Increasing number of Russian billionaires buy luxury real estate in the U.S.
Roustam Tariko, billionaire owner of Russian Standard Bank and Russian Standard Vodka, completed the most expensive home purchase in Miami Beach since 2006 when he bought a US$ 25.5 million estate on Star Island in April this year.
The transaction made Tariko the neighbor of another wealthy Russian with a taste for Florida luxury living. Vladislav Doronin, chairman of Moscow-based real estate developer Capital Group, paid $16 million in 2009 for the Star Island home previously owned by Shaquille O’Neal, the now-retired professional basketball player.
“In Russia, it’s a status thing now,” Jorge Uribe, a real estate agent with One Sotheby’s International Realty In in Coral Gables, Florida, said in a telephone interview. “If you’re wealthy and you say you have a place in Miami, it’s like saying back in the old days, ‘I own a place in Ibiza or Monaco.’ It’s a cocktail conversation thing.”
International investors are buying some of the priciest homes in America as the broader housing market slumps and a weak dollar makes U.S. property more of a bargain. Sales of residences above $20 million are rising in New York, California and Florida, which are popular business and vacation destinations for foreigners, according to Miller Samuel Inc., DataQuick and real estate brokers who cater to luxury buyers.
Seven homes have sold in Manhattan for more than US$ 20 million in the first six months of this year, up from five in the same period of 2010, data from New York-based appraiser Miller Samuel show. The median price of those transactions was US$ 27.5 million, up 15 percent from the year-earlier period. The deals included a US$ 48 million sale to Russian composer Igor Krutoy that set a record for a condominium in the city.
Brokers with Sotheby’s International Realty Affiliates LLC sold about two dozen U.S. homes priced at more than $20 million in the first six months of this year, as many as 25 percent of those transactions going to international buyers.
International buyers purchased an estimated US$ 82 billion worth of U.S. homes in the 12 months ended March 31, a 24 percent increase from the year-earlier period, the National Association of Realtors reported May 18.
The precise number of foreign deals for U.S. luxury properties is difficult to calculate because many purchasers are registered as trusts or limited liability companies. Jed Smith, managing director of quantitative research for the National Association of Realtors, said the number of overseas buyers for multimillion-dollar homes is increasing, helped by the rise of emerging markets such as Russia, Brazil, China and India.
The Forbes list was topped for a second year by Mexico’s Carlos Slim, who in July 2010 bought a Manhattan townhouse known as the Duke Semans mansion for $44 million. Foreign buyers are also turning to resort locales such as the ski area of Aspen, Colorado, said Tim Estin, a broker at Mason Morse Real Estate in the town. “It’s a pre-eminent international mountain resort brand,” Estin said of Aspen, where luxury properties are selling at discounts of as much as 30 percent from the peak.
In the last three years, Aspen had at least five deals above $10 million in which the purchaser was from Russia, according to Craig Morris, president of the town’s Morris & Fyrwald Sotheby’s International Realty. “Four years ago we didn’t have any Russian buyers,” he said.
“Compared to other markets around the western world, the U.S., including New York and Los Angeles, lost significant value during the crash and are more fairly priced,” Liam Bailey, the head of residential research at Knight Frank in London, said in an e-mail. “There is no doubt a surge in interest in New York, particularly for people looking for deals.”
U.S. home prices in 20 cities are 32 percent below their peak in July 2006, according to the S&P/Case-Shiller index. While luxury values haven’t been hit as hard, the sellers don’t always get what they want. The Spelling home in Los Angeles was on the market for two years at $150 million before selling at a 43 percent discount. The Miami Beach estate bought by Tariko fetched 20 percent less than its $32 million list price.
A weakening U.S. currency helps make the nation’s homes seem like a good deal, said White, the Sotheby’s president. The dollar has fallen against each of the 16 most-traded currencies in the past year, according to data compiled by Bloomberg. Among emerging-market currencies, the Russian ruble increased 7.7 percent against the dollar in the 12 months through yesterday. The Brazilian real advanced 12 percent, while the Chinese yuan gained 5.2 percent.
For Russians, interest in luxury properties is as much evidence of conspicuous consumption as it is efforts to capture bargains, said Edward Mermelstein, a real estate attorney Rheem Bell & Mermelstein LLP with offices in New York and Moscow.
“Those trophies, they’re buying them to make a splash,” Mermelstein said in a telephone interview from New York. “They’ll definitely gravitate to a property that’s higher profile as much as to a property with a long-term investment potential.”
Yuri Milner, founder of Moscow-based DST, which invests in Internet companies including Facebook Inc., Twitter Inc. and Groupon Inc., paid $100 million for a 25,500-square-foot (2,370- square-meter) mansion in Los Altos Hills, California, according to property records. The transaction is the biggest for a U.S. single-family home sale this year.
In Manhattan, Krutoy and his wife, Olga, bought their 6,000-square-foot condo at the Plaza hotel in March. The deal came six months after the couple completed the purchase of a $12.85 million home in Long Island’s beach area of the Hamptons.
The Krutoys razed the Southampton mansion and are building a new house at the site on Gin Lane, where neighbors have included designer Vera Wang, shopping-mall magnate Alfred Taubman and New York Times publisher Arthur Sulzberger.
Russian buyers “have the money and they always want the best in everything,” Bykov said of the people he represents. “Most of these people are buying pied-a-terres and it’s quite common that the person would buy a luxury apartment in New York and a condo or penthouse in Miami.”
Kirk Henckels, director of the private brokerage at New York’s Stribling & Associates, said he was approached by a would-be buyer from Russia seeking to spend $100 million on a Manhattan home. The most expensive single residential property currently for sale in Manhattan is the Woolworth Mansion, a 1916 “neo- French Renaissance” edifice on East 80th Street. The sellers are asking $90 million, according to StreetEasy.com, a real estate listings website. Buyers from Russia and China have expressed interest in the seven-floor mansion, said Paula Del Nunzio, the broker with Brown Harris Stevens who is listing the property.
The newest Manhattan condo building to catch the attention of foreign buyers is a 90-story tower under construction on West 57th Street by Extell Development Co., according to Mermelstein and Bykov. The property, known as One57, will be the tallest residential tower in New York when completed in 2013.
The 95-unit building will record “a number of signed contracts” in the next 30 days for units ranging from $7 million to “north of” $40 million, Gary Barnett, Extell’s president, said in a telephone interview. He declined to say where the buyers are from, but said inquiries have come in from overseas, including Russia.
Among the contracts to be signed in the next month is one for a full-floor, 6,200-square-foot unit that offers panoramic views of Manhattan, including Central Park, Barnett said.
“Three-hundred-sixty-degree views, unobstructed. That’s something special,” Barnett said. “If you were worth $100 million dollars or you were a billionaire, this is something unusual. If you can afford the best of the best, why shouldn’t you do that?”
In the Los Angeles area, about 75 percent of the people looking at “super luxury homes” for $20 million or more are from countries such as China, Indonesia, Korea and Russia, said Sally Forster Jones, a Beverly Hills broker. Forster Jones plans an October trip to China to seek potential customers, she said.
Asian clients prefer Bel Air, Beverly Hills and Holmby Hills, known as the Platinum Triangle of Los Angeles, with their palm-tree shaded boulevards and history as home to Hollywood celebrities, Forster Jones said.
Russians are among the best customers for luxury homes in the Los Angeles area, said Jeff Hyland, president Hilton & Hyland Real Estate Inc. in Beverly Hills, who shared the Spelling mansion listing with his partner, Rick Hilton, and Forster Jones.
One example is the 2010 purchase and resale this year of a $19.5 million mansion by Dasha Zhukova, art collector and partner of Chelsea soccer club owner Roman Abramovich, said Hyland, who wasn’t involved in those transactions.
“You have the new wave of the oligarchs with their big yachts they dock off the beach at Malibu when they’re here,” he said in a telephone interview. “It’s all about the weather here. It’s about the ease with which people can move back and forth in Los Angeles. They can get in their Ferrari or their Rolls Royce Ghost and drive where they want without need of security.”