They landed with a thump and scooped up trophies in some of Manhattan’s most expensive locations. Now the Russians seem to be leaving in a whisper.

Several have in recent days inquired with real estate agents about selling millions of dollars worth of properties in Manhattan as they attempt to liquidate assets before becoming entangled in a web of US sanctions. Most do this through discreet “whisper” lists with trusted brokers, as opposed to public sales, to minimize publicity.

But not everything: The Upper East Side mansion owned by Alfa-Bank co-founder Alexey Kuzmichev, who was hit by US sanctions, was recently listed for $41 million, $1 million less than he paid for it in 2016.

“They’re all just talking about selling,” said Dolly Lenz, one of New York’s leading luxury real estate agents. The big question, according to Lenz, is under what conditions they will get out, and how big the hit they will have to be to close deals quickly.

“If buyers think you might be upset — and your whisper list is a sign of that distress — that’s a problem,” Lenz said, pointing out she was already “inundated” with inquiries from investors hoping to pick up Russian property. housing cheap.

Many Russian buyers are a long way—both in wealth and political connections—from the infamous oligarchs who have captured public attention, and their names are unlikely to ever be found on any sanctions list. But the concern is that they may also be motivated to sell because of a sudden hostile climate and a fear of what Lenz called “guilt by association.” They may also need to raise cash to cope with the financial pressures brought on elsewhere in their portfolio by Western sanctions.

Garrett Derderian, director of research at Serhant, a luxury real estate broker, predicted that New York, Miami and other markets would remain strong after last year’s post-pandemic recovery. For example, the number of Manhattan sales completed in the fourth quarter was 77 percent higher than in the previous year.

Those Russians who wanted to sell, Derderian said, were “a very small subset of individuals” compared to a larger pool of wealthy Russians still seeking the safety of U.S. real estate. “World markets like New York and Miami have become the favorite destination of the rich. At the moment there is no fire sale of Russian-owned real estate in New York,” he said.

According to brokers and real estate managers, Russian oligarchs became less visible in the US market after the 2014 annexation of Crimea in Moscow worsened relations with the west. As Manhattan’s major buyers, they were overtaken by the Chinese, who have since been held back by capital controls imposed by Beijing.

Yet no one seems to know how much real estate the Russians own in the US. That’s because many have operated through shell companies that hide their identities. Congress passed legislation in 2020 requiring limited liability companies and other entities to disclose their beneficial owners. But the Treasury still makes the rules.

In the meantime, Douglas Kellner, a New York attorney specializing in real estate, predicted authorities would struggle to identify owners who have been placed under sanctions. “It’s hard,” Kellner said. “The Justice Department has people who are good at asset tracing. But it is complex, time-consuming work and often requires the cooperation of foreign governments.”

Jamal El-Hindi, former deputy director of the Treasury’s financial crime enforcement network, agreed. “There are ways they can put things together, but it’s hard,” he said. El-Hindi, now a counsel for Clifford Chance, recalled that financial institutions themselves were surprised to discover how much Libyan money they were holding after the US imposed sanctions in 2011 to punish Muammer Gaddafi and his regime.

According to Michael Romer of Romer Debbas, a New York-based real estate law firm, some Russian investors may have funneled money into development projects in addition to individual apartments. “I think this is a dangerous onion. If you keep peeling it can get really complicated,” Romer said.

Andrei VavilovIn 2007, Andrei Vavilov agreed to pay $53.5 million for two penthouses at the Plaza Hotel before pulling out of the deal © Ruth Fremson/New York Times/Redux/eyevine

As an investment, New York real estate’s appeal to wealthy Russians is the same as it is to other foreign buyers: it retains its value and can be easily traded. Russians, real estate agents say, prefer condominiums in new buildings, such as the former Time Warner Center, and avoid the intrusive assessments performed by the cooperative boards in older buildings.

“A lot of money went into the high-end, new development market because, to be fair, it was an easy place to park cash,” explains Romer. “The heyday was about 10 years ago, but those units still exist.”

The overwhelming magnitude of Russia’s wealth became apparent in 2007 when Andrei Vavilov, a financier, agreed to pay $53.5 million for two penthouses in the Plaza Hotel. Vavilov later withdrew from the deal and sued the developer, complaining that the completed apartment resembled “glorified attic space”.

Vavilov was soon outnumbered by Roman Abramovich, the billionaire owner of Chelsea Football Club, who bought three adjacent mansions on East 75th Street to turn them into one mansion. He transferred the property, and two others nearby, for a total of $92 million, to his ex-wife, Dasha Zhukova, in 2018 as part of their divorce settlement. Abramovich has been placed under sanctions by the EU and the UK in recent days.

Russian buyers were so enticing that developer Harry Macklowe sent a sales team to Moscow in 2013 to spark interest in 432 Park, his super-tall tower.

But they also raised concerns that Russians were buying properties just to store suspicious wealth — rather than actually occupying them. In 2016, the Treasury responded by launching a temporary initiative that required property companies to report shell company owners buying real estate for cash in certain neighborhoods.

Then-New York Mayor Bill de Blasio complained to BuzzFeed in 2017, “I see Russian oligarchs as a problem. It manifests here as a lot of people with ill-gotten gains buying a lot of real estate and I don’t like it at all. ”

South Florida also became a magnet for Russian money. Dmitry Rybolovlev, a fertilizer magnate, bought a Palm Beach mansion from Donald Trump in 2008 for a then-record $95 million. Rybolovlev then tore down the mansion and sold the property in three lots.

The area is widely regarded as a haven for affluent, but not excessively wealthy Russians. Sunny Isles Beach, for example, an enclave known as “Little Moscow,” features oceanfront apartments in the $3 million to $5 million range — often in branded buildings, such as the Porsche Design Tower or the Trump Towers. “It’s extremely Russian, but not the same group,” Lenz explained — not the “big fish.”

Homes on Sunny Isles Beach in FloridaWealthy Russians have flocked to the oceanfront property on Florida’s Sunny Isles Beach © Joe Raedle/Getty

Even if the broader luxury market holds up, sanctions — or the threat of sanctions — pose tough questions. If an apartment is effectively frozen in a luxury building due to, say, sanctions, could that affect the value of others? If the unit wasn’t bought outright, would the lender take a hit?

Meanwhile, residents may be saddled with higher communal charges to make up for the owner’s lost contribution under restrictions. It can also be risky to buy real estate if it could get caught up in a legal process.

“The calls we get are: what does this mean to me? Will this affect the value of my property?” said Romer. “Right now, if you are a wealthy Russian resident of the US and want to buy or sell something, all eyes are on you.”

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