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.
July 13th, 2008 at 2:13 pm
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.
July 13th, 2008 at 4:43 pm
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.
July 14th, 2008 at 7:12 pm
Apparently we are happy to welcome foreigners if their pockets are deep enough. No visa bottleneck here.
July 15th, 2008 at 9:42 am
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?
July 15th, 2008 at 10:54 am
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.
July 15th, 2008 at 11:46 pm
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.