Russian govt to profit from London property deal

The Russian government could make millions of pounds from a piece of land it bought from the Foreign Office, it emerged last night.

The site at 245 Warwick Road in Kensington, west London, was sold in 2006 for £8.125m (€10.12m) but is now valued at twice that.

Before the Russians bought it they were already sitting tenants in a deal which had them paying nominal rent of only £1 (€1.25) a year until 2086.

That left the Foreign Office unable to cash in on the land’s potential development value so it decided to sell, according to More4 News.

The Russians were originally given the land in an exchange deal to build housing and a school for their staff while the British did the same thing in Moscow.

But in 2006 the British government let them buy the freehold, allowing them to apply for planning permission to transform the site for commercial use.

An application to build more than 250 apartments and a restaurant has been submitted to Kensington council. If approved it will increase the value of the land.

A spokeswoman for the Foreign Office confirmed the rental agreement meant it was unable to profit from the site.

She said: “Therefore we agreed to sell the freehold to the Russian government for £8,125,000 (€10.12m); largely our fair share of the difference between the value for commercial development and the value for diplomatic use.”

A spokesman for the Russian Embassy said the deal included compensation for the anticipated increase of the value of the site as a result of its commercial use.

He said: “Being a non-commercial organisation, the Ministry for Foreign Affairs of the Russian Federation was unable to develop the site for commercial purposes.

“In order to raise the funds for the construction of a new embassy compound, a long-term lease was given to a state-owned VTB Bank (Vneshtorgbank) for the development of the site to provide residential apartments.”