Even before the collapse of the Soviet Union, European and American companies had recognized the vast market potential of the former Eastern Bloc and were hurrying to get their share. But almost as hard as getting a foothold in the Russian market was finding a place to set up shop. Five years ago, there were almost no "Western class" office buildings, and routine maintenance products - from light bulbs to toilet paper - were in short supply. While today's conditions have improved somewhat, the gap still exists in quality real estate services. One company working to meet that demand is Chicago-based Stein & Co.
JPM: How did Stein first decide to become involved in the Russian market?
William Norwell, CPM[R], vice president of investor services: Initially, we were asked by James McHugh Construction Co. to provide facility consulting services on their construction of the international currency and securities exchange in Moscow. We had worked with McHugh before on several projects, including the expansion of the Chicago Board of Trade.
McHugh's presence was really what enabled us to explore the Russian market. The company had been building in Russia for four years and already had 200 employees, a network of suppliers, and even corporate apartments.
McHugh had been building corporate facilities in Russia, but at the end of the construction process, there was no one to take care of the properties, so they asked us if we were interested in exploring the opportunity. After some research and due diligence, Stein decided that Russia presented a chance for us to leverage our experience with facilities management services into a profitable venture.
JPM: How would you characterize the management you found during your due diligence?
John Korn, senior vice president of corporate services: Because of the difficulty in obtaining goods and maintenance services, companies that used as little as 50,000 square feet of space were very vertically integrated with as many as 40 employees working in facilities management. Consequently, even at a premium rate, centralizing their management with one outside company made sense.
JPM: How did you go about finding the goods and services you needed to supply top-level management services?
Norwell: Again, our alliance with McHugh, as well as with GVA Worldwide, helped provide initial contacts for workers, trucking services, and sources of supply. We also conducted fax surveys of vendors in the Moscow area to locate those able to meet our specifications. Through the survey, we found a Russian-German cleaning company that was able to provide best-in-class service. …