Miami Real Estate Industry Looks Fairly Insulated From Russian Sanctions
Even as the U.S. government crushes the Russian economy with sanctions in response to the invasion of Ukraine, Miami’s real estate industry is unlikely to feel much pain, at least not directly.
While a few oligarchs have parked their money in lavish oceanfront homes, they do not reflect the city’s main buyer pool. Today, domestic shoppers are fueling the luxury market to new heights. And Miami’s most prominent so-called Russian developer, Vladislav Doronin, says he’s not even Russian.
The Magic City may be notorious for money laundering, but the U.S. government can’t target everyone with Russian ties who’s working inside the country. The government “needs a bonafide reason” to sanction someone, which could include close ties to Russian President Vladimir Putin, activity with its government, or illegal conduct said Robert Appleton, who now works in private practice, but spent over a decade at the Justice Department, prosecuting and investigating crimes relating to sanctions violations.
Miami had long relied on foreign buyers — primarily from Latin America — but the pandemic locked them out. Only four years ago, international shoppers accounted for half of the total dollars made from residential deals, according to a report from the MIAMI Association of Realtors. Last year, barred from entering the country because of COVID-19, their share plummeted to 14 percent.
Americans, notably New Yorkers, filled the void, buying into the Florida dream of year-round sunshine, pro-business policies and low taxes. Domestic buyers drove the residential market to new records. Last year, the average price of both a house and condominium in Miami-Dade County rose by 30 percent, reaching $1.2 million and nearly $700,000, respectively.
Of the international customers that purchased real estate in Miami last year, Russians barely registered. Latin American countries as well as Canada and Spain held the top 10 spots.
Even Miami’s “Little Moscow” is looking less Russian these days. Sunny Isles Beach, a town just north of Miami Beach, is known for its soaring luxury condos that wealthy Russians have snapped up, giving rise to the town’s nickname. And yet, much like the Miami region, Russians have been less visible in the Sunny Isles market in recent years. Gil Dezer, who has developed some of the island’s iconic oceanfront condominiums, has relied on Latin American buyers to sell out his projects.
“The Latins are here,” Dezer said at a Commercial Observer event in March. International buyers, typically from Latin America, come to Miami when their country undergoes political turmoil.
“I remember when [Hugo] Chavez was taking power, the Venezuelans ran out. From there, we got hit with the Brazilian in the late 2010s,” Dezer said. As he prepares to launch sales for his Bentley-branded condo in Sunny Isles later this month, Dezer is seeing an uptick among Mexican buyers. The next customer base he’s banking on are Peruvians and Chileans. No mention of Russians.
Miami’s not-so Russian developer
On the developer scene, attention has turned to Vladislav Doronin, who’s behind the hottest office tower in Miami, 830 Brickell, as well as a trio of luxury waterfront condo projects.
The developer has had strong ties to Russia; Doronin was born in St. Petersburg during the Soviet era and left the country in 1986 for Switzerland, where he worked for controversial businessman Marc Rich in the commodities sector. He returned to Russia seven years later, founding the Capital Group. Under his leadership, the firm became one of Moscow’s most prominent developers. Because of those links, he has occasionally been referred to as a Russian oligarch.
But Doronin says he’s neither Russian nor an oligarch. A spokesperson for Doronin told Commercial Observer that since he left the Soviet Union before its dissolution in 1991, he’s never been a Russian citizen. Instead, he holds European citizenship, though the representative declined to name the country for privacy reasons.
His spokesperson said he’s never held a stake in a company that was once owned by the U.S.S.R. or the Russian Federation — the general criteria for being a Russian oligarch. Doronin has also not appeared on the U.S. or European Union’s sanctions list. Nor is he featured on Russian opposition leader Alexei Navalny’s list of the 35 tycoons closest to Putin.
Doronin further severed ties with Russia in 2014, when he sold his stake in the Capital Group, according to his representative, who declined to further comment on the details of the sale because the company remains private.
Following Russia’s invasion of Ukraine, Doronin has gone to great lengths to distance himself from Russia. After The Real Deal published articles about pro-Ukrainian protests near one of his Manhattan properties, Doronin sued the publication for defamation, claiming the articles falsely stated that he was Russian and implied that he supported Putin’s regime. The developer is seeking at least $20 million in damages. A representative for The Real Deal declined to comment.
After the articles came out, Doronin issued a statement, saying that he denounced “Russia’s aggression on Ukraine and fervently wished for peace.”
Since leaving Russia, Doronin has turned to the West. As he exited Capital Group, he bought the high-end Aman resort chain, which is based in Switzerland, for $358 million in 2014. Through his U.S-based company, OKO Group, Doronin launched several luxury projects in Miami, where he also resides.
The building 830 Brickell, a joint venture with London-based Cain International, is undoubtedly the crown jewel of Doronin’s Miami portfolio. It’s the only office tower erected over the past decade in Miami. As companies migrated to Florida during the pandemic, many inked office leases at 830 Brickell, which is slated for completion later this year. The 55-story project garnered so much interest that its leasing brokers raised rates to $100 a foot, a first in Miami, putting it on par with New York.
Besides the office tower, Doronin is developing a slew of luxury condos, including an Aman-branded tower, Una Residences and Missoni Baia. The Aman project began as a joint venture with Len Blavatnik, who’s now facing scrutiny for having sold his stake in an oil company to the Russian government in 2013.
Even developments with links to sanctioned individuals are likely to come out largely unscathed. The government would be reluctant to disrupt a project under construction because of third parties and partners involved, said Thomas Lehman, an attorney specializing in bankruptcy and insolvency issues relating to real estate. It would likely freeze the profits meant for the targeted individual, allowing the construction to continue.
“It’s one thing to [halt] the construction of a project that’s not completed, which has hundreds of agreements with innocent third parties. It’s another thing to seize somebody’s yacht that’s owned by a Cayman Islands company,” Lehman said.
Julia Echikson can be reached at Jechikson@commercialobserver.com.