Covert carve-up: collapse of Dmitry Mikhalchenko’s empire
Billionaire Dmitry Mikhalchenko has likely lost his main asset – the Port Bronka. Recently another news shook St. Petersburg: the Municipal Center for Parking Management has laid hands on the paid parking lot on Vosstanya square, near the Moscow Terminal. According to some experts, this is an indication that the empire of the Governor 24 is being torn apart.
Terminals and trains
The episode with the parking lot has invoked totally different emotions in the city. The municipal authorities seemed happy, while ordinary residents were despondent – it was the only parking in the city allowing to stay 15 minutes for free. However, the municipal administration had its own reasons – the parking had not been registered properly for 6 years. The lease contract signed with structures of Dmitry Mikhalchenko has expired back in 2010. And only after the arrest of the businessman, the municipal administration transferred it to the Municipal Center for Parking Management for temporary management.
But the loss of the parking is only a small part of problems faced by the vast empire of Dmitry Mikhalchenko. In the end of this spring, it became known that lease contracts for shopping premises in four – out of the five – St. Petersburg terminals, earlier signed with companies affiliated with Forum Holding, have expired. To acquire these lease contracts, Magistral private security company owned by Mikhalchenko had been literally kicking out owners of small shops from the profitable terminal premises 10 years ago.
Photo: Dmitry Mikhalchenko
Then information has surfaced that Russian Railways is not going to continue commercial relations with the holding of Dmitry Mikhalchenko and intends to put out the shopping zones of the five terminals for a tender. A lucrative piece of cake – 100% profitable business in Moskovsky, Baltiisky, Finlyandsky, Ladozhsky, and Vitebsky rail terminals – has immediately attracted major players of this market who announced through business media the intention to try their chances in the struggle for this project.
Companies affiliated with Dmitry Mikhalchenko control 17.5 thousand square meters of shopping premises in the terminals. Experts estimate the annual income generated by the management of terminals at 1 billion rubles. The net profit of Russian Railways was 150–180 million rubles per year – i.e. less than 20%.
In fact, rumors about the termination of this contract, unprofitable for Russian Railways, have been circulating since 2013. The Passenger Stations Directorate believed that the situation in St. Petersburg hinders the new development strategy, and, therefore, the terminal managers must be replaced. According to some sources, the management of Russian Railways had understood that the leased premises could bring higher profits a while ago, but the issue had never been raised due to the well-known reasons. However, after the arrest of the Head of Forum Holding, the situation has changed drastically, and Russian Railways is not going to miss such an opportunity to capitalize on the highly-profitable asset. Therefore, Forum Holding might be deprived of a billion-ruble income pretty soon. This is a bad sign for detained Dmitry Mikhalchenko.
According to the experts, companies affiliated with Forum Holding face the loss of profitable contracts worth billions of rubles. This is not only about lease agreements with Russian Railways, but also about other contracts that have become at risk after the arrest of Dmitry Mikhalchenko. It might be somehow linked with operational and search activities performed by law enforcement authorities during the preliminary investigation against the Governor 24.
It is not a secret that the special services used to eavesdrop on billionaire’s telephone conversations prior to arresting him. In fact, the law enforcement authorities never denied that they had started collecting incriminatory evidence against Mikhalchenko long before his arrest. It is known that operatives of the Federal Security Service (FSB) had submitted a petition to the Moscow City Court to perform operational and search activities (eavesdropping) against the businessman for the period of 180 days, and the court has granted this request. This information has instantly disturbed the business community. Many potential partners of Forum Holding rushed to withdraw into the shadows in order to regroup and consider possible scenarios; some of those have completely changed their plans. The entrepreneurs were not happy at all that their business plans became known to the law enforcement authorities.
It is now obvious that the billionaire has to surrender the Port Bonka – either to the government or persons close to the circles of power. Because control over a segment of the state border – even a tiny one – combined with a new Center for Electronic Customs Declaration provides enormous opportunities, and some serious people are ready and willing to fight for those. And the administrative resource of Forum and its partners cannot change anything under such circumstances. Without governmental support, it would be a commercial suicide to attempt to intervene into the situation. In addition, it became known in the end of summer that the Ministry of Transport of the Russian Federation is going to reduce the budget funding for the ship channel to the Port Bronka by 14.1 million rubles. This amount is insignificant in comparison with the total project cost – but in the future, it might allow some interested parties to acquire the port with a discount.
Investments required for operations of the Port Bronka have been estimated at 118 billion rubles. As of today, the total investments in the port are 60 billion rubles, including 43.7 billion rubles of private funds and 15.9 billion rubles of governmental funds.
It is also necessary to keep in mind that Dmitry Mikhalchenko owns only a half of Forum Holding. The other half belongs to the General Negodov who is still afloat, despite the situation with Dima Krikun (Dima the Crier). He also owns 50% of Feniks company managing operations of the Port Bronka.
Photo: Nikolai Negodov
After the arrest of the billionaire, independent experts forecast issues not the holding as a whole, but for each business run by the company.
Another domain of Dmitry Mikhalchenko – the restaurant business – is also facing grim perspectives. Forum Group includes the largest in Europe lounge restaurant of an international chain Buddha-Bar St. Petersburg on Sinopskaya quay, Lago dei Cigni on the Krestovsky Island, and Tse Fung on Rubinshteina street. This was his secondary – hobby – business, but Mikhalchenko had invested considerable money into it, trying to create something unique. Famous restaurateurs later wrote that “it would be a pity if such restaurants are closed”. Chefs of these unique establishments received salaries much higher than in other St. Petersburg restaurants. The restaurant business of Dmitry Mikhalchenko had a slogan: “My taste is unpretentious; the very best would be fine for me”. It is a big question whether buyers could be found for these elite establishments whose total value is currently $50 million. There are neither competitors for these restaurants in St. Petersburg, nor restaurateurs able to afford so expensive establishments. Although some time ago, rumors were circulating in the business community that a major Moscow restaurateur was considering acquisition of one of Mikhalchenko’s restaurants. But his name was never revealed.
Nothing is known about the factories owned by Mikhalchenko. Perhaps, there are no real threats to those and to the Universal Document Service Center, which would continue provision of services to the public in any event. The future of exclusive distributors of premium-class clothing brands – Zilli, Kiton, Frette, and Canali – is uncertain, but this is a drop in the ocean of companies incorporated into the holding.
Photo: Business of Dmitry Mikhalchenko and Nikolai Negodov
In the meantime, the investigation of the smuggling case, where Dmitry Mikhalchenko is a suspect, has been extended to the end of March 2017, while the businessman will stay in detention until December 29, 2016. It is revealing that people who used to cover Mikhalchenko for many years and were his partners (primarily, representatives of the Federal Protection Service) can not help him now, while his almighty patron Evgeny Murov has retired, as well as Andrei Bel’yaninov, the Head of the Federal Customs Service of the Russian Federation. No one can say at this point whether Forum Holding can withstand such a storm. It can not be ruled out that many companies would be closed.