Russia: Tinkoff begins outsourcing property

Through selling off and leasing back its Moscow restaurant building, Tinkoff is freeing funds to invest in development. Restaurant chain Tinkoff has sold one of its prime Moscow locations to Troika Dialog Asset Management in a move to release cash for expanding its main business, The Moscow Times communicated on October 4.

Under the deal, Tinkoff will lease back the 1,900-square-meter building on Protochny Pereulok near Smolenskaya metro station for a period of 10 years, the two companies said on September 29. For Troika, the deal adds the restaurant to the expanding portfolio of its Commercial Real Estate investment trust, a vehicle allowing investors to buy a share in a portfolio of properties.

Financial details were not disclosed, but analysts estimate the restaurant building is worth between $3.5 million and $6 million. "This is the first deal of this kind in Moscow," Pavel Teplukhin, president of Troika Dialog Asset Management, said.

As the first restaurant to be sold and then leased back, the deal is something of a trailblazer, said Anna Savenko, commercial real estate expert at Jones Lang LaSalle. Previously, such deals were done with offices, she said.The deal between the two companies will be expanded to include two more Tinkoff properties.Preliminary agreements are already in place for the sale of a 2,200-square-meter restaurant in Samara and a 1,650 square meters restaurant in Yekaterinburg, Teplukhin said.Tinkoff restaurants controlled by Tinkov is currently in the midst of expansion, with plans to open new outlets this year, as well as to launch a new bar chain called T.

Previously this year, Belgian beer giant InBev acquired all Tinkoff beer brands and production facilities for $202 million.

Foregoing real estate ownership in order to access capital to expand a more profitable core business makes financial sense if that business has a higher rate of return than the real estate market, said Maxim Gasiev, retail director at Colliers International.

Troika and Tinkoff ironed out the details of the agreement back in April, but the real estate ownership registration process took five months to complete, Troika's Teplukhin said.

"We had to turn to the regulator to clarify virtually every word," Teplukhin said. There was confusion, for example, over how to register a real estate investment trust, or REIT, as the building's owner.The Moscow Registration Chamber was perplexed because the authorities had only registered individuals or companies as real estate owners in the past, according to Teplukhin.

The process was problematical because of confusion over tax administration. Normally individuals and companies are liable for taxes. However, in the case of REITs, the shareholders are the ones who are taxed.

Troika purchased other properties for inclusion in the portfolio of its Commercial Real Estate trust, Teplukhin said. He declined to elaborate until the property registration is finalized. "News will come in two to three weeks," Teplukhin stated.

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