There's still time to buy a place with a view of the Kremlin - for a price

Engels Would Gasp, and Locals Gripe, at a Golden Mile
By SOPHIA KISHKOVSKY
The New York Times, Monday, December 18, 2006

MOSCOW, Dec. 17 — The statue of Friedrich Engels that graces one of central Moscow’s most prestigious neighborhoods has not been of much use to any but pigeons in recent years. But Engels, the co-author of “The Communist Manifesto,” was a handy rallying point not long ago for some residents of that neighborhood, Ostozhenka, who were protesting its transformation into a hotbed of luxury housing thanks to the Russian capital’s oil-fueled real estate boom.

“Leave Us Alone,” read banners unfurled by the protesters in September. That is the name of their movement, spurred by the latest luxury housing project, slated for the site of an apartment building in which some of them still live, at Khilkov Pereulok 3. The gold domes of Christ the Savior Cathedral, a 19th-century church destroyed by Stalin and rebuilt in the 1990s, just as the district began to take off, overlook the area.

Ostozhenka (pronounced ahs-TO-zhen-ka), once home to many artists and intellectuals, is now known in the parlance of real estate agents and their wealthy clients as the Golden Mile. In the last five years it has become a Kremlin-view Beverly Hills on the Moscow River. Its winding lanes are now home to modern multimillion-dollar penthouses, Ferraris, gourmet restaurants and bizarre crimes: last year a celebrity plastic surgeon was stabbed by roller skaters, and later died, in what appeared to be a roll-by contract killing.

The neighborhood’s rise is only one of many morality tales of money, power and real estate now playing out across post-Soviet Russia.

In recent months, dramas included an elderly Moscow couple who had been evicted from their home and were camping in the yard of their old apartment building, which was slated for demolition to make way for new construction, and villagers being pushed from their homes on the edge of Moscow to make way for high rises. In both cases, residents were infuriated by orders to move to apartments in Yuzhnoye Butovo, a district that is near a former Stalinist killing field and an hour from central Moscow by subway. They are still fighting the orders.

The fight continues in Ostozhenka as well. “The Golden Mile is the most brilliant business project in post-Soviet Russia,” Denis Litoshik said in November at one of the neighborhood’s Starbucks-like coffee shops.

Mr. Litoshik, 27, has a personal stake in its transformation: he lived, until recently, at Khilkov Pereulok 3, and is a leader of Leave Us Alone. As a journalist for the business newspaper Vedomosti, he is awed by what he says is a reported $33,000 per square meter price tag on apartments going up next door to his former home. “They’re not selling drugs, but they’re making much more money,” he said of developers who have converged on Ostozhenka.

But a few buildings, some ramshackle, some solidly middle class, hinder a complete makeover.

One of those is Khilkov Pereulok 3. Mr. Litoshik lived there with his wife and their baby until city authorities issued a decree in May declaring the building subject to demolition to make way for new construction even though the 19th-century building was overhauled in the 1960s and renovated again in the past few years. He and other residents were pressured by officials and developers to leave. Fearing that the building could be burned down, as sometimes happens across Russia when new construction has been slated, he moved away and began to fight.

This month, the business daily Kommersant reported that the federal antimonopoly watchdog had deemed the plans for Khilkov Pereulok 3 illegal. But that ruling could yet be challenged and may not halt the development. Sergei Tsoi, press secretary for Mayor Yuri Luzhkov, was quoted by Kommersant earlier this year as calling the Ostozhenka protesters’ actions “egoism.”

Ostozhenka stood virtually untouched until the late 1990s, frozen in time by a Soviet decree that called for the construction of a vast Lenin-topped Palace of Soviets in place of the razed Christ the Savior Cathedral. It was never built, but the plan was never revoked; a swimming pool was instead built on the site. And Ostozhenka figured in Mikhail Bulgakov’s surrealist novel, “The Master and Margarita,” which gave the Russian language its ultimate real estate catch phrase: “The housing problem has corrupted them.”

Bulgakov depicted the early Soviet years, when aristocratic abodes were forcibly transformed into communal apartments for the masses, with shared bathrooms, kitchens and secrets. Now new money is squeezing out the remaining “kommunalki,” as the communal apartments were called.

Aleksandr Khosenkov, 56, lives in a friend’s communal flat. “I live here, but all the streets have been renamed — I can’t find the houses,” he said. “It doesn’t matter if a person has a Mercedes. Their soul should matter, not their car.”

Georgy Dzagurov, the general director of Penny Lane Realty, which offers properties in Ostozhenka, said, “Practically anyone who is powerful has bought there.”

“One million dollars or $2 million is nothing for them,” he said of his clients. In October, Morgan Stanley announced its purchase of a stake in RGI International, owned by Boris Kuzinez, a developer whose ultramodern buildings are credited with transforming Ostozhenka into billionaires’ row. RGI’s Web site, posted in time for its London Stock Exchange initial public offering earlier this month, lists Khilkov 3 among its projects.

While describing his clients only as “mostly businessmen, bankers, in oil and metals,” Mr. Kuzinez acknowledged an oligarch’s need for the right milieu. “It’s hard for oligarchs to live in a regular building,” he said.

Maksim, a banker, though not an oligarch, declined to give his last name but agreed to show his sleek two-bedroom apartment in an a Kuzinez development. “There are guards everywhere,” he said. “Filtered water, central air conditioning, good parking. The main thing is it’s homogenous. This is a plus.”

Mr. Litoshik, wearied by battle, is accepting a buyout of over $10,000 per square meter for his 80-square-meter (860-square-foot) apartment. A victory, he said, because in Russia a fair price is almost miraculous. A loss because “we never wanted to sell our apartment.”

It is a story that has been familiar to generations of Russians, both before and after the Soviet era. “Khilkov 3 is ‘The Cherry Orchard 2,’ ” Mr. Litoshik said, referring to Chekhov’s play about — what else — money, real estate and one class squeezing out another.

UPDATE: Turkish expat blogger Dinc Arslan, writing from Moscow, questions the recent reports claiming that the Russian capitol is the world's most expensive city. Arslan cites a UBS report claiming that Moscow is actually only the 41st most expensive city on Earth, based on purchasing power for essential goods (i.e. food, clothing). Along with owning apartments passed down from family members, this fact would help to explain how hundreds of thousands of poor Russians earning $300-400 a month manage to survive in the city.

UPDATE2: You can watch a real estate investment marketing video in Russian, complete with cheesy techno background music, here: