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. Last Updated: 07/27/2016

Brooke Group Forms Venture With Apollo to Fund Ducat III




Financier Bennett LeBow's Brooke Group Ltd. and New Valley Corp. said they have formed a venture with Apollo Real Estate Advisors to develop real estate in Moscow, Bloomberg reported.


Under the agreement announced last week, the venture, called Western Reality Development LLC, will entail the contribution of up to $58 million in investment from Apollo, headed by financier Leon Black, and part of the Ducat Place office project from Brooke Group.


"The formation of Western Realty with Apollo will allow us to significantly expand our real estate business in Russia, where we are already very well positioned," Bloomberg quoted LeBow as saying.


Brooke Group is developing a three-phase office complex called Ducat Place on Gasheka Ulitsa in downtown Moscow. Some of the tenants include Motorola Inc., Morgan Stanley, Dean Witter, Discover & Co. and LUKoil-Arco. Ducat I and II are completed, but work on the third building has yet to begin. Ducat I and II are managed by Hines Interest.


Michael Capaccio, president of BrookeMil, a unit of Brooke Group, said Apollo's investment would primarily go toward the development of Ducat III. He said that construction on the project was scheduled to begin during the first quarter of 1999, with completion expected in 2001.


He said Ducat III is planned at a total of 35,000 square meters with an estimated cost of $70 million.


The project site is occupied by a tobacco factory. Ted Liebman of Liebman-Melting Partnership, BrookeMil's architects, said the factory will be demolished as soon as the workers can be relocated to a new facility under construction in the suburbs.


Plans for Ducat III have changed since the project was first announced. The building is now set to be exclusively office space, according to Liebman, but in late 1996 it was being looked at by U.S. casino and real estate mogul Donald Trump as a likely site for a luxury apartment tower to be called Trump International.


Trump reportedly became interested in the Moscow luxury apartment market after noticing how many Russians were buying space in his high-rent Trump Palace, Trump Parc and Trump Plaza towers in New York. On a three-day trip to Moscow in November 1996, the developer announced planned investments of $250 million in the city, including Trump International and a Moscow Trump Tower. The mayor's office reportedly approached Trump about possible reconstruction of the run-down Rossiya and Moskva hotels. Since then, however, the plans seem to have stagnated. Bloomberg, in reporting the Western Realty deal, said the Trump projects were inactive. Brooke Group owns tobacco company Liggett Group Inc. and a 42 percent stake in New Valley. New Valley owns investment bank Ladenburg, Thalmann & Co. and owns and manages commercial real estate.


The Ducat buildings are an integral part of the rebirth of the Tverskaya-Yamskaya area, which until recently had long lived in the shadow of the city's prime shopping street, Tverskaya Ulitsa from Manezh Square to Mayakovskaya metro station. Tverskaya-Yamskaya, which runs from the Mayakovskaya to the Belorusskaya station, and the surrounding regions have also seen the construction of a Marriott Hotel, an addition to the existing Tverskaya Hotel, a neurological hospital and a 17-story Most Development office complex. The planned 51,000-square-meter Four Winds Plaza near the Palace Hotel is another major addition to the area expected during the next few years.