“The beautiful thing about Russia is that whatever it is today, it is not going to be the same tomorrow.”
Michael Lange is well known as one of the founders, and current managing director for Russia & the CIS of the real estate firm Jones Lange LaSalle. As one of the original Western ‘pioneers’ who arrived in the early 1990’s he has seen a few changes. In this interview, he tells PASSPORT of some of the ways in which Russians’ attitudes to Westerners have changed, and how Westerners’ attitude to Russians is changing, from both personal and professional points of view.
Interview by John Harrison
Photos by Sasha Antonov
Q When and why did you first come to Russia?
I first came to Russia as part of the German diplomatic corps in April 1990. In 1991 I moved over to an entrepreneurial position, when I managed and personally founded and financed a trading business for mainly consumer goods.
Q What made you move into real estate?
Apart from Real Estate there were a lot of opportunities, and still are. You go into a particular business due to a combination of factors: if you see an opportunity there, whether you have some kind of base, whether you can do it. A combination of several different factors made me believe, and obviously that belief has been confirmed over the past decade or so, that this was a field which would offer a tremendous upside.
Q What was the atmosphere like in the early days?
In a few words – great, grim, unfriendly, and fun. It was a true emerging market, which it still is today 15 years later. Then it was a story of just a few pioneers exploring Russia, tremendous upside, huge perceived risks – nothing had been proven at that time. I like to look at that time as a challenge and an opportunity, and I’m glad to have been a part of it.
Q Is there any truth in the saying that Russia is the world’s best kept secret?
The Russian soul in the beginning is a tricky customer to get to know, to understand mentality- and personality-wise. The major issue perhaps is – why is Russia not exposing itself to foreign countries? Why are they not inviting more business people, why are they not easing up on certain visa regulations, bringing in the tourists, creating an industry around tourists. I guess the biggest problem everyone has is that there is still an outdated perception of what Russia is. Whenever we get visitors over here, we find that the perception is still rather negative. People still believe that Russia has wild bears walking down the main street. It is unfortunate that the perception of Russia is being kept in such light. I am sure that the treasure box will open, - it’s an amazing city, great people, really unbelievable personalities. I just wish that others have the chance to experience what I have come across over the years.
Q Have you fully acclimatized to Russia now?
I’ve been Russified over the years. I’ve had the pleasure to have spent time with Russians, family-wise, as well as through my circle of friends, which today of course has a large number of foreigners; but a much larger number of local individuals who have grown very close to me. So, to the question have I become fully accustomed to everything that is happening in Russia? To a large extent, the question really is – would I ever want to be fully accustomed? I guess no, but this is what gives you the thrill, the excitement in the morning. Yes there are moments when I think – why Moscow? Couldn’t it have been another place, like the South of France, or somewhere else.
Q Has the attitude of Russians towards foreigners changed over the years?
One of the first apartments which I rented was not in a central location, and not in the true style western-renovated. I remember the lifts – the babushkas taking the lifts with me, this was definitely something memorable. Today it is more open, people have become more accustomed to seeing foreigners around, to be with foreigners, and the foreigner in the lift today is not the Martian that he was perceived to be many years ago. We have one head, no horns, and we boil eggs with water too.
Q You are a businessman. What do you think the main differences are between doing the same business in Russia and Germany for example?
Without diving down into the economic influences that have created the markets in which the businesses are embedded, I like to look at risk as opportunities and challenges. The description ‘the sky has no limit’ is being lived in full, from my perception of the real estate business. The thrill, the opportunity, the visionary freedom to create something new that exists in many other markets, but which has not been seen here, the operational opportunity in simply living life from a point of view which is different.
Q What about the downside?
We’re moving up there. We have another month of decent weather [interview taken in mid-September], then… Among the things that I think can be improved, are rules concerning certain issues: the countryside, regulations on construction and development are big issues for me. I think a lot more wider helicopter-view planning perspective should be used. All the bad things which everyone talks about – corruption and all the very negatively influencing factors which are still in a lot of people’s minds, are there, but they are being overcome. Certain rules and regulation make me wonder about that at times though. The perception of foreign countries towards Russian is something that I think should be tackled and overcome, and anything which is bordering on unethical business practices, is something which I totally and utterly dislike.
Q Why is it that the foreign investment markets still cannot understand specifics of dealing with the Russian market? Why, when there is real profit to be made, is there still a huge reluctance to adapt to local conditions?
Well the previous position was to say ‘let’s see how the political situation stabilizes, and how the economy performs. I guess nowadays we can’t use those points anymore, there are issues in the political system which still need to be sorted out; but everything seems to be pointing in the right direction. The real issue is about confidence, at least this is what certain groups are planning to put forward as reasons and excuses as to why they have not so far been able to enter the market, and giving slightly different reasons as to why they have not been able to succeed in operations. Just recently we were looking at ways to boost the inflow of institutional money which has come in – several hundreds of millions of dollars over the last few years. But the situation is changing fast – today, we as one firm will be placing and originating over a billion dollars’ worth of institutional capital. The transaction volume which was a quarter of a billion a few years’ back is currently four times that, there are a lot of developers wanting to capture on yield compression and advancement of the market, and there is a huge appetite of investors trying to acquire. There is still a limited amount of foreign institutional money, it’s mostly from private investors, local investors who are currently transacting on triple A commercial assets. The true big funds are still in need of finding large volume pipeline deals of hundreds of millions before they can make up their minds, and can convince their board of directors that they don’t want to buy one or two assets, they want to establish a portfolio worth billions of dollars. The situation in Russia was not there a few years ago, but we believe that Russia is clearly on track, and arriving at the necessary point much faster than anybody expected it to. The beautiful thing about Russia is that whatever it is today, it is not going to be the same tomorrow.
Q Are you married?
Married, daughter out of first marriage. Daughter is an understatement, now a young lady of 19 years of age. I am married to an amazing person, who keeps up with all my ups and downs as well as my constantly changing paces and views in business and private live.
Q What are your plans for the future? Do you plan to leave?
I don’t think there are that many places around which offer similar opportunities in business as Moscow Russia. My focus is on business, and will remain so for the next few years., I am bullish that Russia will remain a good environment, and I’m certain that I’ll remain in Moscow. We are however preparing a second place where we can rest our bones in a warmer place, in the South of France, in Cannes. To answer the question, what has been the most challenging part of my life whilst in Russia, the answer is not queuing up for petrol for two hours, or being without sugar for another week or month, or building a business in an very aggressive field. It has been the acquisition of a villa in the South of France. This has cost me much more than acquiring several properties in Moscow, Everyone complains about the Russian system, But the problems involved in acquiring properties here have been nothing compared to the phenomenally protected French legal syste. It has cost more than a little grey hair.
Q Do you get out to the theatre and other cultural do’s?
Not as much as we would like to. We do like the wealth of cultural programs offered, but we don’t take the time that we should to fully indulge in them.
Q What advise would you give the new people arriving here, wanting to get into business, faced with the picture of contrasts that is Russia?
Be open minded, be creative, think out of the box. Most importantly, deliver on what you have promised. Drive from the side of the utmost ethical values, there is no need to overstep that threshold. Stick to your promises, and keep your word.