Not all Renaissances are the same, or the story of how the American Renaissance never opened in Kyiv, and the Russian Renaissance defrauded the Ukrainian budget.
Hotel Leipzig
This story tells how a seemingly ordinary renovation of a building in Kyiv turned out to be a multi-million dollar scam that harmed the Ukrainian budget and Ukrainian contractors, while benefiting foreign companies, including those closely associated with the Russian president and his entourage.
To begin with, it’s worth telling the backstory and getting to know its participants.
Grand Plaza and Mohammad Zahoor
In November 2009, the media reported a major deal in the Kyiv commercial real estate market. Gennady Shenshaft, owner of the Lviv-based Dom Grandov concern, sold his Kyiv hotel project to Mohammad Zahoor's Istil Group. The project concerned the Leipzig Hotel on the corner of Prorizna and Volodymyrska Streets, which had been listed as unfinished for many years. The deal was completed by selling the Grand Plaza subsidiary, the property's owner, to Istil Group. The transaction value was $35 million. At the time of the deal's announcement, Istil Group declared an investment of $25 million, with the building's reconstruction and hotel opening scheduled for completion by Euro 2012.
European Bank for Reconstruction and Development
In July 2011, the Board of Directors of the European Bank for Reconstruction and Development allocated a $27 million loan to Grand Plaza for the reconstruction of the Leipzig Hotel.
International hotel chain "Marriott International"
In May 2012, representatives of the Istil group announced the conclusion of a management agreement for the five-star Renaissance Kyiv Hotel (formerly Leipzig) with the international hotel chain Marriott International, with the hotel opening planned for the first quarter of 2013.
Renaissance Construction represented by the Ukrainian Renaissance Engineering and Construction LLC
Plans for opening in 2013 were based on the participation of another major player in the project – the Renaissance Construction group (represented by its Ukrainian subsidiary, Renaissance Engineering and Construction LLC), the general contractor for the reconstruction of the semi-abandoned building into a five-star hotel.
In news reports, Renaissance Construction presents itself as a Turkish company, a position it espouses purely based on the nationality of its founder, Erman Ilicak. However, in reality, the company is Russian. Founded in 1993 in St. Petersburg, Renaissance Construction has built approximately 500 projects since its inception. But what's interesting about the company's history is that its founding and development path coincides, both chronologically and geographically, with that of Russian President Vladimir Putin. Putin started out in the St. Petersburg mayor's office in the 90s, and Renaissance's history began around the same time. As Vladimir Putin's career progressed, so did the company.
Vladimir Vladimirovich's "commitment" to St. Petersburg cadres is well known: Sechin, Medvedev, Zubkov, Kudrin, Miller, Gref, Ivanov, Naryshkin, Mutko—all of these colleagues of Putin's from St. Petersburg are now key officials or heads of major state-owned companies. This fact, along with the "rapid" growth of a non-Russian company, gives reason to wonder about Renaissance's connection to the Russian Federation's "first man." Further confirmation may be the fact that Renaissance was entrusted with the construction of the Rossiya Tower (the tallest skyscraper in Moscow City) https://www.kommersant.ru/doc/2399843, as another company with Russian origins could have completed the project with such a significant name. Furthermore, Renaissance has been awarded the most lucrative contracts for the reconstruction and construction of Olympic venues in Sochi and major infrastructure projects throughout Russia. Thanks to such a favorable regime in the Russian Federation, today the company is among the 100 largest contractors in the world.
In April 2011, DP Gran Plaza and Renaissance Engineering and Construction LLC signed a contract under which Renaissance would reconstruct the building into a hotel, adding attic, mansard, and utility floors, restore the façade, construct underground parking, and add a new five-story extension in the courtyard of the building at 24/39 Proreznaya Street. The total cost of the contract was approximately $50 million.
It would seem that everything is fine: an investor attracts money, invests it in Ukrainian real estate, creates jobs in Ukraine, but not everything is so simple....
ISTIL's plans to open a hotel in 2013 failed to materialize—to this day, the building on the corner of Proreznaya and Vladimirskaya Streets remains fenced off with a construction fence.
The question arises: how could the investor and owner have committed such negligence? A loan from a foreign bank was obtained, interest is accruing, the money is invested, and yet the business project is generating no income. Where is the EBRD?
The Unified State Register of Court Decisions provides us with many answers. It becomes clear that a commercial dispute arose between Istil, represented by Grand Plaza DP, and Renaissance Construction, represented by Renaissance Engineering and Construction LLC, in 2013.
Renaissance Engineering and Construction LLC filed a lawsuit seeking 22 million hryvnias in unpaid wages for work performed and termination of the contract. Grand Plaza DP countersued Renaissance Engineering and Construction LLC with a claim for 120 million hryvnias in damages, which resulted in Renaissance's claim being increased to 140 million hryvnias.
As it turned out, Renaissance's obligations to perform the contract work were secured by guarantees in foreign banks totaling approximately $8 million. Renaissance's primary goal was to prevent these guarantees from being written off in favor of Grand Plaza. This prohibition was imposed by a ruling of the Kyiv Commercial Court, but was overturned by a decision of the Kyiv Commercial Court of Appeal. This allowed Grand Plaza to receive approximately $5 million under these guarantees.
Subsequently, after a year of litigation, the parties suddenly reached an agreement, and the Kyiv Commercial Court approved their Settlement Agreement on May 19, 2014. As a result, Renaissance Engineering and Construction LLC (the general contractor) received only 6 million hryvnias, while the claimed claims amounted to approximately 140 million hryvnias.
Well, we agreed and that's fine, but...
Firstly, Renaissance Engineering and Construction LLC acknowledged in the settlement agreement that it had written off approximately $5 million in guarantees in favor of the Grand Plaza State Enterprise, amounting to approximately 40 million hryvnias. This means that the general contractor ultimately did not receive 6 million hryvnias, but paid over 30 million hryvnias to the client. This fact already raises questions.
Secondly, the general contractor acknowledged the Client's right to write off over $3 million more from the Austrian bank UniCredit. It's unclear whether the money was written off in favor of Grand Plaza, but again, this raises questions about Renaissance's generosity.
Could such a large and renowned contractor have performed such poorly that they paid more than they were contracted for? Or is this an elaborate scam?
As a hint to answer the question, we will use data from another state register – the Unified State Register of Legal Entities and Individual Entrepreneurs.
Before the court's decision approving the settlement agreement, the party to the case and the reconstruction contractor was called Renaissance Engineering and Construction LLC (code 37318836), and after the settlement agreement, it was changed to Engineering and Construction LLC. Is this a reluctance to continue operating in the Ukrainian market or simply a move to extricate a "prosperous" brand from a clearly "dirty" and scandalous situation?
But what's even more interesting is that the company changed not only its name but also its founder: a certain Iqbal Khurram. As it turns out, Iqbal Khurram is the head of sales at the Istil Group.
So, following the settlement agreement between Grand Plaza State Enterprise and Renaissance Engineering and Construction LLC, the latter company became the property of the Istil Group. Again, why did the construction giant give up its subsidiary?
But here, too, is a strange thing: Renaissance Construction LLC (code 32254160), headed by a certain Burak Bektash, remains in Ukraine. When contacted by phone at the number listed in the State Register, they say they know nothing about such a company.
Only law enforcement agencies can answer what's really going on at the construction site on Proreznaya Street and around it, but for some reason they're oblivious to the millions of hryvnias that have been lost to the Ukrainian budget.
Civil activists have already taken an interest in this situation and are actively trying to draw attention to it not only from the public, but also from the Prosecutor General's Office, the Ministry of Internal Affairs, and the State Fiscal Service.
The article was added to the section SEND A SKELETON
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