The Russians Were Coming!

The Russians Were Coming!

Residential News » Residential Real Estate Edition | By Ruth Ryon | September 20, 2008 9:19 AM ET

(LA LEOPOLDA, France) - Just before meltdown on Wall Street and Main Street, there was a surge of high-end Russian real estate transactions in the United States and elsewhere that included the purchase of Villa La Leopolda on the French Riviera for $750 million.

The selling price made the villa the most expensive house in the world, according to the Guinness Book of World Records.

The transaction amazed local real estate agents but fueled concerns that Russian investments on the Cote d'Azur could be getting out of hand. Another sign of it developed when sellers started demanding asking prices no lower than $100 million.

Few facts are known about Villa La Leopolda except that it is one of the most sumptuous properties in the area. At first, the buyer was believed to be Roman Abramovich, owner of the Chelsea football club, but he denied it. Now the owner is simply called  "a mysterious Russian billionaire," "an unnamed Russian oil tycoon," and "a Russian oligarch."

Since the 1990s, Russian oligarchs have been drawn to the area by stories handed down to them from the old Russian aristocracy, which loved the Riviera. The villa, Belle Apoque in style, was one of several created by King Leopold of Belgium for his various mistresses. Leopold II acquired the property in 1902.

The biggest price paid for a house before the villa was $57 million (in British pounds) in 2004. A steel tycoon was the buyer. The home is in Kensington Palace gardens.

Microsoft co-founder Paul Allen, singer Tina Turner, Rolling Stones member Keith Richards  and singer Elton John were listed as neighbors of the record-breaking villa, which is in the French village of Villefranche, near Monte Carlo.

Microsoft co-founder Bill Gates may be a former owner. Others were banker Edmund Safra and Fiat mogul Gianni Agnelli. Safra's widow, Lily, once turned down the chance to buy the villa, because she did not want to support the 50 gardeners needed to maintain the grounds.

The Russians were investing in the United States just before the meltdowns. A Russian oil baron bought a $51-million home, a Russian energy mogul bought a $14.5 million house in Snowmass, Colo., and Russian billionaire Abramovich bought two houses for $50 million.

The Russian market "exploded over night," said Edward Mermelstein, a New York-based real estate attorney and developer with an office in Moscow.  "The Russians didn't have the downturn we had for more than a year, and so the change in the market was a tremendous shock--a major disaster to them," he said.

Wealthy Russians are licking their wounds, trying to figure out what to do next. Some are planning to diversify their portfolios, but Mermelstein says his "favorite investment is real estate, especially in top markets like New York City."

"Overall, real estate in the United States is perceived as a safe, long-term investment," he said, and generally speaking, New York "has held up better than the rest of the country."

Asked for his opinion of the U.S. Presidential candidates, Mermelstein describes John McCain's saber rattling as "unrealistic, because we must work with each other at the end of the day." But Mermelstein doesn't appear to be a strong supporter of Barack Obama, either. He doesn't like Obama's "political posturing," he said.

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