Russian Investors Seek Safety in US Real Estate

Anyone familiar with the New York or Miami real estate markets knows the buying power of Russia’s moneyed class – from super-rich to the merely well-off. But two alarming trends in the Russian Federation – the steady build-up of jingoistic rhetoric from President Vladimir Putin and a sharp downtown in the economy – are significantly altering the investment decisions of Russia’s wary elite.

In 2011, a trust linked to the eldest daughter of potash fertilizer magnate Dmitry Rybolovlev paid $88MLN for a four-bedroom penthouse at 15 Central Park West – the most expensive New York City apartment purchase ever. The same year. Composer Igor Krutoy also broke records when he bought a $48MLN condo at the Plaza Hotel – one of three units he owns in the building.

Now it is mainly a flight to safety in American markets.

The oligarchs who acquired massive wealth during the privatization of Russian state industries in the 1990s, and from high oil prices thereafter, have long sought safe investment in the West.

The trend has accelerated as Russia’s $2 trillion economy is now in virtual free fall.

The rating agency Standard & Poor’s Friday cut Russia’s sovereign debt rating to just one step above “junk” status, citing the destabilizing effects of capital outflow from Russia, which it said had reached nearly $51 BLN in the first three months of 2014. The ruble is significantly down ($1= 60 Rubles, used to be at $32-$33) and the stock market has plunged.

On top of that, the US and European Union may widen economic sanctions to include key financial and energy sectors in Russia, which they blame for stocking unrest in Easter Ukraine, a charge Moscow denies.

In 2014 Russian purchases shifting from ultra luxury to $3-10MLN  residential purchases for personal use more easily disposable investments designed to generate rental income. The trend confirming by Miami and Luxury real estate agents. It includes a flight to safety by “highly exposed clients” who are now lying low. If you are in Russia, you don’t want to announce large, visible purchases in a country you are virtually at war with.

In Miami Russian millionaires made headlines with their taste for giant waterfront mansions.

Russian millionaires luxury real estate purchases are always in news:

The most expensive home ever sold in Miami was purchased by a Russian. The 30,000 s.f. home on Indian Creek Island went for $47MLN in August 2012
Palazzo del Sol, new ultra luxury development on Fisher Island sold  PH priced at $35MLN to Russian buyer
– A home on Star Island sold recently for $25MLN to Russian vodka king Roustam Tariko.
The $20 MLN sale of an entire floor of St. Regis Ba Harbour went to a millionaire from Ukraine
– Russians spent over $12 BLN on overseas real estate last year, with more than $1 BLN of that coming to USA, according to National Association of Realtors.
– Yet Russians have a particular attraction to the largest Miami mansions and condos.
-Russian millionaires are also obsessed with security and protection, which they can easily find in Miami’s large collection of gated communities, private islands with private police forces and protected condo towers.
Miami becoming worldwide destination
The weather is a welcome escape from Moscow winters
Buying a mansion or condo in Miami also requires limited disclosure – a big plus for Russian who are loathe to give information about their finances and business backgrounds.