White Square: A Perfect Storm in Moscow

Brian Patterson was the lead developer of a large office project in Moscow when the global financial crisis hit. His project, which had looked like it would be jaw-droppingly profitable just months before, was suddenly thrown into turmoil, and he faced trouble on all fronts. His local development partner wanted to sell in order to shore up its failing balance sheet, his world-class anchor tenant suddenly reneged on its pre-lease agreement, the contractor was running months behind schedule, and the project’s bank was looking for any excuse to pull the construction loan.

Just months earlier, the project pro forma had projected hundreds of millions of dollars in profit. Suddenly there were serious questions around whether the project could even be completed. And if it could, what rent and cap rate values could be assumed to determine if it made sense to continue development? Patterson needed to make some assumptions to determine whether or not to accept a sale offer that had been drudged up by his local partner. And if he decided to turn down the sale offer, he needed to find a way forward through a maze of (i) diverging interests amongst his partners and (ii) project development problems.

As the economic and financial system faced global turmoil and threatened collapse, Patterson had to decide whether to keep developing the project – at significant risk to both the project and his personal career – or to sell for a modest profit and live to fight another day.