MOSCOW-Russian developer AFI has reached a non-binding agreement with the city to buy its 25% stake in AFI Mall City for $310 million and transfer its development rights in the Tverskaya Zastava downtown shopping center to the city in exchange for full compensation for costs to date, possibly in the form of additional building rights for other projects.

Company chairman Lev Leviev said AFI supports Moscow Mayor Sergey Sobyanin’s plans to enhance road transportation and is satisfied with the decision to allow it to continue to  develop the Tverskaya surroundings while receiving compensation for work completed on the mall. Moscow plans to convert the retail space into underground parking, while AFI remains owner of the projects surrounding Tverskaya - nearly four million square feet of commercial and residential space, with planning permission remaining in place.      

The agreement will also allow AFI to retain full control of its flagship AFI Mall City/Mall of Russia, which had a soft opening mid-March. The largest shopping project in the centre of Moscow with total area of more than two million square feet, it will have nearly 400 stores, 50 restaurants and cafes and a range of entertainment facilities. Some 75% was let at opening.

The company also said it leased its Paveletskaya office complex in Moscow to a single tenant, a subsidiary of the State Atomic Energy Corp. Rosatom. Despite the slow recovery of the office market, it maintains confidence in the project. The complex is the first phase of a larger development project on the Moscow river embankment. London-listed AFI is a subsidiary of Israeli Africa Israel Investments.

Allan Saunderson is a managing editor of Property Investor Europe and a contributor to GlobeSt.com.