by Louise Story
For more than a year, my colleague Stephanie Saul and I examined the influx of global cash fueling New York City’s high-end real estate boom. In our series, we pierced the secrecy of more than 200 shell companies that have owned condominiums at one complex in the heart of Manhattan, the Time Warner Center.
Who are these condo owners? Many of the owners represent a cross-section of American wealth: chief executives and celebrities, doctors and lawyers, technology entrepreneurs and Wall Street traders. But we also found a growing group of foreigners, including at least 16 owners who have been the subjects of government inquiries, personally, or as heads of companies. Four have been arrested, and four have been levied fines or penalties for illegal activities.
And the influx of global cash extends beyond NYC. Nearly half of the most expensive residential properties in the U.S. are now purchased anonymously through shell companies.
It’s becoming easier than ever to move money across borders. A lot of this “capital flight” is moving from the developing world into NYC luxury condos like those at the Time Warner Center. And it’s becoming more common for people to purchase real estate using shell companies — LLCs, trusts, and other entities.
We found that an entire chain of people involved in high-end real estate sales — lawyers, accountants, title brokers, escrow agents, real estate agents, condo boards and building workers — often operate with blinders on. As Rudy Tauscher, a former manager of the condos at Time Warner, told us: “The building doesn’t know where the money is coming from. We’re not interested.”
In many ways, the government has allowed the real estate industry to turn a blind eye to the source of money used to buy luxury properties.
The real estate industry does not have the same sort of legal requirements to examine money flow as banks have. This is in part due to an exemption the Treasury Department made to a law over a decade ago. And a commitment to confidentiality is something real estate brokers told us is essential to buyers today. As Hall F. Willkie, president of Brown Harris Stevens, told us: “One thing of being a high-end broker is we have to protect the privacy of our clients. If we didn’t, we wouldn’t have them as clients. We’re very much like private bankers in that sense.”
I invite you to read the series and share your questions and comments on this post. I’ll be responding to your posts throughout the week. I’m open to any questions, but in particular, I’m interested in hearing from:
- People who have served on co-op and condominium boards about their thoughts on the story.
- Real estate professionals anywhere in the U.S. who have worked with foreign buyers about their thoughts on how easy or difficult it is to trace peoples’ backgrounds.
- New Yorkers who have noticed the increase in shell company buyers on whether they think the shift in buying is making a difference in their neighborhoods, and in what way. Is this good for the city?
Louise Story is a reporter from New York Times.