Rich Russians Returning to U.S. Property Lured by Lower Prices By Yuriy Humber
July 15 (Bloomberg) -- Russian millionaires are returning to the U.S. property market, lured by distressed sales and the ruble's rise against the dollar, lawyer Edward Mermelstein said. "The way many look at the U.S. right now is that it's a bargain," said Mermelstein, who has arranged about 300 real estate deals for buyers from the former Soviet Union since 2007. 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 ruble rallied about 13 percent against the dollar from this year's low on Feb. 17 and 4 percent against the pound sterling from a Feb. 6 low. U.S. sellers are cutting prices 30 percent to 40 percent from their peak in 2007, Mermelstein said in an interview in Moscow, 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 U.S. property are new clients, he said. "Now that oil has settled at about $70 a barrel, there's a little bit of a comfort level," he said. Oil has averaged $60.14 a barrel in New York trading since April, rising as high as $72.68 on June 11. Last year's plunging commodity and equity markets wiped out $380 billion in the value of Russia's so- called Golden Hundred, according to Forbes. $10 Million Apartments Closings for apartments priced over $10 million in Manhattan fell by 82 percent in the last year, helping bring the average co-operative price down 29 percent from the second quarter of 2008, according to Brown Harris Stevens Co. About 32 percent of second-quarter listings included discounts from the original asking price, according to StreetEasy.com, a property listing service. Mermelstein said he closed deals for $1 million and $3.8 million properties last month in New York and has bids for commercial real estate for $25 million to $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," Mermelstein said. A Thomas Cooley Law School graduate, 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 U.S. Celebrity Influence The increase in Russian interest in U.S. 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 Russia and Italian buyers took advantage of the pound's weakness, London-based broker Knight Frank LLP said June 27. Many Russians considering buying are influenced by celebrities and financiers including Chelsea FC soccer club billionaire Roman Abramovich and telecommunications billionaire Mikhail Friedman, 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 $9.5 billion, isn't interested. "Why do I need a house an eight-hour difference away?" Prokhorov said in an interview in Moscow. "I spend 90 percent of my time here and it makes no sense to have a private home so far away." http://www.bloomberg.com/apps/news?pid=20601109&sid=adx4qqDiCti4
