Israeli real estate development companies active in Russia are not rushing to comment on the possible effects of the sanctions about to be imposed on Russia. Irrespective of the nature of the sanctions, the ruble will clearly be hit, and developers are liable to be significantly damaged.
The possible consolation is that not many Israeli real estate companies do business in Russia. That is probably not a coincidence. The golden age of Israeli real estate development in Russia is well behind us, in the first decade of the century, and it reached a peak in the days of the extensive activity of Lev Leviev in Moscow and the construction of the Afimall in the new business center in the city. Since then, Leviev has bought out the business of AFI Development from Africa Israel Investments, and Israeli development activity in Russia has declined substantially.
One reason for this is the episodes that preceded the full-scale invasion of Ukraine, with the conquest of the Crimean peninsula in 2014. The Israeli companies active in Russia felt the crisis keenly. The ruble fell 55% against the US dollar because of the sanctions imposed by Western countries on Putin's administration. What is liable to happen now is a repeat on a larger scale.
The Israeli real estate company that is invested up to its neck in Russia is Mirland, formerly owned by Eliezer Fishman. Regardless of the current situation in Russia, the company goes from one debt arrangement to another.
It owns offices in Moscow, a residential project in St. Petersburg, and commercial centers in Saratov and Yaroslavl. According to the company's financials, its revenue from its Russian business fell by nearly 30% in 2020. Mirland lost some $800 million following the occupation of the Crimean peninsula. Its share price fell by up to 90%.
Israel Canada and Electra have a large real estate development in St. Petersburg consisting of some 30,000 housing units. So far, 5,000 units in the project have been sold and various parcels of land. "The proceeds of the sales balance the fall in the ruble exchange rate," the company said. "We are dealing with planning and marketing as usual."
Another Israeli real estate company invested in Russia is Gazit Globe, through its former subsidiary Atrium. Atrium's Russian portfolio amounts to euro250 million, which represented 10% of the company, and after the merger it represents a much smaller percentage of Gazit Globe.