first real estate
the
Moscow,
The
primary Soviet
joint
of this
partner
the
are fully leased.
three office buildings that
renovation of
completed
has
Joint Venture
Perestroika
venture is
the
construction enterprise responsible for all infrastructure in
the
City
Moscow.
of
joint
the American
venture is
primary
the
Association,
Architectural
Dialogue and
Other partners
the
Moscow
Hotel
as a
40-40
Moscow
Association,
The
deal between
the
remaining interest
between the other three partners.
the
Group.
partner, The Worsham
structured
partners, with
include
distributed
The joint venture has been
self-financed to date, with ten year pre-paid leases covering
the costs of construction.
Amstroi
This joint venture
addition to an
is designed to renovate
office building in Moscow.
33
and construct an
The partners are
the
team.
development
foreign
tenants.
venture.
One of the more
the
City
Moscow
through the quasi-legal
of internal
awaiting
Project financing
pre-leasing commitments
capital,
financing
construction
office of
currently
are
They
Council.
registration with the Ministry of Finance.
consists
the
recent real estate joint ventures,
been working
Amstroi has
interest in
a 50%
partner has
Each
Soviet and
serve both
project will
The
American
an
and
Housing Authority
Rise
High
Moscow
through
Finnish
a
and
construction
company.
Rosinka
an 82 acre residential
Rosinka will be
kilometers from the Kremlin.
units of housing
bringing
to the
the
partner has a
The project will consist of 528
foreign community.
for members of the
a collective farm, brings
Soviet partner,
approvals
community located 24
joint
marketing
venture with
and
land and building
expertise.
50% interest and financing for
currently being sought.
partner
the American
development
The
Each
the project is
The Finnish government has agreed to
back the 100 million dollar project.
Filco
Located in the City of
Leningrad, the partners are a Finnish
and a Soviet construction company.
turn
joint
(Lensoviet).
of
ventured
with
The Finnish and
the venture,
with
the
This joint venture has in
Leningrad
City
Council
Soviet partners each split 60%
Lensoviet receiving
a 40%
interest.
Financial
Financing has been secured through a Finnish Bank.
guarantees have been secured through the Finnish construction
company's parent company.
FINDING THE RIGHT PARTNER
historically been the
has
This
in the Soviet
way to conduct business
However, the modus apperandi is becoming more complex
Union.
changes from a centralized system
as the political structure
to
"well
as
heralded
government.
Soviet
the
within
connected"
are
ventures
joint
established
Many
with
one
levels
several
and
parties
numerous
of
government.
distinguishing
have
partners
defunct
under recent
potential
a recent trip
example, on
Boston was
partners.
acquaintance
reviewed
informed
officials.
to the Soviet Union,
him
list
that
Soviet
However, when the American
of
attendees,
half
represented" were no longer operating.
35
For
be a positive first step in
partner.
the
of
a developer
of potential
a meeting
The meeting seemed to
businessman
ex-agency
by
are
foreigners as
be represented to
invited to
the pursuit of a Soviet
agencies
However, some
political reforms.
partners
Soviet
viable
state
Many
crones.
continue to
Soviet
foreign partners
potentially
between
political
and
these agencies
from
is the difficulty
the side effects
One of
of
the
a
Soviet
"agencies
Whereas
state officials,
negotiated with
to be
deals used
Soviet partner.
of finding a
the difficulty
contributes to
Councils
local City
of
role
increasingly significant
The
local government agencies and enterprises now negotiate their
double edged
be a
to
has proven
This
deals.
own
sword.
Despite their interest in getting the project approved, local
many areas
where they have little
Moscow
The
City
joint
negotiate
and
all
action
recommend
to the
in
chaos.
quasi-legal
a
with this increased interest
Mosinter charter
The
ventures.
created
has
Council
organization, Mosinter, to deal
in
now interested
thereby adding
venture opportunities,
joint
Additionally,
expertise.
enterprises
and
local governments
more
power in
are exerting
City Councils
Newly elected
wheel.
bureaucratic
in the
another cog
involvement is
government
to
review,
joint
venture
is
new
proposals in the City.
concepts
The
unfamiliar in
provide
the Soviet Union.
contacts
Organizations
closest example
and
lobbying
organizations or
trade
it's
of
like
business
networking
As a result, there
foreign
potential
the USSR
of
Union
the Union
partners.
Architects are
of a professional society.
western counterparts,
are no
available to
professional societies
for
are
the
However, unlike
exists to
provide an
20
intellectual forum for the discussion of architecture.
It
is critical
to find
a partner
approvals and development process.
36
that can
assist in
the
However, this can be one
of
the most
difficult
the team.
the Soviet partner brings to
bring the
not
land or building
offer a
local real
partners.
to find in
the construction
the foreign
responsibility on
in the bureaucratic maze,
partner to succeed
of Soviet
the way
foreign partner for this expertise.
deal of
a great
The
are more representative of what
partners unfamiliar with
process will look to the
but do
expertise.
estate development
can expect
Soviet
This places
Most Soviet partners
component to the venture
Amstroi and Rosinka projects
a foreign partner
expertise that
unusual in the
Venture is
Perestroika Joint
The
partner search.
a
aspects of
and places the
project at greater risk.
STRUCTURING THE DEAL
four obstacles in structuring a
The case studies demonstrate
real
estate joint
These
venture.
include: providing
for
long term strategies within
follow on projects, establishing
the current economic and political constraints, assessing the
value
of
each
partner's
contribution
and
developing
a
mutually satisfactory operation and management style.
Long term
upfront capital
the large
required due to
holding strategies are
expenditures in real estate
joint ventures.
Although currently strong, the market for hotels, offices and
residences
for
development
firms
is
foreigners
Unfortunately, joint
will need
to
limited.
expand
into new
ventures cannot, at this
effective long term strategies
Eventually,
markets.
time, develop
to meet this untapped demand.
in the
Standing
inability
motivated by
Perestroika
and
Filco
While
roubles because of
free
of a
profits,
hard currency
positions
in better
are
the
such as
lack
and the
roubles,
to expatriate
system.
market
economic constraints
way are
to
spend
Soviet workers they
the large numbers of
employ.
Registration
is perhaps
establishing a real estate
partners
ought to
of the
one
biggest challenges
joint venture.
develop strategies
Therefore foreign
to include
Soviet partners that offer follow on potential.
City
Councils and
large
in
state enterprises
long term
For example,
with access
to
property and resources enables start up costs to be amortized
over a longer term.
Agreeing
the
on
value
an d
contribution is a difficult
timing
of
each
partner's
p art of the negotiation process.
The difficulty stems from the
lack of a universally accepted
valuation system for land and
buildings in the Soviet Union.
Compounding
this situation,
is
the
long standing
western
reliance on market appraisals and brokers.
This became
an irreconcilable difference is
Joint Venture.
contributed
As originally
three
buildings
partner contributed capital.
the Perestroika
structured, the Soviet partner
as
equity,
and
the
foreign
However, during negotiations
the
value of
contribution
the buildings
and the
be agreed
could not
the capital
timing of
result was
The
upon.
a
split up, and the introduction of a replacement partner.
Finally, joint venture by-laws need to address management and
the book
Behind the
differences
need to
These differences
As highlighted in
Factory Walls, 2 1 there
between Soviet
roles of
the specific
to day operation?
each partner in the day
management
in
differences
what will be
resolved and
styles be
will
How
issues.
operational
are fundamental
management styles.
and American
and worked
be understood
into a
strategy that meets both partner's objectives.
The Perestroika Joint Venture provides
management and operational issues
a good example of how
have been resolved between
the Soviet and American joint venture partners.
FINANCING A DEAL
Despite
real
the market
demand and
estate projects
undertaking.
the Soviet
in
mixed reviews
There are
lending money to these new
of other Eastern
profit potential,
ventures.
Union
on the
a
difficult
viability of
As the economic issues
nations surface, and the
debt rises to 3 billion
is
financing
short term Soviet
dollars,22 foreign investment in the
Soviet Union may tighten.
lack of international business
and economic uncertainty, the
and
collateral
Soviet
of
shortage
the
and
experience
tremendous political
problems: the
three primary
There are
financial guarantees.
government guaranteed the total
Rosinka venture, the Finnish
guarantees were
financial
Filco joint venture
a Finnish
through
financing
bank
secured
The
100 million dollars.
project cost,
the
instance, in
For
ventures.
joint
real estate
Soviet
more aggressive in
and banks are being
European governments
provided
by
the
and
bank,
parent
the Finnish
company.
In
of securing
lieu
sources,
traditional
with real
undertaken
from
have
been
approaches
other
several
financing
in the
joint ventures
estate
Soviet
A common financial strategy is to use pre-paid leases
Union.
to cover
was able
and the
leases
five
approach
For instance,
construction costs.
Joint Venture
four,
long term
and
short
is
to leverage
Rosinka project
and
six
to
give
the foreign
percentage of the profits in
it's ten
year pre-paid
receives payment
time
at the
the Perestroika
of
occupancy.
construction
for years
Another
company
a
exchange for their financing of
the construction costs.
These
First,
approaches have
tremendous
only been
foreign
demand
40
possible for
for
office,
two reasons.
hotel
and
Second, the development projects
and obtain pre-paid leases.
have
Prospective foreign
outlook for future financing is unknown.
formidable challenge
not underestimate this
partners should
current
Soviet Union, the
political instability in the
economic and
the
With
in scale.
small
relatively
been
high rents,
owners to charge
has enabled
residential space
to Soviet development.
THE EVALUATION OF RISK
associated with doing business in
There are tremendous risks
the
A
Union.
Soviet
difficulty
primary
partners is
how to evaluate
traditional
start
facing
of
and time,
capital
to
and economic
with the Soviet political
fundamental problems
from the
the risks which range
up investment
foreign
systems.
The
to
first risk
evaluate is
Doing
resources are available.
is
associated
costs
economy.
This
economy,
foreign community,
informally
patrons.
It
currency in other than
foreigners
business
will
in the
Additionally, the
find
secondary
the
in
for
established
operates separately from
is still illegal
substantial
there are
with operating
economy and offers commodities
the
the centralized
and services to hard currency
spend hard
for foreigners to
state operated enterprises.
it virtually
Soviet Union
capital
business in the Soviet Union
Foreigners find
very expensive.
hidden
whether sufficient
impossible
without using
prices charged hard currency
to
However,
conduct
hard currency.
patrons have
to the prices charged
no relationship
The
Soviet citizens.
there is virtually nothing for
distinguishing factor is that
on, and there is plenty for
Soviet citizens to spend roubles
foreigners to buy.
For instance,
difficult.
easy or
use Soviet materials
distinction is based solely on
Union.
Soviet
into the
resources
bring
to
for the
Amstroi joint venture should anticipate
and labor, while the
having
this may be
it is reasonable
venture to expect to
Perestroika joint
labor.
and
strength of the Soviet partner
Depending on the
the joint
ability of
materials
building
Soviet
secure
to
venture
evaluated is the
to be
A second risk
This
the connections of the Soviet
partner.
risk cannot
Finally,
posture
Rather,
alone.
measured by
be
one needs
political, economic and social
in
Moscow
developed
rents,
for the
the
is
foreign
saturation point
For instance, at
conditions.
negligible.
of building office
Office
years
space
is
despite the
community and
is
financial
the dynamic
to consider
financial and market risk
face value the
space
market and
away.
situation will
evaluation of
the political
there will be
an ongoing demand for this type
being
high
However,
an
dictate whether
of product in
the short term.
SUMMARY
The difficulty then becomes how do you evaluate the political
and
stability
economic
This evaluation is not easy.
diversity of the Soviet Union.
changes
Although
have
Venture
Joint
forming a
advantages of
increased the
theoretically
on
Law
the
in
and
size
the
with
a country
of
joint
venture and made the approval process easier, the constraints
of
have not
Union
Soviet
in the
operating
significantly
changed.
For those enterprises, that evaluate the constraints of doing
term
for long
opportunity
system
the
understand
and
business
an
development
Real estate
gain.
be
may
there
strategies need to address a myriad of issues that are unique
to
the
inaction
as well
article,
those
idiosyncrasies
as
action.
companies
of
a
There is
Union.
Soviet
the
that
Soviet
get
early,
in
system
learn
the
of
the
ways
and
recent
in a
highlighted
As
with
associated
risk
bureaucracy will have an advantage over those who wait for no
risk.23
continue to
Projects will
driven
by the
However,
until
including
the
presence
further
be initiated
of foreign
firms
economic reforms
convertibility
of
the demand
to meet
the
on Soviet
are
soil.
established,
rouble
and
the
establishment of a free market system, there will be very few
real estate
development projects that will
meet Soviet needs.
43
be structured to
CHAPTER FOUR
CONCLUSIONS AND RECOMMENDATIONS
It
is
objective
remain
difficult to
The demand
appears endless,
of Soviet partners is
strong, for once
is contagious!
The excitement
enthusiasm on behalf
Soviet Union.
ventures in the
real estate joint
success of
potential
about the
government seems to be sincere in following through with much
But these
needed reform, and the returns would be promising.
motivations
alone do
home
the story.
ventures are extremely capital
estate joint
intensive,
enough of
not tell
country.
What
multiple
intensive, time
even in
and RISKY,
frustration intensive
factors do
Real
apply
you
one's
when
transferring these expenses to the Soviet Union today?
ultimate success or failure of
the Soviet
comment on the
this thesis has not been to
The objective of
Union.
Rather,
real estate joint ventures in
it was
provide the
intended to
prospective developer with an overview of the constraints and
opportunities that
encountered in
might be
developing real
estate in the cities of Moscow and Leningrad.
Problems
with
current
real
estate
joint
are
ventures
symptomatic of the larger economic and political issues faced
by the Soviet Union.
depression
in
the
centralized economy
Perestroika is
Soviet
economy.
not a remedy to a minor
Seventy
years
has resulted in inefficiencies
sector that are now crippling
the entire economy.
of
a
in every
There are
many critics
that
tumultuous change,
countries, will be
Eastern block
now ails the
have already
as we
Soviet economy.
of skepticism,
authorities, that
other
seen in
to what
the only recourse
against this background
It is
bordering on "doom
repair and
is beyond
the country
who believe
some noted
and gloom" by
we must measure the
relative successes of
joint ventures to date.
In the past,
a way of
joint ventures were primarily used as
exporting Soviet products abroad and importing technology and
commodities.
Soviet oil and
ventures have
of hard
the
However, with
decline in
other exports over the last
Due to
of
few years, joint
an alternate source
provided the Soviets with
currency.
the export
the dire need for
hard currency,
the emphasis placed on joint ventures has changed from one of
wanting
and
technology
interest
currency.
in
any
joint
The result
imports/
venture
the
growing
that
will
has been the emergence
joints ventures structured to
of
exports
foreign
to
a
critical
generate
hard
of real estate
satisfy the hard currency base
demand
office,
for
hotel
and
residential property in the Soviet Union.
While the
rationale has political support,
and reforms have
been introduced, the economic infrastructure required to make
real estate joint
ventures function is not
in place.
Until
further economic reforms are established, including the
establishment of
a free market system
and convertibility of
the rouble, real estate development projects will continue to
be adhoc solutions in a declining market.
proposed
under Perestroika,
partners
to
execute
Two
improved.
the
address
lack
framework
within
could
techniques, and
recent
city governments that
The
months.
involvement in
benefits of
the development
a
valuation
the state
has begun to
local
having
process are being
to the
emerge in
government
offset by
the central administration in the
the continuing presence of
approvals process.
and
of
reflect the dissipation
authority from
and economic
republics and
lack
joint
Secondly, the system set up for executing
joint ventures does not
of political
estate
addressed internally by any joint
impediments that cannot be
real estate
and
mechanisms are severe
lack of value pricing
venture agreement.
legal
the
such as
appraisal
of
lack
currency,
convertible
not
real
which
Issues
operate.
level did
of an. economic,
fundamental
institutional
ventures
Supreme Soviet
the
proposed at
legislation
First,
offered.
be
can
reasons
primary
not
has
ventures
estate joint
real
local
ability of
overall
the
been
that have
changes
of
tremendous number
the
Despite
There is indecision on the part of Soviet
approval
authorities and
partners
The
climate
confusion on
for
negotiation
the part
is
of foreign
fraught
with
uncertainty.
There are
countless difficulties
46
and risks
associated with
business
conducting
today.
Union
Soviet
in the
Some
of
these, such as the limited access to international telephones
and
the
faxes, and
a 3-5
his home country without
a phone call to
cannot make
everyday
a businessman in Leningrad
For example,
business difficult.
machines make
Xerox
lack of
day advance reservation, and even then the chances of getting
remote.
through are
capability
operating
simple
project
a
getting
in
tasks
insurmountable
bureaucratic
endless
and the
a
of operating
and taxing
of
in
aspects
of
The
economy.
centrally planned
a
maze involved
inherent
are
registered
to day
day
title search
lack of
like the
Others
time and
everyday
business
money.
become
Nothing
is
easy.
Developers evaluating potential risk
lifetime of their
likely to change in the
these factors are
project,
need to assess which of
develop short
and long
term
term strategies
for
Above
resolving these issues, and develop contingency plans.
all they will need to develop patience.
However, despite the difficulties
in this thesis, real estate
to work.
process
There
will
that have been highlighted
joint ventures can be structured
is supporting evidence for
not
be
easy,
and
as
this claim.
previously
The
stated,
perseverance, patience and luck will play a role.
What are
the short
and long term
outlooks for
real estate
In the short, 6-12 month
joint ventures in the Soviet Union?
term, significant
improvement in the economic
Fundamental change is in the
situation can not be expected.
witnessed
change
community
rest
the
in
in
takes hold
However, if some of the
unknown.
process, but the result is
the
of
European
Eastern
Union,
the Soviet
to result for real
significant changes
and political
we can
expect
estate joint venture
opportunities in the next 3-5 years.
At
the
moment, the
development in
good
working
develop
relationships,
to
for
expand
develop a strategy for
as they emerge.
the
approach to
viable
the Soviet Union
projects
opportunities
only
is to start
remain flexible
foreign
into Soviet
market,
driven
real
estate
small, develop
and
patient,
look
for
markets,
and
but
taking advantage of new opportunities
APPENDIX A
FLOW OF MONEY & MATERIALS
SOVIET OF MINISTERS
IALS
$is
BANK ACCOUNT
STROICOMMITTEE
$$
DESIGN
49
APPENDIX B
CASE STUDIES
PERESTROIKA JOINT VENTURE (PJV)
joint venture in the City of
Touted as the first real estate
and
renovation
office
three
of
occupancy
full
achieved
completed
has
Venture
Joint
Perestroika
the
Moscow,
buildings.
By contrast to the many other joint venture "deals" that were
conceived
venture
executed
in
the Soviet
the result
of
a
and
was
this
Union,
meeting in
Washington
joint
D.C.
between various Soviet and American business leaders in 1987.
between Andre Stroyev, the
(the
Moscow
City
Paul Van
Ward the
General Director of Mosinzhstroi,
responsible
Council enterprize
infrastructure construction
was initiated
the partnership
that prompted
The discussion
for
all
within the city
boundaries) and
the Delphi
Organization, a
president of
Washington based research organization.
Stroyev's
in
interest
equipment was matched
acquiring
by Van Ward's interest
in the
strategically
established
players in the development
Moscow Hotel
Association and
to
include
process.
Administration,
technology
and
in executing a
venture was
The joint
Soviet Union.
joint venture
the
advanced
several
other
key
These partners included
the Moscow
Dialogue, a previously
Architectural
registered American/
servicing
and
selling
in
involved
Venture
Joint
Soviet
personal computers within the Soviet Union.
Using
statues,
by-laws,
venture
joint
Dialogue
the
and
agreement format as a guide, the Perestroika JV documentation
6 months of
the venture registered within
was assembled and
its conception.
Within a
rather than dissolve the
would
to a
be sold
principals.
two
between the
surface
issues began to
few months irreconcilable internal
that
was decided
partnership, that Delphi's interest
third party.
to the
Stroyev returned
new partner.
and sought a
United States
It
in 1989,
By early
the restructured Perestroika Joint Venture was operating with
a new partner, The Worsham Group out of Atlanta.
Each partner brings different
he joint
venture.
magazine
as the
businessman
is a
Trump
Union's Donald
international
by
a German
Stroyev characterized in
Andre
Soviet
strengths and personalities to
less
standards much
unqiue
typical
Soviet standards.
"...His resume reads
to
beating socialist
last decade he
higher,
like it should be published
in a guide
few years
during the
systems.
Every
has climbed the proverbial
getting appointed
to
ladder higher and
chairmanships
of bigger
bigger state-owned construction companies.... "124
and
Earl
co-chairman of
Worsham, the
able to negotiate
the partnership, he was
and percentage in
is equally
Group's contribution
the Worsham
When negotiating
suited.
this venture,
2.5 million to 1 million
their equity contribution down from
and their share of the partnership up from 20% to 40%.
main
the
Although
is
to
beginning
international
enter
venture is
also
construction management
other
into
and
investment
of
the acquisition
including
activities,
and
development
the
the joint
real estate management,
involved in
and
estate,
of real
re-development
is
of PJV
focus
a
construction management company.
The
partner,
Soviet
Contractor for all construction
in
a
hires
turn
acts
Mosinzhstroi,
foreign
as
construction
approvals as
from
In
laborers, and
supplies
a
Mosinzhstroi
architectural design
the Soviet
partner
site, provides
skilled
addition,
to the
all infrastructure
as
company
securing pre-development
well as commissioning the
Soviet architects.
provides
local
the responsibility for
General
The joint venture
projects.
subcontractor for the majority of construction.
has assumed
the
such as
materials
concrete,
cement, steel, gravel, sand, and lumber as available.
Mosinzstroi
is distinguished
enterprises
by
organization.
a cost
it's
from
most state
as
classification
a
construction
self
financing
This distinction requires the organization use
accounting
system
whereby
it
is
responsible
for
construction
and
The
projects.
has
PJV
the
through
expenses
it's
meeting
by
agreement between
Mosinzhstroi
the
construction
pay
to
structured
been
generated
revenue
enterprise for it's labor and materials in both hard currency
(50%) and roubles (50%).
and were
space
8-10 months
completed in
of the
were part
original buildings
Perestroika
Union,
sub-contractor
construction is
leases.
does
look
not
financed through
These leases are
to the
to
the
in
the
Soviet
construction
financing.
Rather
the pre-payment
of office
construction
for
equity brought
doing work
companies
construction
three
The
each.
Although an option with some
venture by the Soviet partner.
foreign
Class A
consist of
to date,
buildings developed
The three
generally ten year pre-paid leases
with rents ranging from $600-800/ square meter/ year.
unique ways of compensating it's
The joint venture has found
employee's, not the least of which
training program
This
that was
business
improving
management
management to
techniques,
productivity.
managers spent a
organized by KPMG/
PJV
program oriented
has been the funding of a
As
budgeting
part of
month in the United
management policies in practice.
25
the
Peat Marwick.
basic
courses in
processes,
program,
and
Soviet
States observing these
AMSTROI JOINT VENTURE
Despite what
in
business
doing
Soviet
the
interested in the
after
the
both HUD in Washington and
Office (USCO)
Commercial
US
Commerce Department's
became
In
years ago.
several
visit
a tourist
small
is a
in the Soviet
potential of doing business
process of doing research through
the
international
the
Union,
Millpond International
of
Peggy Hughes
community.
uncertainties of
the vast
within Moscow,
community particularly
business
Union
to be
would appear
in
Moscow she began to make contacts with other individuals that
had been involved in real estate joint ventures.
of
contacts, she
her
put
was
in
touch with
Through one
the
Delphi
Organization and in turn one of their staff Larry Kaufer.
working on the Perestroika Joint
Kaufer having just finished
Venture negotiation was breaking off from Delphi to start his
own consulting
practice.
a consultant, he
established in Moscow
in getting
assisted her
Hiring Kaufer as
and provided
access to numerous local and international contacts that were
valuable to the emerging partnership.
It was
Millpond's
local
which Millpond
partners,
was
Soviet partner
she handled
liaison,
within
these contacts, Nona
through one of
and
provided
Acting
found.
logistics,
was able
as a
provided a
to access
translation
Fedortseva that
Moscow
network
potential Soviet
services.
After
six
months of looking for both the appropriate site/ building and
a viable
Moscow High
for
the
This
a joint venture that
forming
initially
was
would renovate a
follow
only during
was
It
in Moscow.
theater
the
group responsible
Moscow,
housing in
of
management
to
introduced
Millpond was
Rise Housing Authority.
interested in
movie
partner,
Soviet
on
meetings that the possibility of a renovation and addition to
surfaced
office building
their
ultimately became
and
the
initial project of the Amstroi Joint Venture
As the momentum
several
partnership took hold,
and direction of the
other players
were made
Dvorak of
Otto
partners.
Steffian Bradley Associates was brought in for his design and
and Larry Kaufer for
development expertise
his knowledge of
executing business agreements in the Soviet Union.
stages of the
intimately involved in all
partners have been
All three
strategy and negotiation of the project.
One
of
first
the
determining that
and was
for the parcel.
the
were
the Soviet partner
Falling
required
under
was
the land
lease arrangement
This approval was separate and distinct from
agreement and
protocol, statue,
also
had rights to
enter into a
legally entitled to
process
development
the
steps in
the
of
the
auspices
newly
of
the
(Mossoviet), approval to outlease the
design approvals
formed
Moscow
joint
City
that
venture.
Council
land and to enter into
a joint venture was required of the city council.
Adding to what is already a complex and lengthy procedure for
55
registration of
City Council had
joint ventures, the Moscow
recently established a quasi state legal office, Mosinter, to
assist both soviet and foreign parties in the negotiation and
agreements.
approval of
joint venture
reviews all
joint venture documentation,
understanding
negotiates changes
Finance for approval.
and then the Ministry of
the
is that
Although not
agreements, the
approve
to
entity empowered
fee, Mosinter
makes recommendations to the Mossoviet
to the documents, and
an
For a
recommendations
unwritten
made will
more
likely be approved.
The Amstroi Partnership
was one of the
first joint ventures
required to work through this new organization.
have
encountered some
business
conducting
the frustrations
of
Soviet
in the
with
a party
blat and secondly how
bureaucrat.
through Mosinter the first
with regard
to
the
Of these,
how to conduct business without
primary challenges have been
reverting to
Union.
As such they
Despite
to negotiate effectively
these hurdles,
working
stage of approvals, the Protocol,
was approved within two weeks.
With
the
assistance of
their
own
legal counsel,
and
in
conjunction with Mosinter, the feasibility study, the statues
and
the agreement
were
drafted.
lengthy and difficult negotiations,
forwarded to
MOSSOVIET for approval
the Ministry
of Finance.
is anticipated
in October
Although
the subject
the agreements have been
and will then go
Registration of
on to
the joint venture
1990 and construction
56
of
started in
April 1991.
Finance registration, the Request
While awaiting Ministry of
for Proposal has been issued to Austrian, Italian and Finnish
building contractors that are experienced with working in the
Soviet
The
Union.
working
the
completing
construction.
executing
responsible for
will be
firm selected,
drawings, importing
intends to
Amstroi
materials
and
to
the
look
foreign construction firm for the construction financing.
both Soviet
and foreign
respective currency.
being
covered
by
Moscow.
to
Although
strengths are
With local
rouble
committed to
International is
has begun
the
look
Each
tenants.
their
and
building will be
planned the office
As currently
rent
real
the system.
pay in
costs of
operation
revenue.
Millpond
holding strategy
estate ventures
small by some standards,
in their patience and
understanding of
tenant will
a long term
at other
leased to
in
the partnership'
perseverance, and their
They have been
approached by
several large American developers that are interested in real
estate
joint
venture
opportunities
projects that might be appropriate.
57
and
are
looking
for
ROSINKA--A RESIDENTIAL COMMUNITY
The
units.
groups of 44
of 528 units clustered in
project will consist
a
be
will
project
supporting
self
The
Kremlin.
the
from
kilometers
24
located
community
residential
acre
82
an
will be
Rosinka
1988,
in
Begun
complex
consisting of a sports complex, retail shops and restaurants.
of the founders
As one
but I am optimistic that
structured for the Soviet market...
the legal framework
that there
within the soviet Union
will be opportunities
is changing and
that enable
in the future
in meeting
the Soviets
to assist
foreign partners
not been
pointed, "this project has
some of
their residential construction needs." 26
Rosinka
like many
real estate
of the
development projects
currently under development, is being marketed to the foreign
business community
Soviet Union.
flooding into the
that is
In this particular project 80% of the units will be leased to
hard currency.
foreign firms for
set aside
for the
lease term
years 4,
is 6
5 and 6
20% will be
of foreign
firms doing
Soviet employees
business in the Soviet Union
The
The remaining
and will be leased for roubles.
years and
requires the
of occupancy.
at the time
prepayment of
In
addition a
letter of credit guaranteeing this payment is required at the
time
of leasing
configurations
year.
the unit.
and rents
There are
range
four different
from $45,000
unit
to $82,000
a
One of the first of it's kind, and the one that is closest to
being executed, this residential joint venture was structured
as
and development
marketing
the partnership
and
the project.
plots for the
and roads
infrastructure
will build
The
and equipment from
part of the
As
60 acres
will develop
kitchen garden
nearby into
to
their hard currency proceeds.
the West with
deal
expertise
intends to buy machinery
collective farm
the financing,
partner bringing
the American
venture, with
joint
the
to
approvals
building
and
land
brings
farm,
a collective
Soviet partner,
The
partnership.
a 50-50
of other
land
Collective's use,
adjacent
for the
town.
periphery
on the
Located
approval of
required
the
(Oblast)
as well
as
the
both
jurisdiction,
Agricultural
under
their
committee
the
Rosinka
Regional City
Council
(Mossoviet).
City Council
the Moscow
the City Council of the town
Approvals were also required of
having
of Moscow,
City
of the
surrounding
two
towns,
the
farm
fell
the collective
(because
KGB
jurisdiction),
the
been granted
by all
and
the
defense
department.
Approvals have
venture
statues
and agreement
has
Ministry of Finance for approval.
positive
1990, due
and a
ground breaking
to the political
parties, and
been
forwarded to
the
Even though the outlook is
is scheduled
turmoil within the
there have been times as recently
the joint
for September
Soviet Union
as six months ago when the
Of particular concern were the
project looked very tenuous.
municipal
was adamantly
candidates
other sectors had
support from
Despite the strong
the site.
involved in the development of
party being
a foreign
opposed to
mayorial
of the
One
1990.
in March
elections
the project
he been elected
would have been derailed.
The
company
construction
The
contract.
turnkey
a
under
Finnish
a
use
to
intends
Venture
Joint
Rosinka
conceptual drawings were prepared by an American firm and the
construction
materials
first
firm
of building
The
A Finnish
provide
the
working
drawings,
Although
materials,
Finnish
construction
developer's
not the
due
existing
to the
out of pre-cast
units will be constructed
building code the
concrete.
will
and construction.
choice
"feel".
to have a New England
units are designed
firm will
not
be
a
partner in the venture and
will not provide the construction
However due to
the strict guarantees provided by
financing.
time and fixed fee, Rosinka's
the contractor regarding fixed
relationship with
them to
contractor has enabled
a Finnish
secure a government guarantee from the Finnish Government for
the
$100,000,000
approached,
partner that
however,
Several
project.
it
is
the opinion
there is resistance
the Soviet Union at this time.
60
lenders
US
of
the
to funding real
were
American
estate in
FILCO- A SOVIET/ FINISH JOINT VENTURE
Leningrad, the FILCO partnership is a
Located in the City of
Haka
This partner has access to
Council of Leningrad (Lensoviet).
city
and buildings
owned property
lumber,
steel
with
concrete,
and
contributes
company
Finish
importing
Haka
the
brings to
which it
Soviet construction
The
partnership.
with the City
turn has a joint venture
FILCO partnership in
The
company, Lenstroi.
construction
Soviet
and the
construction company,
large Finish
between a
joint venture
finishing materials and sewage infrastructure.
The
each
(50%
interest
a
receiving
land and
receiving a
between
Agreements
Lenstroi
and
Lenstroi)
60%
FILCO
and
economic agreements regarding the use
Lensoviet are based on
of
Haka and
for
interest.
40%
with FILCO
structured
partnership is
buildings (in
other
words a
lease or
rental
payment for use) rather than a land lease.
Although Finnish
to
the
as
involvement
This
contracts.
Haka
in
construction business
traditional
a
construction
way
not strangers
construction contractors are
has
the
construction
venture was
initiated by
j oint
to remain
c ompetitive
within
the Soviet
venture agreement was signed i n
registered in 1989.
their
to
been limited
particular
market
Soviet Union,
in
the
Union.
tightening
The
joint
1988 and the partnership was
is one of a
The underlying strategy
The
disband but rather
to
needed
profiled, this
of
City
Leningrad.
the other joint ventures that
Additionally unlike several of
have been
the
and
concern that could
to provide an ongoing
as
services
provide
one project
to do
not structured
partnership was
long term relationship.
JV does
for the
develop projects
Soviet market.
Projects
are
that
include
the
soviet factory,
the
board
drawings
the
for
housing units
of
construction
on
a
renovation of a historic building in the city center, a hotel
a factory for the production
complex near the University and
of slabs on grade.
The projects are basically structured as follows: the housing
units will
be built
authorized
for
purchase
use
for a
by
the
housing to their employees.
into a
be renovated
space,
parking.
retail
The
business in
Leningrad.
roubles/ square meter
currency
and 20%
and provide
the
There
will office
and
underground
to foreign
firms doing
complex.
be leased
flats
Office rents will
range from 80-100
per year and will be paid
in roubles.
will
building in the center will
residential
space will
has been
factory
The
partnership
The
mixed use
space,
land that
the LenSoviet.
units from
the
factory, on
Payment for
80% in hard
the residential
units will be 50% in roubles and 50% in hard currency.
Plans
for the
300-400 rooms.
building a
hotel include
It is anticipated
that 75-80% of the revenue
hard currency with 20-25% in
will be in
hotel with
5 star
The joint
roubles.
venture is in the process of interviewing hotel operators and
plans for the operator to assist with securing the financing.
The deal will leave FILCO with a 10% interest, Lensoviet with
a 20%
interest and
a 10%
operator with
interest, the
the
investors with a 40-60% interest in the property.
The construction plant
has been sited in
and will bring in another partner.
FILCO will both build the
the product into
well as integrate
factory as
a Leningrad suburb
their future
projects, Lensoviet will in effect contribute the land, and a
third
partner will
deal.
The plan
the production
bring
the
using the slabs
is to amortise the costs of
Soviet Union by
within the
equipment to
to export
eventually being able
the technology abroad.
An interesting
guarantees that
reflection of how
have traditionally been required
banks lending money
required
the
risk is evaluated
in the Soviet Union.
guarantee
of
one
of
the
are the
by foreign
Until 1989, banks
following
agencies: 27
Bank for Foreign Trade
All Union Ministries
All Union Government Insurance
Local City Councils (Moscow, Leningrad, etc.)
Soviet
Aeroflot
Shipping Company
of 1990, the
However, as
been reduced
list of acceptable
guarantors has
the All Union
Ministries and
to two agencies,
the All Union Government Insurance (Ingostrab).
The FILCO joint venture has avoided this constraint by taking
advantage
of the
parent company, Haka.
project financing.
loans.
It
the problem
financial standing
strong
And
Finish
The Finnish Bank Oko will be providing
Haka will be the
is the opinion
risk but
guarantor of these
of the FILCO Soviet
of securing financing
perceived market
of the
partner that
has not been an
rather the political
economic instability of the Soviet Union.
issue of
and overall
(reference meeting
with Alexander Vehnistrov General Manager FILCO).
FOOTNOTES
1. Jerry F. Hough. "Perestroika Yes, Glasnost No" The
International Economy. Jan/Feb 1989
2. Perestroika translates as reconstruction. The notion
of Perestroika was created by Mikhail Gorbachev in 1985
primarily as a remedy to the growing stagnancy in the Soviet
Economy
3. Interview with Vladimer Linov, Chief Architect at
Lenniitag, (June 10, 1990)
4 . A. Agabegyan, Inside Perestroika.
Row, 1989) p.88
(New York, Harper &
5. Interview with Jukka Suominen, Project Manager Astoria
Hotel Leningrad. Yit Corporation (June 12, 1990)
6. G. D.Andrusz, Housing and Urban Development in the USSR.
(Albany, New York, Suny Press 1984) p. 149
7 . Interview with Alexander Tobveen, Chief Architect at
Lenproject (June 12, 1990)
8 . G. D. Andrusz, Housing and Urban Development in the USSR.
p. 159
(Albany, New York, Suny Press 1984).
9.
Ibid., p.g 160
10. Telephone interview with Chris Senie, The Rossinka
Project (July 13, 1990)
11. Blat is the term used to define gifts, bribes, and
incentives given as part of the process of getting something
accomplished.
12.
The Boston Globe, May 1990.
13. Joint Ventures in the USSR, International Chamber of
Commerce, Doing Business in the USSR, American Management
Association, Joint Ventures: Benefits for All. Soviet
Publication
14. Mark S. Vecchio.
Eye on the Goalposts"
April 1990
"Soviet Joint Ventures: Keeping an
International Financial Law Review.
Coudert Brothers, Moscow. "Legal Issues in Real
15.
Estate Transactions in Moscow" (June 1990)
16. Apparet is defined as the bureaucracy of central party
members that have traditionally made decisions in the USSR.
65
17 A. Aganbegyan. Inside Perestroika.
Harper & Row, 1989) pgs. 169-170
(New York,
18.
American Management Association. Doing Business with
the Soviet Union. (New York, AMA, 1988) p. 48
19. A. Aganbegyan. Inside Perestroika.
& Row, 1989) p. 107
Interview with Dimitrij Podjapolskij.
20.
(June 20, 1990)
Moscow.
(New York, Harper
Architect in
21. Paul Lawrence and Vlachoutscios, Charalambos
(Boston, Harvard
Vlachoutscios. Behind the Factory Walls.
Business School, 1990)
Interview with Marshall Goldman. Professor of Russian
22.
Studies, Harvard University. (July 16, 1990)
23. Jerry Hough. "Perestroika Yes, Glasnost No".
International Economy. Jan/ Feb 1989
The
24. Moscow Magazine. June 1990
25.
PR Newswire, New York.
May 31, 1989
26. Telephone interview with Chris Senie. The Rosinka
Project (July 13, 1990)
27. Interview with Alexander Vahnistrov. General Manager,
Filco Joint Venture (June 15, 1990)
BIBLIOGRAPHY
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Aganbegyan, Abel, Inside Perestroika,
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Doing Business with the
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Albany: State University of New York Press, 1984
Bubnov, Boris, Foreign Trade with the USSR A Manager's Guide
to Recent Reforms. Oxford: Pergamon Press 1987
Eisen, Jonathan, ed.
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the Factory Walls.
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Shipler, David.
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Estate Transactions in
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(Undated Draft 1989)
Euromoney.
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November 1988
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The
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Estonia: Can It Become the Soviet
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Malmgren, Harald.
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The Soviet Case, Presented at the Third International Shelter
Conference, Washington, D.C., (April 26, 1990)
"Inside Gorbachev's USSR".
Hedrick.
Smith,
(Aired April 30, May 7, May 14, May 21, 1990)
WGBH
Boston,
INTERVIEWS
Antonov, Valerie. Deputy Managing Director at the Institute
(Lenniitag), (June
of Architectural and Urbanistic Theory.
13, 1990 and June 14, 1990)
Leningrad
Albert.
Baranov,
Sociologist, (June 9, 1990)
City
Council
Member
Research Director at Lenniitag,
Berezin, Michael.
1990 and June 12, 1990)
and
(June 6,
Dvorak, Otakar. Principal, Steffian Bradley Associates Inc.
(American Partner, Amstroi Joint Venture) (June 22, 1990 and
June 23, 1990)
Russian
Marshall.
Goldman,
University (July 16, 1990)
Expert/
Professor
Harvard
Krivov, A.S. Deputy Chairman of the State Committee
(April
Architecture and Planning (Goscomarhitecture),
1990 at the Massachusetts Institute of Technology)
for
23,
Executive Vice President The Worsham Group
Leblanc, Alan.
Joint Venture).
the Perestroika
Partner of
(American
1990)
5,
(July
Interview
Telephone
Head of the Leningrad
Leonidovich, Vitrenko.
Planning Commission, (June 13, 1990)
City Council
Linov, Vladimer. Chief Architect at Lenniitag, (June 6, 1990
and June 10, 1990)
Maslennikov, Nikita. Director of Lenniitag, (May 2, 1990 at
the Massachusetts Institute of Technology and June 20, 1990)
Nazarov, Valentin.
15, 1990)
Deputy
Boris.
Nikolilaschenko,
(June 13, 1990)
Leningrad.
Podjapolskij, Dmitrij.
Reuther, John.
(June 22, 1990)
Leningrad (June
Genplan in
Direct or of
Chief
Architect, Moscow.
of
in
Genplan
(June 20, 1990)
General Director, Perestroika
Joint Venture
Senie, Christopher. Lawyer/ Partner Rossinka Joint Venture.
Telephone interview (July 13, 1990)
Suominen,
12, 1990)
Jukka.
Tovbeen, Alexander.
1990)
Project
Manager, Yit
Chief Architect
Vahnistrov, Alexander.
(June 15, 1990)
General
69
Corporation.
(June
at Lenproject (June 12,
Manager, Filco Joint Venture