The Wall Street Journal
Oligarchs Buy Homes In Chic U.S. Enclaves;
Rock Star’s Two Condos
The Russians are coming.
As many of America’s wealthy are roiled by the credit crisis and general financial gloom, a growing number of rich Russians are house-shopping — and buying — in costly U.S. enclaves.
Fertilizer mogul Dmitry Rybolovlev is set to pay nearly $100 million to Donald Trump for an oceanfront mansion in Palm Beach, Fla., say people familiar with the deal reached in May. Last year, Oleg Baibakov, president of GSC City, a Moscow construction-management and consulting firm, bought a condo at Manhattan’s Time Warner Center for $13.5 million, according to public records.
And in Snowmass, Colo., perhaps the most famous Russian oligarch, Roman Abramovich, paid $36.4 million in April for a 200-acre ranch. The property’s massive, split-level house is five minutes away from an $11.8 million ski-in, ski-out house that Mr. Abramovich, owner of England’s Chelsea soccer team, purchased two months earlier, records show.
While the number of Russians with the means to buy trophy homes is relatively small, they represent an important but little-known demographic group for U.S. real estate. Several years ago, the weakening dollar began to draw more overseas buyers but Russians were scarce. Now, Russia’s economy is booming amid soaring energy prices. Moscow real estate is among the world’s costliest, making property elsewhere a relative bargain.
In New York City, foreign buyers now make up about 15% of the market, with Russians the largest contingent, says Hall Willkie, president of real-estate firm Brown Harris Stevens. “A few years ago we didn’t see any Russians,” Mr. Willkie says. “But now, especially at the high end of the market they are buying big apartments…so they are a significant factor.”
In some ways, America is just the latest stop on a Russian grand tour. In London, so many Russians have bought property in one neighborhood that it has been dubbed Moscow on the Thames. Vacationing Russians for several years have frequented resorts in the south of France, such as Biarritz and Nice, where some have purchased large homes.
Sergey Skaterschikov, a Moscow-based private-equity investor, is shopping for a house in Palo Alto, Calif., because his son will attend school in the area. With a budget of $3.5 million to $5 million, the five- and six-bedroom houses the 36-year-old Mr. Skaterschikov has looked at struck him as cheap compared with Moscow real estate, which he called “insane.”
The Miami area in particular is drawing Russians with its upscale shopping, hip nightlife and an escape from Moscow’s harsh winters. In Miami Beach, a Russian paid $10.6 million in April for an unusual white concrete house with five boat sails on its roof and two curved terraced pools, according to the seller, developer John Turchin. Nelson Gonzalez, a broker with Esslinger, Wooten, Maxwell Realtors in Miami, says he has shown several Russian shoppers a house on Indian Creek Island with a $35 million asking price, one of the area’s most expensive listings.
Miami first became popular with Russians in the mid-1990s, when a coterie of Soviet-era pop stars purchased condos there and Russian media covered their new homes. Newer residents of nearby Sunny Isles Beach include Irina Allegrova, a pop singer who bought a two-bedroom condo for $1.4 million in January, records show. Reached on her Miami cellphone, Ms. Allegrova declined to comment. Rock star Leonid Agutin and his wife, singer Angelika Varum, own two Miami condos, including a three-bedroom one they bought for $790,000 in 2004 after Mr. Agutin recorded a CD in Miami with guitarist Al Di Meola. “I liked it there so much I bought the apartment next to the hotel,” he says. “My wife and I spend three months a year there in-between our tours.”
In Manhattan, former Kremlin insider Boris Berezovsky bought a high-rise condo on Central Park West for $3.2 million in 2001, records show, the same year he fled Russia after clashing with then-President Vladimir Putin. A spokeswoman for Mr. Berezovsky declined to comment. Last November, Len Blavatnik, whose investments include metals, chemicals and oil, paid Seagram heir Edgar Bronfman Jr. $50 million for a townhouse off Manhattan’s Fifth Avenue, just a few blocks from a $31.25 million townhouse he bought a few years earlier, records indicate. He also owns a Fifth Avenue apartment that he bought in January 2007 for $27.5 million. A spokesman for Mr. Blavatnik, who is a longtime U.S. citizen, said the two townhouses are long-term investments.
The new buyers also include other residents of the former Soviet Union. In February, Bolat Nazarbayev, an oil magnate and brother of Kazakhstan’s president, paid nearly $20 million for an apartment at the Plaza condominium, according to records.
Russian buyers are “a small community — it’s the same people who have been to the same schools,” says Natalia Harrison, a native Russian real-estate agent who handles international real-estate marketing and sales for Douglas Elliman Worldwide Consulting. “Once someone oligarchal goes somewhere, they all go there and follow them.”
At a recent Sotheby’s International Realty conference, agents discussed Russian as well as Chinese nationals as new markets for eight-figure homes, according to Washington, D.C.-based broker Daryl Judy. Arsen Gasparyan, a Russian-speaking marketer in Miami, has teamed up with the W Residences South Beach, Regalia Miami and other Miami-area developments to advertise their properties in Russian magazines.
The Russian-American Consulting Corp., a New York travel agency specializing in package tours for Russians, has helped about 10 clients from Russia look at property in the past year, says owner Andrei Shuranov. “It’s difficult to attract people from the former Soviet Union because they don’t know the States and it’s difficult for them to get visas,” says Mr. Shuranov. “But at the same time, it’s growing.”
In January, San Francisco-based brokers Misha Kurgatnikov and Victor Borelli met with a delegation of more than 100 Russia-based brokers representing wealthy Moscow clients interested in buying distressed luxury properties in California and Las Vegas. Michael Valdes, a broker with Miami-based SOL Sotheby’s International Realty who focuses on the Russian market, says he has 14 active Russian clients, ranging from a couple shopping in Palm Beach with a budget of $20 million to $30 million to a hedge fund looking to buy condos in bulk.
Russian developers also are getting involved. Mirax Group Corp. of Moscow has invested in 13 partially completed houses at the Aqua, a New Urbanist-style development near Miami’s South Beach. The $75 million project will offer fully equipped homes, including linens, flatware and towels, aimed at Moscow-based buyers. Three homes in the Aqua have sold to Russian buyers in excess of $5 million each, according to Mr. Valdes, who is handling marketing for the project. (He declined to reveal the buyers’ names.)
Aqua is the first U.S. project for Mirax, which specializes in large high-rise and mixed-use developments in Moscow. It hopes eventually to be involved in developments in cities including New York, Atlanta, Chicago, Las Vegas and Aspen, Colo., says Dimitry Lutsenko, a Mirax board member, via email.
Security-related requests by Russian buyers are common, including underground parking, gated entrances and video cameras. Quintessentially Estates, a real-estate concierge service in London, has satisfied some unusual requests by Russian clients, including building a hidden helipad at a residence in the south of France, constructing an underground wine cellar with a gun safe in London, and a panic room in another English house. The firm recently opened a U.S. office in response to requests from Russian clients buying in America, says Lucy Russell, the company’s managing director.
Mr. Rybolovlev, the Russian fertilizer billionaire, made headlines last month for agreeing to pay $100 million for Mr. Trump’s Palm Beach house. Mr. Rybolovlev first visited a lavish Palm Beach residence that wasn’t on the market but brokers said might be had for about $225 million, according to Mr. Gonzalez, the Miami broker, who showed him the house. He eventually chose Mr. Trump’s estate, which has one of largest waterfront expanses on the island, because of its land value. He plans to tear down the 33,000-square-foot house and redevelop the property, say people familiar with his thinking, which likely would set a record for the most expensive U.S. teardown.
Mr. Rybolovlev, via a spokesman, confirmed last month that he agreed to purchase Mr. Trump’s house but didn’t respond to recent questions about his real-estate shopping, including whether he looked at the $225 million Palm Beach house.
In some cases, nearby residents haven’t been pleased with the changes proposed by Russian buyers. In May, the Greenwich, Conn., planning board rejected a Russian couple’s preliminary proposal to build a 27,000-square-foot house on seven acres, citing safety issues related to the amount of construction required and concern that the house wouldn’t be primarily used as a residence, says the board’s chairman. The land’s owner is Olga Kogan, wife of Valery Kogan, a wealthy Russian who is chairman of East Line Group, which manages Moscow’s Domodedovo airport. Ms. Kogan paid $18.5 million for the property in 2005, records show. It came with a 19,000-square-foot house dating to 1924. Ms. Kogan’s attorney, John Tesei, didn’t return calls seeking comment.
But other neighbors of Russian buyers see an upside. “What an interesting neighbor I will have,” says philanthropist Lois Pope, whose Snowmass ranch is adjacent to Mr. Abramovich’s. “I hear he’s a wonderful person,” says Ms. Pope, the widow of National Enquirer founder Generoso Pope Jr.
Ms. Pope may not be a neighbor for long: She put her property on the market about the same time as Mr. Abramovich’s purchase, asking roughly the same rich price that the Russian paid, $36 million.