More than 200 real estate brokers and lawyers, many of them among the most ambitious in the Manhattan real estate world, filed into an Off Broadway theater last month for three hours.
Times Topic: Alexei Barrionuevo
The subject of the gathering was not art, but money: specifically, how to sell multimillion-dollar properties to clients from Russia and other parts of Eastern Europe.
While the brokers sipped wine and nibbled cheese, a panel of lawyers and a banker reviewed some of the biggest sales made to Russians, including the $188 million spent on properties in Florida and New York by trusts linked to Dmitry Rybolovlev, who made billions from potash fertilizer; the $48 million that a composer, Igor Krutoy, paid for an apartment at the Plaza Hotel; and the $37 million spent by Andrei Vavilov, a former deputy finance minister, on a penthouse at the Time Warner Center.
The real estate market in the United States may still be slumping, but its high end is enjoying a remarkable updraft, propelled by money flowing in from all corners of the globe, including from developing countries like Brazil, China and India. But no group is consistently writing bigger checks than the Russians.
Over the past four years, Russians and other citizens of the former Soviet Union have signed contracts to buy more than $1 billion worth of residential real estate in the United States, according to estimates from lawyers and brokers.
The spending spree may just be warming up, given that $84 billion left Russia last year, with the Russian government estimating that up to 5 percent of that capital flight was being plowed into American real estate. The number of billionaires in Russia and Ukraine has more than tripled since 2009, to 104, according to Forbes.
“The fact that everybody recognizes that the high end of the market right now is controlled by that buyer is definitely driving that interest,” said Edward A. Mermelstein, a lawyer with Rheem Bell & Mermelstein, which helped organize the seminar last month.
Jill Sloane, a broker with Halstead Property, said, “Everyone knows they are the ones with the big money right now.” She added that when she heard that the penthouse at 15 Central Park West had sold for $88 million, “I knew it had to be a Russian.”
The billionaire buyers are flush with cash from the privatization of Russian state industries and from high prices on oil and other commodities, and are eager to park much of their fortunes outside the reach of the government of Vladimir V. Putin.
Mr. Putin signaled his frustration in February, when he said Russia “must end this period,” referring to what he called the “unfair” privatizations in the 1990s.
Even before Mr. Putin was elected last month to another term as president, many wealthy Russians had been taking steps to move their families to New York, in some cases by using EB-5 visas in exchange for making government-approved investments, Mr. Mermelstein said.
“I think that Putin scares them to death,” said Victoria Shtainer, a Russian-born broker with Prudential Douglas Elliman in Manhattan. “You can’t have so many droves of people here purchasing at such high rates of speed if things were O.K.”
Many of the Russians seem determined to make names for themselves as conspicuous consumers. After buying trophy apartments and houses, they often pour tens of millions of dollars more into remodeling projects by brand-name interior designers like Jacques Grange. They also collect rare art and commission one-of-a-kind yachts.
Mr. Rybolovlev, worth an estimated $9 billion, has been involved in two of the biggest sales. In 2008, a trust linked to him bought a 69,000-square-foot oceanfront home from Donald Trump for about $100 million — then a record in the United States. In February, a trust linked to his eldest daughter, Ekaterina, 22, bought a four-bedroom penthouse at 15 Central Park West from the former Citigroup chairman Sanford I. Weill for $88 million — the most ever paid for an apartment in New York City.
That sale stirred the imaginations of Manhattan brokers and emboldened developers to increase the prices of other luxury residences. In the past four months, Extell Development Company has increased its listing prices by 5 percent to 15 percent at 157 West 57th Street, which will be New York’s tallest residential building. The two-floor penthouse is now selling for $115 million, up from the original asking price of $98 million.
Extell’s president, Gary Barnett, said Russians had signed contracts to buy two apartments in the new building, each in the $25 million to $30 million range. A few other Russian buyers walked away after failing to negotiate “big price reductions,” he said.