Greetings!
Most of you probably remember the 1966 movie starring Alan Arkin, "The Russians Are Coming," about a small New England town coping with the sudden appearance of a Russian Submarine and Russian Navy men. Of course movies often times deal with hypothetical and imaginary situations. This week's article is unfortunately based on facts.
As hard as it is to realize that the world is in fact changing, there is growing evidence of the magnitude of this change, especially so when we assess how much change has occurred in Russia. Just as America is not the same economic and military power we grew up with, so too Russia is not the same economic and military power.
The land of communists turned capitalists is now the land of Billionaires and Millionaires. Last year Russia saw an increase of 14% in the total number of wealthy individuals; a number that is double the global average according to a Merrill Lynch survey. The increase in 2006 and 2007 was also around 15% each year. What this shows is that Russia is now the largest creator of wealthy individuals on a year to year basis. The primary generator of this wealth is Oil. This poses an interesting correlation to the rise of wealthy individuals in America in the early 1900's when we were the largest exporter of Oil, and a large manufacturing economy.
Names like, Roman Abramovich, Mikhail Prokhorov, Andrei Vavilov, and Vyentseslav Leibman are not household names as of yet. However, if they and other Russians like them continue buying up real property in cities like New York, one day their names and faces will be as recognizable as Donald Trump.
While we here in America are trying to forget the real estate fiasco of 2008, a weak dollar and distressed real estate markets are bringing in foreign real estate buyers to snap up bargains, and paying for them in some instances with all cash.
While other foreigners from Brazil and China are also shopping for real property, it is by far the Russians who are the biggest shoppers. The richest of them all is Mikhail Prokhorov. Recently he finalized a $200 million deal to purchase an 80 per cent interest in the New Jersey Nets basketball team, and a 45% stake the Atlantic Yards, a real estate development in Brooklyn, the proposed new home of the Nets. It is not only Russian individuals who are buying but a growing number of Russian Real Estate Investment Funds, otherwise known as REITS. They are buying not to build, but rather to simply invest in what they believe to be bargain prices for land and buildings in one of the world's premier cities.
While we all may have heard of the depressed high end New York apartment market, billionaire Andrei Vavilov thinks nothing of his recent purchase of an apartment in Manhattan's Time Warner Center for $37.5 million. While no one knows how long New York City's real-estate prices will continue to decline, real estate analysts say Russian and other foreigner buyers view New York property as a long-term investment carrying lower risk. A far cry of domestic mindsets who view real property as a precarious investment today, even if they could get the money to buy.
For these new age Russian Billionaires, the issue is diversification and safety. They are uncomfortable holding all their wealth in Russian assets and are looking far and wide around the globe to spread their risk. Europe, Africa, Australia, Panama, Brazil, Montenegro, Croatia, Cypress, Bulgaria and Zimbabwe are some of the regions seeing increased buying by Russian investors. Of late, there have been numerous headlines across newspapers and the Web reciting the growing number of Russian real estate investors. Numerous reports from across newspapers and many websites confirm that the Russians have no intent on stopping anytime soon. In New York, some estimate that Russians represent almost 15% of the current Buyers.
Click Here For To View the BBC Report on this topic
One of Russia's largest investors is an extremely young and aggressive developer by the name of Vyentseslav Leibman. While discussing some of his real estate projects with a newspaper reporter, told the scribe "the money keeps coming, despite the financial crisis". How fortunate for some.
