They landed with a boom, raking in trophy assets in some of Manhattan’s most expensive places. Now the Russians seem to be leaving in a whisper.
Some have inquired with brokers in recent days about selling millions of dollars in Manhattan properties while trying to liquidate properties before they are caught in a web of American sanctions. Most of them do this through discreet “whisper” records with trusted brokers, as opposed to auctions, in order to minimize advertising.
But not everything: The Upper East Side estate owned by Alexei Kozmichev, co-founder of Alpha Bank, which was hit by US sanctions, was recently listed for $ 41 million, $ 1 million less than what it paid for in 2016.
“Everyone’s just talking about a sale,” said Dolly Lenz, one of New York’s leading real estate brokers. The big question, according to Lenz, is on what terms they will come out, and how big a blow they will have to get in order to close deals quickly.
“When buyers think you’re in potential distress – and your whispering list is a sign of that distress – it’s a problem,” Lenz said, noting that it has already been “flooded” with investor inquiries hoping to pick up Russian-owned properties cheaply.
Many Russian buyers are far – both in wealth and political ties – from the infamous oligarchs who have attracted public attention, and are unlikely to ever find their name on a list of sanctions. The fear, however, is that they may be motivated to sell also because of a sudden hostile climate and fear of what Lenz called “guilt by association.” They may also need to raise cash to deal with financial pressures elsewhere in their portfolio caused by Western sanctions.
Garrett Dredrian, research director at Serhant, a luxury real estate broker, predicted markets in New York, Miami and other markets would remain active after the post-epidemic recovery was announced last year. The number of sales in Manhattan completed in the fourth quarter, for example, increased by 77% from the previous year.
The Russians interested in selling, Dardarian said, were a “very small subgroup of people” compared to a larger pool of wealthy Russians still seeking the security of U.S. real estate. “Global markets like New York and Miami have become the target of choice for the rich. Currently, there is no fire sale of Russian-owned real estate in New York,” he said.
Russian oligarchs have become less visible in the US market after Moscow’s 2014 cold annexation slashed relations with the West, according to realtors and asset managers. As major ticket buyers in Manhattan, they were bypassed by the Chinese, who have since been halted by Beijing’s capital controls.
Still, no one seems to know how much Russian property actually holds in the U.S. This is because many have acted through shell companies that hide their identities. Congress passed legislation in 2020 requiring limited liability companies and other entities to expose their beneficial owners. But the Treasury is still planning The rules.
Meanwhile, Douglas Kellner, a New York attorney who specializes in real estate, predicted authorities would struggle to identify owners who have been sanctioned. “It’s hard,” Kellner said. But it is a complex job, time-consuming and often requires the cooperation of foreign governments. “
Jamal al-Hindi, former deputy director of the Finance Ministry’s Financial Crimes Enforcement Network, agreed. “There are ways they can put things together, but it’s hard,” he said. Al-Hindi, now a consultant at Clifford Chance, recalled that financial institutions themselves were surprised to find out how much lobbying money they hold after the United States imposed sanctions in 2011 to punish Muammar Gaddafi and his regime.
In addition to individual apartments, some Russian investors may have also poured money into development projects, according to Michael Romer, of the New York-based Romer Devas law firm, which specializes in real estate. “I think it’s a dangerous shadow. If you keep peeling it, it can get very complicated,” Romer said.
As an investment, the attraction of a New York property to wealthy Russians is the same as that of other foreign buyers: it holds its value and can be easily traded. Russians, say realtors, prefer condominiums in new buildings, like the former Time Warner Center, while avoiding the invasive criticisms of cooperative councils in older buildings.
“A lot of money went into the prestigious and new development market, because to be honest, it was an easy place to park cash,” Romer explained. “The heyday was about ten years ago, but those units still exist.”
The scale of Russian wealth became apparent in 2007 when Andrei Vabilov, a financier, agreed to pay $ 53.5 million for two penthouses at the Plaza Hotel. Vabilov later withdrew from the deal and sued the developer, complaining that the finished apartment was reminiscent of a “glorified attic space.”
Vabilov was soon overpowered by Roman Abramovich, the billionaire owner of the Chelsea Football Club, who bought three nearby townhouses on 75th Street East to create one mansion. He transferred the property, and two others nearby, for a total of $ 92 million to his ex-wife, Dasha ZhukovaIn 2018 as part of their divorce settlement. Abramovich Sanctions have been imposed by the EU and the UK in recent days.
Russian buyers were so attractive that entrepreneur Harry McLaughlin sent a sales team to Moscow in 2013 to spark interest in 432 Park, its tallest tower.
However, they also raised concerns that the Russians were buying properties only to store suspicious wealth – as opposed to actually occupying them. In 2016, the Treasury responded with a temporary initiative that requires ownership companies to report to owners of shell companies that purchase real estate in cash transactions in certain neighborhoods.
The then mayor of New York, Bill de Bellasio, complained to BuzzFeed in 2017: “I see Russian oligarchs as a problem.
South Florida has also become a magnet for Russian money. Dmitry Rivolovlev, a fertilizer mogul, bought a property in Palm Beach from Donald Trump for a record $ 95 million in 2008. Rivolovlev then dismantled the estate and sold the property in three lots.
The area is generally considered a haven for wealthy but not terribly wealthy Russians. Sunny Isles Beach, for example, an enclave known as “Little Moscow,” includes apartments across the ocean in the $ 3 to $ 5 million range – often in branded buildings, such as the Porsche Design Tower or the Trump Towers. “It’s very Russian but not the same group,” Lenz explained – not “the big fish.”
Even if the wider luxury market persists, sanctions – or the threat of sanctions – raise embarrassing questions. If an apartment is actually frozen in a luxury building because of sanctions, for example, can it affect the value of others? If the unit was not purchased outright, will the lender suffer a blow?
Meanwhile, residents may be equipped with higher common payments to compensate for the lost contribution from the owner under restrictions. It may also be risky to buy a property if it could be related to legal proceedings.
“The calls we get are: What does this mean for me? Will it affect the value of my property?” Said Romer. “Right now, if you are a wealthy Russian resident in the US, looking to buy or sell anything, all eyes are on you.”
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