Estée Lauder Scion to Help Develop Moscow Hotels?

The Financial Times is reporting that Ronald Lauder, a scion of the Estée Lauder cosmetics empire, is planning on creating a $2 billion venture with the Moscow city government to manage and revamp the capital’s hotel business in time for Russia’s hosting of the 2014 Winter Olympics.

The deal will see Lauder’s recently created Russia Real Estate Fund take a 51 percent stake in the venture to manage the city government’s stakes in dozens of hotels across the city, including the Rossiya and Moskva hotels on Red Square, in return for investing 31.7 billion roubles ($1.1 billion) into the company. The Moscow city government is to take a 49 percent stake.

The venture aims to bring in the best international management expertise to upgrade the city’s hotels in order to cope with an expected influx of tourists when Russia’s southern city of Sochi hosts the Winter Olympics in 2014. The venture will also seek to upgrade tourist infrastructure and transport across the city.

Moscow is well known for its glitzy luxurious hotels such as the Ritz-Carlton on the city main thoroughfare Tverskaya, but suffers from a distinct lack of cheaper budget hotels in the two and three star range, while those that do exist are extremely down at heel. The venture is expected to manage the 13-hectare Rossiya hotel complex, the five star 1500-roomed Moskva, the Renaissance, and the Metropol, all in central Moscow, as well as lower grade institutions.

Lauder, who stepped down from the board of Estée Lauder this summer and is a frequent visitor to Moscow, is understood to have been selected for the project because of his lack of affiliation to the hotel business – and is seek out the best management and infrastructure companies.

Lauder’s ultimate holding in the venture will be determined by the number of other investors who could enter his real estate fund.