International investors are buying some of the priciest homes in America as the general housing market slumps and the weak dollar makes U.S. property more of a bargain. Among those wealthy investors are a slew of Russian individuals who are putting down large sums of money on U.S. homes.
In April, billionaire owner of Russian Standard Bank and Russian Standard Vodka, Roustam Tariko, closed the most expensive home purchase in Miami Beach since 2006 when he bought a $25.5 million estate on renowned Star Island. But Tariko is not the only Russian billionaire to buy property on that exclusive island. In 2009, Vladislav Doronin, chairman of Moscow-based real estate developer Capital Group and boyfriend of supermodel Naomi Campbell, purchased now-retired NBA player Shaquille O’Neal’s mansion for $16 million.
One Sotheby’s International Realty Inc. agent Jorge Uribe said, “In Russia, it’s a status thing now. If you’re wealthy and you say you have a place in Miami, it’s like saying back in the old days, ‘I own a place in Ibiza or Monaco.’ It’s a cocktail conversation thing.”
Perhaps surprisingly to those who constantly hear about how bad the real estate market is in the U.S., sales of residences above $20 million are actually rising in New York, California and Florida – all locations popular with foreigners for business and vacation. In just the first half of 2011, seven homes have sold in Manhattan for more than $20 million, up from five in the same period of 2010. The deals includes an impressive $48 million sale to Russian composer Igor Krutoy that set a record for a condominium in New York City. Krutoy and his wife, Olga, bought the 6,000-square-foot condo at the Plaza hotel in March, just six months after the couple finalized the purchase of a $12.85 million home in Long Island’s beach area of the Hamptons.
On the West Coast, Los Angeles County had 42 houses listed for more than $20 million earlier this year. Six of those properties sold above that level through June, compared with four in the first half of 2010.
One of the more recent, and highly publicized, multi-million dollar home sale came when British heiress Petra Ecclestone paid $85 million for the late television producer Aaron Spelling’s Holmby Hills estate.
Overall, it is estimated that international buyers purchased approximately $83 billion worth of U.S. homes in the 12 months ended March 31, a 24% increase from the year-earlier period. Because many of the purchasers are registered as trusts or limited liability companies, the exact number of foreign deals for U.S. luxury properties is difficult to calculate.
Emerging overseas markets are partially behind all of the international investors coming to the U.S. to buy property, and of the 214 newcomers to Forbes magazine’s annual global ranking of billionaires this year, 54 were from China and 31 from Russia. In fact, the Asia-Pacific had more billionaires than Europe for the first time in more than 10 years and Moscow displaced New York as the city with the greatest number of billionaires with 79 compared with new York’s 58.
Foreign investors aren’t only look at big cities for their purchasing needs. They are also turning to famous and luxurious resort locales such as Aspen, Colorado. In the last three years, Aspen had at least five deals above $10 million in which the purchaser was from Russia.
Back in Miami, on Star Island in particular, the 15,000-square-foot mansion that Tariko bought in April has nine bedrooms, nine full bathrooms and three half-baths. Like many homes in Miami, the driveway is lined with palm trees and, less like most homes in Miami, the house has spectacular views of downtown Miami across Biscayne Bay.
Tariko purchased the home, which was built in 2003, from Thomas H. Morgan who is the founder of Morgan Energy Corp., a closely held oil and gas exploration company based in Englewood, Colorado.
So why are foreigners putting up the money for these luxury homes and American’s are not? Well, according to Morgan, “Americans don’t want to put down 80% or pay cash. A lot of Americans are tapped out.”
Luxury home values haven’t been hit as hard as general U.S. home prices, but wealthy sellers still aren’t always getting exactly what they ask for. The Spelling home, for example, was on the market for two years in Los Angeles for $150 million before Ecclestone scooped it up at a 43% discount. Tariko also got a good deal – the Miami Beach property was originally listed at $32 million, meaning Tariko paid 20% less than asking price.
Currently, in New York City, the most expensive single residential property for sale is the Woolworth Mansion, a 1916 “neo-French Renaissance” on East 80th Street. The sellers are asking $90 million and buyers from Russia and China have allegedly expressed interest. The home has seven floors of prime Upper West Side living.
Source: Bloomberg
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