Russian Oligarchs and New York City Real Estate

New York City Faces Challenges in Exposing Oligarch Property Purchases

After Russia invaded Ukraine, international leaders including President Biden declared sweeping sanctions on Russia in an effort to destabilize the ruble, which effectively “prohibits Americans from doing any business with the bank as well as freezes its assets within the United States” according to coverage from CNBC.

In the first week of March, the Department of Justice announced a crackdown on assets owned by Russian oligarchs that include real estate, yachts, cars, planes, and other luxury assets commonly owned by these mysterious elite figures. Of course, not all Russians who buy property in the United States are oligarchs, nor are all Russians laundering money with their real estate purchases. When Biden talks about seizing assets, he’s targeting a small number of ultra-wealthy Russians who have close ties to Putin.

New York City Luxury Real Estate and Sanctions Against Russia 

New York City has long been a favorite market for the world’s wealthy to invest in assets like luxury real estate. Now, these luxury penthouse apartments and townhomes are coming under fire amid Western countries targeting the billionaire oligarch class of Russians. 

Oligarchs have connections to real estate primarily in New York City going back decades. However, American intelligence teams are finding it difficult to seize these properties, as Russian-owned real estate is often hidden behind intricate shell companies designed to protect their investors. 

With these shadows cast over international investing in cities like New York City, elected officials and experts in the intelligence communities are calling for city and state governments to expand laws that would require more transparency in real estate investments. 

“There’s an elaborate system, a legal shell game, essentially, that has been used for years, and the city and state can help to pierce through that,” said Mark Levine, the Manhattan borough president, after a rally in support of Ukraine last Friday. 

Contrary to the chaos surrounding Russia today, New York City officials have encouraged foreign investment in luxury real estate for decades, even after it became clear that some of these investors obtained their money illegally or through suspicious means. In 2013, then-Mayor Michael Bloomberg spoke with New York Magazine and said that taxes paid by wealthy foreigners provided funds for city schools, healthcare systems, and public safety. 

“Wouldn’t it be great if we could get all the Russian billionaires to move here?” Bloomberg said. 

Now, “At least 61 properties have been put up for sale or have had a price update or some other change in Central Park South within the last week,” a real estate source told FOX Business.

Russian billionaire investment in New York City goes back decades and once was a common practice by New York-based hedge funds. 

How Wealthy Foreign Investors Protect Their Identities 

Often, oligarchs ask their associates to invest money in their names through shell companies, making it difficult for investigators to track down the origin of the funds. 
Today, with U.S. and European sanctions targeting wealthy Russian investors, many firms are deciding to ditch these controversial clients. 

While it’s not illegal for firms to represent clients in countries under sanctions, the reputational damage far outweighs the financial incentive.

Russian Oligarch Investments in New York City Real Estate

The history of Russia’s link to luxury real estate in New York City is long and complex. For decades, Russia’s ultra-wealthy have used financial advisors in New York to secretly invest in U.S. hedge funds and private equity firms that would then re-invest this money in luxury real estate holdings. For example, Dmitry Rybolovlev acquired a Central Park apartment for $88,000,000 in 2012, which remains one of the biggest real estate deals in New York history. 

While we know that Rybolovlev purchased this particular apartment in 2012, most purchases made by Russian oligarchs are done in the dark. 

Right now, there are lists of blacklisted Russian oligarchs who are being investigated. Here are five Russian oligarchs of interest and their real estate holdings in New York City (that we know of): 

• Roman Abromovich - Abromovich is known for being Putin’s banker and the owner of the Chelsea football club. It’s believed that he owns NYC four properties in the same building, which he used to create a huge mansion. 
• Dmitry Rybolovlev - Rybolovlev made his fortune in Russian fertilizer and purchased a penthouse in Central Park that made headlines for setting one of the biggest real estate transactions in the city. 
• Eugene Shvilder - Shvilder made his billions as an oil tycoon, and he purchased an apartment on the Upper East Side in 2017. 
• Alexei Kuzmichev - Kuzmichev is the co-founder of Russia’s largest private bank, Alfa Bank. The billionaire purchased a pair of apartments on the Upper West Side in 2016. 
• Oleg Deripaska - Deripaska is known for making his money in the aluminum industry. He purchased a townhouse in Greenwich Village, which made headlines when the FBI raided it in 2021. 

It’s clear that Russia’s elite holds influence in New York City real estate, but with sanctions closing in, many of these oligarchs are rushing to explore their options, which could include selling their luxurious estates. 

Sanctions Are Scaring Russian Oligarchs

With firms dropping these wealthy clients, Russian oligarchs with ties to New York City real estate and the Kremlin are quickly liquidating their real estate assets in fear of U.S. sanctions.

Dolly Lenz, a luxury real estate agent in New York City, told FOX Business her firm received calls from Russian clients wanting to "whisper list" between 50 and 70 properties, mainly in Manhattan. These properties range in value from $5 million to $50 million. 

If you’re interested in how Russian oligarchs influence real estate on a national scale, read our blog What Impact Do Russians Have on the U.S. Real Estate Market?

The CE Shop readers: What are your thoughts on Russian real estate investment in New York City? Have you seen real estate acquisitions in your market? We’d love to hear from you in the comments below!