In this first anniversary addition to our dictionary, we would like to make a start on recording the history of the post-Soviet real estate industry in Russia. What better way to do so that with brief introductions to two of the founding fathers of that industry who have also been inspirational to us and this project: Parker Hudson and Gere Gaige. And what better timing than on the 25th anniversary of Parker leading the first CCIM class in Russia on 10 September 1991.
With the move away from state ownership of all property in 1991, Russia suddenly needed concepts and systems for dealing with keeping track of, valuing, developing, marketing, buying, selling and renting all forms of real estate, including residential and commercial buildings and land.
At almost the same time, The CCIM Institute, the U.S. organization dedicated to education and best practice in real estate investment, wanted to go international – to create a common language for investing in real estate. Parker Hudson was a long time CCIM instructor who had studied Russian in St. Petersburg while a graduate student in the summer of 1969. CCIM asked him to try to figure out a way to introduce CCIM to the Soviet Union.
Coincidentally, down the hall from Parker’s real estate brokerage office in Atlanta was the office of a man named Earl Worsham. By 1991 Mr. Worsham had already been partners for three years with Andrei Stroyev in a company called Perestroika Joint Venture, which had redeveloped the first commercial office building for rent in Moscow: Bolshoi Gnezhnekovski 26. In a classic frontier market deal, they had invested about $1,000 per square meter in renovating the building, using part of the tenant’s multi-year up front lease payment, with the rental rate also being about $1,000 per square meter per year.
Parker knocked on Earl’s door to ask if he had any ideas on who would be interested in a CCIM course in Moscow. Andrei Stroyev happened to be there, so they went to lunch. Stroyev used Moscapstroi to do the construction on his projects and wanted them to understand the investment principles behind his business, so he introduced Parker to Boris Selivanov, who was Chairman of Moscapstroi. In May 1991 Parker met Mr. Selivanov and Andrei Belaborodov of Moscapstroi on a one day stopover in Moscow en route home from a week of Christian outreach work in Kiev.
Boris and Moscapstroi were serious about learning about U.S. real estate – while they wanted to have the course taught in Moscow, they were even more interested in having the 50 people on their management team see how real estate worked in U.S. cities. They paid CCIM to develop and conduct a full program that included both the two-week course in Moscow followed by ten day tours of five U.S. cities for five groups of ten Moscapstroi managers each.
Parker then started writing the course, combining the relevant parts of CI 101 & 102 and renewed his study of Russian. He stumbled upon a Russian course for adults by chance. One day among the mass mailings that came to his office was a flyer on classes at Emory University. Parker paid no attention to it and tossed it in the waste basket. But the flyer caught on the rim and when he reached down to push it in he saw the advertisement for Russian lessons.
He signed up for the tutoring course, and then when it was time to have the new CCIM course translated, Parker naturally asked his Russian teacher. She couldn’t do it, but her husband offered to. His name was Oleg Myshkin.
Finally, in September 1991, a few weeks after the unsuccessful coup against President Gorbachev, Parker was joined in Moscow by Allen Decker and Sandy Shindleman to teach the first CCIM course in Russia. He also brought over 50 Delta Airlines tickets for the Russians’ U.S. tours that followed a month later.
Parker’s interest in Russian real estate was sparked. Andrei Belaborodov identified a good empty site in the center that Moscapstroi controlled: Bolshoi Gnezhnekovskii Pereulok 1. A few years later Samsung would eventually build a new Class A office building on the site, but in 1992 Parker and Andrei set out to attempt a first ground-up office development in Moscow. Parker and a colleague named Bradley Fulkerson offered the project to the company where they worked – Carter & Associates, who turned it down. Then they talked with a young Carter real estate broker named Preston Haskell, who thought his father’s development company in Jacksonville might be interested. Together as partners, Parker, Preston, Oleg and Bradley made trips to Moscow in 1992 and early 1993 to investigate the possibility, but in the new market there was no way to finance the project.
By the spring of 1993 Oleg and Preston were also convinced that Moscow had potential, but decided it would be better to start in brokerage. Together they founded Haskell International Brokerage, or HIB, which would eventually become Colliers.
Later in 1993 Parker met Page Aiken and convinced him to join Parker in opening their own brokerage company in Moscow, which they did in November 1993. Maria Troitskaya became the first Russian employee of The Western Group, while Oksana Tikhonovsky administered the office from Atlanta. Soon thereafter Parker and Page would be joined at The Western Group by Mark Stiles and Sergei Ryabokobylko. And then in 1996 he hired me. But those are stories for another time…
Meanwhile, in 1993 a group of young Russians, with common thoughts about the need for real estate valuation in the newly evolving economy of their country, formed the Russian Society of Appraisers and, led by Igor Artemenkov, traveled to Houston, Texas to attend one of the regular classes in valuation that Gere Gaige taught as part of his real estate valuation business (left top picture with the founders of RSA). A few months later, they invited Gere to teach the first course on real estate appraisal in Moscow in January 1994, where almost 100 Russians learned the basic concepts of value creation and how to measure it to estimate property value (left bottom picture). The success of the course led to a series of trips to teach it in St. Petersburg, Ekaterinburg, Saratov, Samara, Nizhny Novgorod and Novosibirsk (right side pictures in Saratov and Volgograd in 1994).
Gere’s work not only made him an honored member of the Russian Society of Appraisers, but also one of the very few foreign experts on the changes taking place in the real estate sector of Russia’s developing economy. So in 1994, when the U.S. Agency for International Development set up a program to privatize urban lands (Enterprise Land Sale program (ELS)), Gere was called upon to be one of its program managers. ELS was to encourage business enterprises to privatize the land associated with their businesses and start a commercial real estate market. Presidential Ukaz 1535 was the first legal basis for private land ownership and gave enterprises the right to own the land used by their business.
To counter the still Communist controlled national legislature, Gere and his colleagues first went to local governments to create the mechanism to implement commercial land ownership. This involved, creating a cadastral system and defining rights and documentation for the process of ownership. They started in St. Petersburg and Nizhni Novgorod where the progressive leaders Anatoly Sobchak and Boris Nemtsov had teams interested in passing regional land laws to accommodate a real estate market in their regions.
Once the laws were in place, they went to the large enterprises to explain to them the benefits of owning the land – gaining an asset fully under one’s control that could be used to finance development of the business and upon which expansion would be more secure. The ELS team led closing of transactions transferring ownership of land from the Russian Federation to major businesses that led to the beginning of urban commercial markets in major Cities of Russia.
The two-year ELS project ended in 1996 with commercial real estate markets started in major Russian cities from Moscow to Siberia and up and down the Volga River region. In addition, real estate professionals from appraisers to brokers and managers had been trained to support and encourage ongoing market transactions. American experts that had assisted went back home, except for Gere who joined Arthur Andersen to start a real estate appraisal and consulting practice to assist the global client base of Andersen in entering the Russian market. Gere hired and worked with many talented Russians, including one names Olga Arkhangelskaya.
Companies from around the world recognized the potential of the developing Russian market and needed real estate for their businesses, or wanted to invest in real estate for its own investment benefits. The presence in the market of international quality real estate appraisal and consulting practices like Gere’s and brokerage advisors like HIB and The Western Group encouraged investment activity and the development of other specialized real estate businesses. Along with international real estate developers and brokerage firms entering the market, Russian-owned entities began to compete in the real estate marketplace.
And so, only twenty-five years ago, the modern Russian real estate services industry was born.