REAL ESTATE DEVELOPMENT IN RUSSIA CENTRAL TO BUSINESS GROWTH By Michael Newman, President, Golub & Company

Golub-Europe, L.L.C., an affiliate of Chicago-based Golub & Company, has transferred to St. Petersburg a team of real estate specialists from several western markets. From that base, they will continue to support our growing international real estate development and service initiatives.

Since entering central and eastern Europe in 1989, Golub-Europe has pursued real estate opportunities driven by clear market demands. During preliminary feasibility studies, we identified both St. Petersburg and Moscow as viable markets for our activities. We believed these cities would be the first in Russia to enjoy substantial economic resurgence.

Officials in St. Petersburg, whose free-market economy blossomed early, were quite receptive to the concept of public-private real estate development. They desired to participate in the global economy and recognized the need to attract multinational companies to their city. But they also saw that St. Petersburg's severe shortage of modern office space would hamper their economic development plans.

The circumstances are similar in Moscow, where both local and foreign private enterprises can find little modern office space. Without such space, many prospective office tenants tell us, they cannot operate profitably in Russian markets.

Golub-Europe is working to fill the void in both cities. In St. Petersburg, we are renovating a former residential building and converting it to first-class office and retail use. Located on the city's primary commercial artery, Nevsky Prospekt, Nevsky 25 when completed late this summer will add nearly 10,000 square meters of western-style space to the central city. Redevelopment of the five-story building is by St. Petersburg Property Development Company, a joint venture of Golub-Europe, L.L.C. and its Russian partners, the City of St. Petersburg and RUBIN. The original facade and other significant design elements are being retained, while an existing interior light atrium, a shopping arcade and central core with state-of-the-art elevators are being added. Financing for the project was provided by the Overseas Private Investment Corporation and the European Bank for Reconstruction and Development. Istanbul-based Alarko Alsim is the general contractor.

In Moscow, we are in the preliminary stages for developing a new office building. It is too early to provide full details, except to say that this project also will meet a pressing need for modern, efficient office facilities with advanced systems throughout.

Golub-Europe strongly emphasizes on-site property management and tenant services, thereby providing unprecedented benefits to our properties' Russian and foreign tenants alike. Ongoing preventive maintenance programs to keep building systems operating at peak efficiency and state-of-the-art security systems to safeguard our buildings and their occupants are two vital goals of Golub-Europe.

Lease documents in Russia are similar to those in the west, while occupancy costs are significantly higher because of greater development costs and the scarcity of first-class space.

Many prospective domestic and foreign tenants today are eager to pre-lease space and lock in long-term leases. Our staffs in St. Petersburg (7-812-325-6161) and Chicago (1-312-440-8800) are available to guide tenants through the process.

Real estate development in Russia remains relatively time-consuming and expensive for the private developer, but it is absolutely essential to the republic's long-term economic health. Fortunately, our experience and track record in the region have helped us implement much-needed development cost efficiencies. We therefore are committed to our present and future Russian projects and intent on helping to facilitate the expansion of the free market economy in that country.