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Tiny Firm Lands Big Job on Soviet Project : Perestroika: A Woodland Hills company is leasing agent for a $1-billion Moscow office complex designed to satisfy the needs of Western businesses.

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TIMES STAFF WRITER

Pyramid Investment Co., a tiny Woodland Hills real estate consulting firm, has landed the job of U.S. and Japanese leasing agent for Technopark, a vast $1-billion, 4-million-square-foot office complex planned in Moscow by a joint venture of Italian companies and the Soviet government.

Ambitious in scope, Technopark would include a 40-story office tower, a total of 1.26 million square feet of office space and a 250,000-square-foot research and development facility. Prospective tenants would be U.S., European and Japanese companies doing business in the Soviet Union. If all goes well, Technopark would also have 620 hotel rooms, 250 apartments, retail shops, a health club, casino and even its own satellite station, and would be finished in six years.

Industry sources say the only Western real estate project planned in the Soviet Union that would rival Technopark is a $345-million, 1.25-million-square-foot office, hotel and apartment complex planned in Moscow by the huge Canadian developer Olympia & York as part of a joint venture with the Soviet Chamber of Industry and Commerce.

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“I feel fortunate to be involved at this stage,” said Dan J. Lutkenhouse Jr., owner and president of Pyramid, whose previous projects included small apartment houses and hotels in the Los Angeles area and in Europe.

Technopark is a grand idea all right, but big plans often turn to big nightmares for U.S. companies in the Soviet Union.

So far, only 42,000 square feet of Technopark’s office space is under construction, with the work being done by a Turkish company. Lutkenhouse said Technopark’s first phase will cost $5 million--the money has been funded through private investors, he said--but this represents less than 1% of the cost of the whole project. No hotel or telecommunications company has signed on for the project and financing for the next stage hasn’t been finalized. Western banks are often skittish about financing ventures in the Soviet Union, and the country’s bureaucracy can be choking.

“Some of these projects are people’s ideas of what could happen, not what is happening,” said Tim Bruinsma, head of the international practice group at the Los Angeles law firm Fulbright & Jaworski.

In fact, only about one-third of the 3,200 foreign-Soviet joint ventures registered with the Soviet government are now operating, according to Alan B. Sherr, associate director of the Center for Foreign Policy Development at Brown University.

William Forrester, president of the U.S.-U.S.S.R. Trade & Economic Council, a New York trade group, said Technopark will have its share of hurdles to overcome. But Forrester said the modern office facilities Technopark would provide are badly needed by Western companies operating in the Soviet Union. Also, he said, the project’s Soviet partners--Mossoviet, Moscow’s powerful city council, and VDNH, the city’s economic exhibition center, which is providing the land--bring their influence to the deal. “They seem to be covering all the necessary bases to get this thing off the ground,” he said.

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The other Technopark partners are Italian and include Grassetto, a big construction company, Financial Projects, a financial consulting firm, and a unit of the state electric utility.

But attorney Bruinsma said the biggest stumbling block for most Western-Soviet deals isn’t getting the Soviets’ approval, because they’re hungry for such ventures, but that the Soviets have no capital to invest. And because of the political and economic instability there, Western banks are wary of funding these deals.

Many ambitious Soviet ventures have been announced in a blaze of publicity, only to wither and die. One such deal was an $8-billion joint venture announced by Irvine-based Phoenix Group International Inc. in 1989. Phoenix was thought to have scored a coup against larger U.S. computer companies when the Soviets chose it to ship personal computer parts to the Soviet Union, where the computers would be assembled and distributed to schools, factories and offices.

But Phoenix ran out of money and was unable to obtain financing to complete the deal. The company filed for bankruptcy-court liquidation in January.

Another local company, Americom International Corp. in Irvine, is also involved in a real estate development in Moscow. The American Trade Center is a joint venture between Americom, Radisson Hotel Corp. and the Soviet tourist agency, Intourist. The $125-million, 650,000-square-foot office, hotel and retail complex is privately financed--no Western banks would lend money for the project, said Paul Tatum, Americom’s founder.

The Americom project started in 1987 and was originally scheduled to open last year, but it has been plagued with delays, mostly due to Soviet red tape, Tatum said. The plans were later changed to a spring opening, but only part of the hotel is now open. The development is now slated to debut in September, but Tatum said there may be further delays.

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“Everything takes two to three times the time frame that people expect to accomplish things here in the West,” Tatum said.

The first phase of Technopark’s project is six small office buildings that are being prefabricated in Turkey and shipped in pieces to Moscow for assembly there. Those buildings are due to open in November and they are about 70% preleased, Lutkenhouse said, although he declined to name any of the prospective tenants.

All rents at Technopark are to be paid in hard currencies, such as dollars, francs and marks, rather than in rubles, which aren’t convertible into foreign currency. (Although Soviet President Mikhail S. Gorbachev hopes to make the ruble convertible as part of his economic reforms.)

The second stage of the Technopark development calls for a 14-story, 250,000-square-foot steel and glass office building that would cost an estimated $40 million. Lutkenhouse said Technopark has a letter of commitment for the second phase from a group of European banks--he would not identify the banks--but said the bankers are requiring 30% to 40% of the building to be preleased before they make a final commitment.

Because the Soviet phone system is notoriously bad and overseas calls must be ordered in advance, a key selling point to potential tenants will be the satellite station, Lutkenhouse said. The satellite facility would provide for telephone, computer and fax linkups and would allow tenants to bypass the antiquated Soviet phone lines.

But so far, those plans remain on the drawing board. Meanwhile, Lutkenhouse has had his own experiences with the unwieldy Soviet bureaucracy. The original design for Technopark was by a Soviet team and called for the centerpiece office tower to be about 50 stories, with the satellite dish on top. Not only would the design have been prohibitively expensive, but the Mossoviet said it was too tall for the Moscow skyline and another Soviet agency said the satellite dish would have to be moved for security reasons, Lutkenhouse said. The revised plans call for a 40-story tower and the satellite dish would be lower.

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If Technopark is built, it would be Lutkenhouse’s biggest project by far. Lutkenhouse, 31, dropped out of UCLA in 1978 to start his own company, a freight forwarding firm that arranged the transport of military hardware and personnel. He sold that company in 1982 and started his real estate consulting business, putting together small residential and commercial projects for European and American clients. To date, his biggest projects have included the Clarion Suites Hotel in Canoga Park and a Red Lion Inn in Palm Desert.

About three years ago, Lutkenhouse was brought in to the Technopark project by Financial Projects, which had previously worked with Lutkenhouse’s Geneva-based partner, Pierre Messiqua. Lutkenhouse now spends about 75% of his time in Europe.

Lutkenhouse won’t disclose his firm’s revenues, but from Technopark he stands to earn commissions on leases he signs and construction management fees. He said he has five employees, but will probably hire five to 10 more as Technopark progresses, and eventually hopes to bring in a high-profile real estate broker.

Most of the leasing interest in Technopark has come from Japan and Europe, Lutkenhouse said. Outside of large, multinational concerns, he concedes, most U.S. companies are reticent about the Soviet market due to the political turmoil and primitive business environment.

Lutkenhouse said he believes that “there’s no turning back” from the opening of the Soviet Union. Nonetheless, he’s trying to hedge his bet. He said he’s been negotiating with Lloyds of London for political risk insurance, which is very expensive but would cover losses on Technopark if the political situation in the country made it impossible to continue operating there. That insurance, however, wouldn’t cover any losses in the normal course of business.

“The risks are very big,” he admitted. “We’ve measured that risk, and we think the market will definitely bear this type of project.”

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