Wealthy Russian real estate owners are whispering out of Manhattan

They landed with a boom, collecting trophies at some of Manhattan’s priciest spots. Now the Russians seem to be leaving in whispers.

Several have reached out to brokers in recent days about the sale of multimillion-dollar Manhattan properties as they attempt to liquidate assets before being caught in a web of US sanctions. Most do this through discreet “whisper” listings with trusted brokers, as opposed to public sales to minimize publicity.

But that’s not all: The Upper East Side mansion of Alexey Kuzmichev, co-founder of Alfa-Bank, which was hit by US sanctions, was recently listed for $41 million, $1 million less than he paid for it in 2016.

“Everyone’s just talking about selling,” says Dolly Lenz, one of New York’s leading brokers for luxury real estate. The big question, Lenz says, is what terms they need to exit and how much they need to pocket to close deals quickly.

“If buyers think you might be in trouble — and your whisper list is a sign of that distress — that’s a problem,” Lenz said, noting that she’s already been “inundated” with inquiries from investors hoping to Russian-owned real estate to buy cheap.

Many Russian buyers are a far cry from the notorious oligarchs who have garnered public attention — both in terms of wealth and political connections — and will likely never find their names on any sanctions list. But the concern is that they could also be motivated to sell because of a suddenly 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 Derderian, research director at Serhant, a luxury real estate broker, predicted that New York, Miami and other markets would remain buoyant following the release of a post-pandemic recovery last year. The number of Manhattan sales completed in the fourth quarter rose 77 percent year-over-year.

Those Russians looking to sell are “a very small subset of individuals,” according to Derderian, compared to a larger group of wealthy Russians still seeking the safety of US real estate. “Global markets like New York and Miami have become the destination of choice for the wealthy. So far there has been no bailout of Russian-owned real estate in New York,” he said.

Russian oligarchs became less visible in the US market after Moscow’s 2014 annexation of Crimea soured ties with the West, according to brokers and property managers. As big Manhattan buyers, they were overtaken by the Chinese, who have since been held back by Beijing-imposed capital controls.

Still, no one seems to know how much property Russians actually own in the US. That’s because many have operated through shell companies that hide their identities. Congress passed legislation in 2020 requiring limited liability companies and other businesses to disclose their beneficial owners. But the Treasury is still working on the rules.

Meanwhile, Douglas Kellner, a New York real estate attorney, predicted authorities would have trouble identifying the sanctioned owners. “It’s difficult,” said Kellner. “The Justice Department has people who are good at tracing assets. But it is complex, time-consuming work and often requires cooperation with foreign governments.”

Jamal El-Hindi, former deputy director of the Treasury Department’s Financial Crime Enforcement Network, agreed. “There are ways they can put things together, but it’s difficult,” he said. El-Hindi, now a lawyer at Clifford Chance, recalled that the financial institutions themselves were surprised when they discovered how much Libyan money they were holding after the US imposed sanctions in 2011 to punish Muammer Gaddafi and his regime.

In addition to individual apartments, some Russian investors may have poured money into development projects, according to Michael Romer of Romer Debbas, a New York real estate law firm. “I think that’s a dangerous onion. If you keep peeling, it can get very complicated,” Romer said.

Andrei Vavilov
In 2007, Andrei Vavilov agreed to pay $53.5 million for two Plaza Hotel penthouses before going out of business © Ruth Fremson/New York Times/Redux/eyevine

As an investment, the appeal of New York real estate for wealthy Russians is the same as for other foreign buyers: it retains its value and is easily traded. Russians, realtors say, prefer condos in new buildings, like the former Time Warner Center, and avoid the intrusive inspections carried out by co-op boards in older buildings.

“A lot of money went into the high-end new development market because, to be honest, it was an easy place to park money,” Romer explained. “The heyday was about 10 years ago, but those units are still around.”

The staggering extent of Russia’s wealth was revealed in 2007 when Andrei Vavilov, a financier, agreed to pay $53.5 million for two penthouses at the Plaza Hotel. Vavilov later went out of business and sued the developer, complaining that the finished apartment resembled a “glorified attic”.

Vavilov was soon surpassed by Roman Abramovich, the billionaire owner of Chelsea Football Club, who bought three adjacent townhouses on East 75th Street to construct a single mansion. He transferred the property and two others nearby to his ex-wife for a total of $92 million. Dasha Zhukovain 2018 as part of their divorce settlement. Abramovich has been subject to sanctions by the EU and the UK in recent days.

Russian buyers were so attractive that developer Harry Macklowe sent a sales team to Moscow in 2013 to generate interest in 432 Park, his super-tall tower.

However, they also raised concerns that Russians were only buying properties to store suspected riches — rather than actually occupying them. In 2016, the Treasury Department responded with a temporary initiative that required title companies to report shell company owners who bought real estate in cash deals in certain areas.

New York City Mayor Bill de Blasio complained to BuzzFeed in 2017, “I see Russian oligarchs as a problem. It’s manifested here as a lot of people with ill-gotten gains buying a lot of property, and I don’t like that one bit.”

South Florida also became a magnet for Russian money. Dmitry Rybolovlev, a fertilizer tycoon, bought a Palm Beach mansion from Donald Trump in 2008 for what was then a record $95 million. Rybolovlev then demolished the mansion and sold the estate in three lots.

The area is widely regarded as a haven for wealthy, but not outrageously wealthy, Russians. Sunny Isles Beach, for example, an enclave known as “Little Moscow,” offers $3 million to $5 million in oceanfront condos — often in branded buildings like the Porsche Design Tower or the Trump Towers. “It’s extremely Russian, but not the same group,” explained Lenz — not the “big fish.”

Real estate on Sunny Isles Beach in Florida
Wealthy Russians flock to the beachfront property on Sunny Isles Beach, Florida © Joe Raedle/Getty

Even if the broader luxury market holds up, sanctions – or the threat of sanctions – raise uncomfortable questions. For example, if an apartment in a luxury building is effectively frozen due to sanctions, could that affect the value of others? If the unit was not purchased outright, would the lender take a hit?

Meanwhile, residents could be hit with higher common fees to make up for the owner’s lost contribution under restrictions. It can also be risky to buy a property when it could be involved in a court case.

“The calls we get are, ‘What does this mean for me? Will this affect the value of my property?” said Römer. “Right now all eyes are on you if you are a wealthy Russian living in the US looking to buy or sell something.” Wealthy Russian real estate owners are whispering out of Manhattan

Adam Bradshaw

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