Russian Oligarchs Take Manhattan

Could political unrest in the former Soviet Union be causing a flight to the Big Apple?


The awning for 15 Central Park West extends from the luxury condominium building in New York, U.S., on Tuesday, Jan. 6, 2009. Manhattan apartment sales fell for the fourth straight quarter and prices for the most expensive apartments dropped for the first time since the recession began as the national housing slump hit the metropolitan area. Photographer: JB Reed/Bloomberg News


First there were the Japanese and then came the oil sheikhs from the Gulf kingdoms. The latest group of mega-rich foreigners buying a chunk of Manhattan real estate are Russian oligarchs.

Edward Mermelstein, an international real estate attorney, says that the Russian infatuation with residential New York City properties is a “very serious trend” that surprises even him. “We’re seeing the very high end of Manhattan purchases — and I mean $30 million and up — going to the Russians. It’s incredible,” he says.

Mermelstein, who speaks Russian and has a branch office of his law firm Rheem, Bell & Mermelstein in Moscow, is accustomed to helping Eastern European entrepreneurs find a piece of America. But he says that growing political unrest across the republics of the former Soviet Union is causing a flight to financial safety among the richest families there.

In fact, Russia’s Deputy Economy Minister Andrei Klepach speculated that $80 billion will be leaving his country in the next few months. He has originally estimated that amount to be $65 billion. In 2011, Russian billionaires buying second and third homes in New York City purchased real estate totaling more than $181 million.

For instance, Ekaterina Rybolovleva, the daughter of Russian billionaire Dmitry Rybolovlev, is expected to pay $88 million for the penthouse in 15 Central Park West belonging to former Citi chief Sandy Weill. Alexander Rovt paid $33 million for an apartment on East 68th Street known as the Sloane Mansion. Then there’s Igor Kruoy, who dropped $48 million for an apartment in The Plaza. And Andrey Melnichenko paid $12.2 million for the penthouse apartment at 110 Central Park West.

For decades, Mermelstein helped arranged the purchase of trophy apartments and swanky office spaces for foreign firms and governments in New York City. But the latest wave of apartment hunting among his well-heeled clients is unmatched in terms of its market value. So is the scope of clients, he says. Ten years ago, he was familiar with the major families of the former Soviet republics. But now there are more people who have profited from the vast wealth connected with natural resources on the Asian continent.


What’s even more interesting is that unlike the Japanese real estate aquisitions in the 1980s, these high-profile purchases are intended for the families of the oligarchs. “These aren’t investment properties so much as they are for personal use. They’re being used as second or third homes,” says Mermelstein.

The Upper East Side of Manhattan is still a popular address, but it’s being given a run for its money by the Columbus Circle neighborhood, he says.