J&T Acquired the Most Esteemed Hotel in Moscow
J&T has always been interested in the fast growing Russian market, so in April 2007 it bought 100% of the shares of the Tretij Rim bank in Moscow. The bank was renamed and now it is called J&T Bank. We also started to seek interesting projects in the field of real estate and hotel business, primarily in Moscow.
At that time we already had two common projects with Kempinski Hotels in Slovakia - Grand Hotel Kempinski in the High Tatras Mountains and Kempinski Hotel River Park in Bratislava. There were proactive negotiations concerning these projects, which clarified that Kempinski was ready to sell a controlling package of shares in the Baltchug Kempinski Moscow Hotel. At that time we intended to buy a 5-star hotel in Moscow. Kempinski needed investments and was ready to sell a part of its shares to a strategic partner with experience in the hotel business. This is how the agreement was formed. We had had an opportunity and we took it.
Companies affiliated with the J&T Group acquired a 75% share of Baltchug, s.r.o. which owned the hotel complex, in Kempinski Hotels. Kempinski kept 25% for itself. The contract was signed in October last year and the agreement was made in April.
In regards to the agreement: In accordance with a non-disclosure agreement, I can only say that the price of our share was calculated on the basis of the price at which Kempinski had bought its share in the hotel from the city of Moscow and its Austrian partner. Of course, this price was increased by revenues earned by Kempinski at the period when it held 100% of the share. Pursuant to the agreement concerning the entry of J&T among the shareholders, we have a duty to renovate the Baltchug Kempinski Hotel and a duty to amend the company's articles of association to guarantee the pursuit of interests on behalf of J&T and Kempinski. The principal duty involves an amendment, which will ensure that a decision on a change of operator shall be approved unanimously by all the co-owners of the company.
I am sure that the market value of Balčug, s.r.o. will amount to at least 5 billion Rouble after completing the planned renovation.
We are very satisfied with this investment, which is strategic for us. We will continue developing the hotel business in Russia; we plan to open a 4-star boutique hotel in the historical Kremlin zone at the end of this year. It will be administered by the J&T Hotel Management company. We keep analysing other opportunities in Moscow, Saint-Petersburg and other Russian cities with populations exceeding 1 million.
However, Baltchug Kempinski remains to be our most precious purchase, as this is not just a common hotel, it is rather a hotel-legend, a part of Moscow's history, a credit to the city. This is the reason why we - shareholders and investors - are not interested just in profits, but we also assume responsibility to maintain the status and prestige of the hotel. In this regard, we have great plans concerning the development and renovation of the hotel.
J&T has much experience in the field of commercial and residential real estate as well as the hotel business. The total volume of Group's investments in real estate exceeds 20 billion Rouble. We plan to implement projects on our lands in the next decades where we will invest more than 90 billion Rouble.
All the development projects of the Group are concentrated in the J&T Real Estate company; hotels are administered either by global hotel operators, such as Kempinski, or by our own company J&T Hotel Management.
in general, J&T has controlling packages in fourteen (14) hotels of various levels, including four 5-star and 5-star+ hotels. Several other hotel complexes at such levels are in the process of design. We have 1,951 rooms in total. Income earned from the eight hotels in operation amounted to more than EUR 20 million in 2007.
One of the most ambitious and biggest projects J&T undertakes in the hotel business and tourism is a comprehensive development of the Low Tatra and High Tatra Mountains. We administer not only hotels, but also the infrastructure companies of ski resorts that operate cableways, for example. These are beautiful places and we believe that they will become very popular among Russian tourists and people intending to buy a property at Slovak ski resorts.
I think that in several years time, our Tatra Mountains will become more popular among Russian tourists than Courchevel. Courchevel is for millionaires only, but the Tatras will become a holiday resort for the middle class. A show-room marketing our holiday resorts in the Tatras will be opened in Moscow this year.
We are aware that visa issues may appear. They are regulated by the European Union. Although we always kept saying that J&T stands out of politics, we will lobby proactively with our government in this issue to adopt flexible rules for trips of Russian tourists and investors to Slovakia and Slovak ones to Russia.
As I said before, Baltchug Kempinski is not just a hotel for us. It is a symbol of a successful transformation of one of the biggest economies of the world. For us as private bankers, Baltchug Kempinski is not just a hotel and business, but it is a base for keeping a dialogue with the business, social and political elite in Russia and the entire region of Central and Eastern Europe.