More than 200 lawyers and real estate brokers filed into an Off Broadway theater a couple of months ago for a three hour seminar.
The subject of the gathering was not about art, but money: more specifically, how to sell multimillion-dollar homes to clients from Russia and other regions in Eastern Europe.
During the seminar, a panel of attorneys and a banker reviewed some of the largest sales made to Russians, including the $37 million spent by Andrei Vavilov, a former deputy finance minister, on a penthouse at the Time Warner Center; the $48 million that composer, Igor Krutoy, paid for an apartment at the Plaza Hotel; and the $188 million spent on properties in New York and Florida by trusts linked to Dmitry Rybolovlev, who made billions from potash fertilizer.
The housing market in the United States may still be in a slump, but its high end is enjoying an amazing updraft, propelled by money flowing in from all around the world, including developing countries like India, China and Brazil.
But no group is consistently writing larger checks than the Russians.
In the last four years, Russians and other residents of the former Soviet Union have signed contracts to purchase more than $1 billion worth of residential real estate in America, according to estimates from brokers and lawyers.
Given that $84 billion left Russia in 2011, the spending spree may just be warming up with the Russian government estimating that up to five percent of that capital flight was being plowed into United States real estate.
The number of billionaires in Ukraine and Russia has more than tripled in the last three years, to 104, according to Forbes.
The fact that everyone recognizes that the high end of the residential market right now is controlled by that particular type of buyer is absolutely driving that interest, said Edward A. Mermelstein, a lawyer with Rheem Bell & Mermelstein.
One broker said that everybody knows that Russians are the ones with the big money right now. When she heard that the penthouse at 15 Central Park West had sold for $88 million, she said she knew it had to be a Russian.
The billionaire homebuyers are flush with cash from high prices on oil, other commodities and the privatization of Russian state industries, and are eager to plunk their fortunes outside the reach of the government of Vladimir V. Putin.
Putin indicated his frustration in February, when he said Russia “must end this” referring to what he called the unfair privatizations in the 1990s.
Even before Putin was elected in March to another term as president, many affluent Russians were taking steps to relocate their families to New York, in some cases making government-approved investments in exchange for EB-5 visas, Mermelstein said.
I think Putin scares them to death, said a Russian-born broker in Manhattan. You wouldn’t have droves of people buying at such high rates of speed if everything was okay, she added.
Many Russians seem set on making names for themselves as conspicuous consumers. After buying trophy houses and apartments, they are also pouring tens of millions of dollars more into remodeling projects by exclusive interior designers, like Jacques Grange. They also commission one-of-a-kind yachts and collect rare art.