And so New Yorkers with garden-variety affluence—the kind of buyers who require mortgages—are facing disheartening price wars as they compete for scarce inventory with investors who may seldom even turn on a light switch. The Census Bureau estimates that 30 percent of all apartments in the quadrant from 49th to 70th Streets between Fifth and Park are vacant at least ten months a year.
To cater to the tastes of their transient residents, developers are designing their projects with features like hotel-style services. And the new economy has spawned new service businesses, like XL Real Property Management, which takes care of all the niggling details—repairs, insurance, condo fees—for absentee buyers. “I feel like foreign investors have gotten a bad rap,” says Dylan Pichulik, XL’s boyish chief executive, who recently took me to see a $15,000-a-month rental at the Gretsch, a condo building in Williamsburg, which he oversees for a Russian owner. “Because, you know, They’re evil, they’re coming in to buy all our real estate. But it’s a major driver of the market right now.”
Even those with less reflexively hostile reactions to foreign buying competition might still wonder: Who are these people? An entire industry of brokers, lawyers, and tight-lipped advisers exists largely to keep anyone from discovering the answer. This is because, while New York real estate has significant drawbacks as an asset—it’s illiquid and costly to manage—it has a major selling point in its relative opacity. With a little creative corporate structuring, the ownership of a New York property can be made as untraceable as a numbered bank account. And that makes the city an island haven for those who want to stash cash in an increasingly monitored global financial system. “With everything that is going on in Switzerland in terms of transparency, people are being forced to pay taxes on their capital that they used to hold there,” says Rodrigo Nino, the president of the Prodigy Network. “Real estate is a great alternative.”
Those on the New York end of the transaction often don’t know—or don’t care to find out—the exact derivation of foreign money involved in these transactions. “Sometimes they come in with wires,” says Luigi Rosabianca. “Sometimes they come in with suitcases.” Most of the time, the motivation behind this movement of cash, and buyers’ desire for privacy, is legitimate, but sometimes it’s not. An inquiry by the International Consortium of Investigative Journalists, a Washington-based nonprofit, has uncovered numerous cases in which New York real estate figured in foreign financial- and political-corruption scandals. “It’s something that is never discussed, but it’s the elephant in the room,” says Rosabianca. “Real estate is a wonderful way to cleanse money. Once you buy real estate, the derivation of that cash is forgotten.”
More typically, though, foreign buyers are searching for a favorable investment climate and the identity protection provided by an LLC. Rosabianca’s client, the Italian, lives in Nigeria, where her husband is in the oil business. But she said she was still a tax resident of her home country, giving me a knowing look. Italy taxes its citizens’ overseas assets—if it can find them. “To invest in Italy now is terrible,” she said. So the Italian spent most of her Sunday in taxis, bouncing from Gramercy to Tribeca to the High Line in search of the right place to store her wealth.
She ended up back downtown at 75 Wall Street, where she saw a unit she liked: a one-bedroom belonging to a Panamanian-owned company. She ended up making an offer on both that one and the condo at 20 Pine, but ultimately settled on yet another unit at 75 Wall for $1.3 million. The seller was also an LLC, its true owner unknown.
THE REALLY BIG MONEY
Every year, the British real-estate brokerage Knight Frank publishes a document called “The Wealth Report.” The latest edition produces the curiously precise estimate that there are 167,669 individuals in the world who are “ultrahigh net worth,” with assets exceeding $30 million. “Of course, the big question is: are the rich getting richer?” the report asks. It answers gleefully in the affirmative, forecasting that over the next decade, the ranks of the ultrarich will increase by 30 percent, with much of the growth coming in Asia and Africa.
This new global wealth is being lavished on the usual status items—planes, yachts, contemporary art—but Knight Frank is pleased to report that the rich favor real estate most of all. Real estate can serve as a convenient pied-à-terre, an investment hedge against a wobbly home currency, or an insurance policy—a literal refuge if things go bad. Other financial centers boast a similar mix of glamour and apparent security—Knight Frank’s list of the top-ten “global cities” includes London, Paris, Geneva, and Dubai—but New York is forecast to add more ultrahigh-net-worth individuals than any city outside Asia over the next decade.