They are lured by distressed sales and the rouble's rise against the US dollar
(MOSCOW) Russian millionaires are returning to the US property market, lured by distressed sales and the rouble's rise against the US dollar, lawyer Edward Mermelstein said.
'The way many look at the US right now is that it's a bargain,' said Mr Mermelstein, who has arranged about 300 real estate deals for buyers from the former Soviet Union since 2007.
Mr Mermelstein, 41, closed two purchases and bid for 20 more residential and commercial properties in New York and Miami for Russian and central Asia clients in the past three months, he said. That compares with no deals or offers in January, he said.
Manhattan apartment prices dropped for the first time since 2002 in the second quarter as the collapse of Lehman Brothers Holdings Inc and Bear Stearns Cos caught up to property owners in the nation's most expensive urban market.
The rouble rallied about 13 per cent against the US dollar from this year's low on Feb 17 and 4 per cent against the pound sterling from a Feb 6 low.
US sellers are cutting prices 30 per cent to 40 per cent from their peak in 2007, Mr Mermelstein said in an interview here, where his firm has an office.
'All of a sudden in the last three months activity's picked up,' he said.
More than half of the 15 or so Russians he's helping find US property are new clients, he said.
'Now that oil has settled at about US$70 a barrel, there's a little bit of a comfort level,' he said.
Oil has averaged US$60.14 a barrel in New York trading since April, rising as high as US$72.68 on June 11.
Last year's plunging commodity and equity markets wiped out US$380 billion in the value of Russia's so-called Golden Hundred, according to Forbes.
Closings for apartments priced over US$10 million in Manhattan fell by 82 per cent in the last year, helping bring the average co-operative price down 29 per cent from Q2 of 2008, according to Brown Harris Stevens Co.
About 32 per cent of Q2 listings included discounts from the original asking price, according to StreetEasy.com, a property listing service.
Mr Mermelstein said he closed deals for US$1 million and US$3.8 million properties last month in New York and has bids for commercial real estate for US$25 million to US$50 million in the city and New Jersey. He declined to name the clients.
'In the next six months to a year we'll definitely see some high-profile transactions in terms of number and in terms of trophy assets,' Mr Mermelstein said.
A Thomas Cooley Law School graduate, Mr Mermelstein founded his firm in 1995 and worked as a real estate broker in college.
His first Russian client led to a joint venture on New York and Moscow commercial real estate.
His company now focuses on Eastern European clients seeking to invest in the US.
The increase in Russian interest in US property mirrors what's happening in other countries.
In London, luxury-home prices advanced in June for the first time in more than a year as Russian and Italian buyers took advantage of the pound's weakness, London-based broker Knight Frank LLP said on June 27. Many Russians considering buying are influenced by celebrities and financiers including Chelsea football club owner billionaire Roman Abramovich and telecommunications billionaire Mikhail Friedman, Mr Mermelstein said.
'It's a great marketing tool,' he said. 'Russians are very much of a pack- mentality.' Not everybody is ready to jump in.
Metals and banking magnate Mikhail Prokhorov, 43, named by Forbes as Russia's richest man with US$9.5 billion, isn't interested.
'Why do I need a house an eight-hour difference away?' Mr Prokhorov said in an interview here.
'I spend 90 per cent of my time here and it makes no sense to have a private home so far away.' - Bloomberg
Source: Business Times, 16 July 2009