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July 13, 2008

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The great fire-sale of US assets continues. In the 1980s, it was Japanese and European companies buying up US factories, who incidentally helped restore their competitiveness. Then, there was the buy-up of great buildings and commercial real estate. Now, the the dollar down and weakened real estate markets comes the buying up of prestige properties in super-star markets from NY to Palm Beach.   The Wall Street Journal reports on the recent buying binge by the Russian super-rich:

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 ...

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." ...

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 ... 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 ... 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 ...

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 ... 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.


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The Urbanophile

Do you think this is a good thing or a bad thing?

It strikes me that many foreign investments in trophy assets have proven to be money losers (e.g., the Japanese purchase of Rockefeller Center). These purchases are only a dollar recovery away from showing big paper losses.

I'm glad to see that the United States is still seen as a great place to invest.

hayden fisher

Agreed! It's great the people want to buy and live in the US, let's welcome more investment. Foreign investment is the pillow that cushions the fall of the US real estate market. The addition of more diversity is also welcome.

Zoe B

Apparently we are happy to welcome foreigners if their pockets are deep enough. No visa bottleneck here.


I wonder if they have visas - that is work visas - of if they are just visitors/ tourists. Worth looking into. This is worth looking into. Seems likely that a wealthy foreign person can buy property with little scrutiny, but a skilled foreign person has a good deal of trouble trying to gain access to work. Who would create more value in the long run -a wealthy property owner paying taxes, a skilled engineer in a tech company, or an immigrant entrepreneur?


Well, as Russian citizens they'd need a visa for any visit to the US, but tourist visas aren't hard to get. Good luck qualifying for a mortgage from a US bank while on a tourist visa, but they probably don't need one.

If they've got an extra million to invest in a US-based business (just money -- they don't have to actually work there), an EB-5 visa puts their whole family on the road to a green card: http://www.visabylawyer.com/greencard/employment/eb5.html .

As Zoe says, deep pockets do seem to clear up those bottlenecks.

hayden fisher

Great point Richard! It would be hard to argue that the wealthy investor does not add value but it's limited single injection value whereas the skilled foreign worker not only adds the value of their service and furnishes a needed skill-set but also adds to value collectively to the labor force and workplace; and creates the possibility of future entrepreneurship, ie, job and wealth creation. So, collectively, the skilled workers (talent) add more value.

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