'Astute' Russians lease 75,000 sf at World Trade - International Center for Business Cooperation, World Trade Center

Real Estate Weekly, Jan 8, 1992 by Lois Weiss

|Astute' Russians lease 75,000sf at World Trade

An organization formed by the Russian government is leasing space for a cultural and business center at the World Trade Center in a deal arranged by Gronich & Company.

The International Center for Business Cooperation (ICBC) is expected to develop foreign economic relations for Russian businesses in order to integrate them into the world marketplace as well as assist other governments and businesses in dealing with the Russians.

Three floors at Five World Trade Center, totalling about 73,000 square feet, with options to 80,000 square feet, will be used as exhibition, retail, and office space including areas set aside for small companies beginning cross-cultural deals. The-nine story building is also home to Dean Witter Reynolds and First Boston.

The Russian's 25-year lease with a value of $38 million began on Jan. 1. "It's a market deal," said World Trade Center General Manager George T. Rossi, "and a complicated system of escalations with three types of space. They should be in the space and operating by the end of 1992.

Gronich Managing Director James P. Stuckey said he and Chairman Dan J. Gronich worked on the Russian Trade and Cultural Center deal for more than a year.

Stuckey said, "we made a decision early on to work with the Republic. Our feeling had been that Russians had been there for thousands of years and would continue to exist for thousands of years, while the Soviet Union had only been there for 70 years. When the coup occurred in August, we were more concerned about our friends there than the deal going forward."

As it turns out, the Russians associated with the transaction played pivotal roles in resisting the failed coup in August.

Rossi agreed that the negotiations went ahead "almost oblivious" to the political turmoil.

Stuckey, who had headed the Public Development Corporation for four years under former Mayor Edward Koch, said there are always political questions when you deal with governments. "There was some turmoil," he admits.

Since the new Federation has been formed, laws are being changed to encourage free enterprise. Decrees have been adopted that guarantee foreign investments and permit one hundred percent ownership of Russian businesses by foreigners. The ICBC itself is a self-sustaining membership organization, open to Western companies, that will funnel some profits to aid Russian social and humanitarian causes through the Fund for the Social Revival of Russia. The ICBC was formed by a decree of the Russian Council of Ministers and is supported by President Yeltsin and Vice President Rutskoi as an example of Russia's more aggressive commitment to conduct international business and enter western markets.

The ICBC, which will operate Russian Trade and Cultural Centers in other parts of the world, is expected to help member organizations with trading activities and also provide accurate market research and data. It will also assist local business partners and permit Russian Republic taxes to be dedicated to economic development or social causes that would provide benefits to the companies paying these taxes.

Stuckey noted that the current American marketplace is not in good shape. "What we have done is open up a market of 150 million people," he noted. "Those people are desirous of our product and doing joint ventures." If this Center opens a year from now, and Russian businesses are here and they are looking for American projects, that creates a tremendous amount of real estate, manufacturing, and exporting and importing opportunities. If American companies with an interest in Russia wish to be part of the Center, they can."

The World Trade Center space will be divided up into various uses. About 12,000 square feet on the ground level will become exhibition space for a small retail outlet and for a restaurant. Rossi said the Russian restaurant will probably include everything "from white table to take out" in order to promote Russian foods.

The Russians also intend to create about 25,000 square feet of incubator space, apportioned on two floors, which will be used for small offices. Rossi said these will be subleased to firms that want to do business with various Russian entities which will promote trade between the countries. For the most part, it is expected that Russian companies looking to the American markets will occupy most of the space, but, he said, the lease does not eliminate American companies who have interests in doing business with the new Federation.

Stuckey said the mezzanine level will be comprised of exhibition space for larger Russian-made items such as tractors, cars and machine tools in addition to a 150-seat auditorium for marketing purposes and cultural events. Russian performing artists are expected to be presented on a regular basis to help publicize their American tours.

The balance of the mezzanine will contain offices, some for established Russian companies that are already selling products and some for newly emerging companies.