Foreign Shell Companies Hide the Names of the Seedy Buyers of NY’s Luxury Real Estate

Posted On Mon, February 9, 2015 By

Posted On Mon, February 9, 2015 By In real estate trends

The Time Warner Center

We’ve been talking a lot lately about foreign investors with their hands in the NYC real estate market, but a story in the Times took the investigating one step further by uncovering the secrecy of more than 200 shell companies at the Time Warner Center, documenting “a decade of ownership in this iconic Manhattan way station for global money transforming the city’s real estate market.” Though most of these were simply wealthy Americans, at least 16 were rich foreigners who “have been the subject of government inquiries around the world, either personally or as heads of companies,” ranging from environmental violations to financial fraud.

In 2014, around 50 percent of all $5 million+ sales were to shell companies, but at the Time Warner Center it was 80 percent. With this growing trend, however, the government hasn’t taken a closer look at the money being used to buy luxury real estate, allowing shell companies to make the movement of foreign funds largely untraceable.

The Time Warner Center has been “the” place for foreign investors for the past decade; among the owners identified by the Times are at least 17 billionaires on Forbes’ list of the world’s richest people. Out of the 16 aforementioned shell identities with legal troubles, four were arrested and another four were charged with fines or penalties. They include government officials and their close associates from Russia, Colombia, Malaysia, China, Kazakhstan and Mexico. It’s an unspoken rule in the building that ownership comes with a sense of anonymity and a “don’t ask, don’t tell” attitude.

The identities of those behind shell companies are so well hidden that it took the Times over a year to figure them out at the Time Warner Center “by searching business and court records from more than 20 countries, interviewing dozens of people with close knowledge of the complex, examining hundreds of property records and connecting the dots from lawyers or relatives named on deeds to the actual buyers.” But in some cases, it’s still impossible to crack the code.

Time Warner CenterA $31.5 million unit currently available in the Time Warner Center, via Corcoran

Today in a follow-up article in the series, the Times profiles Jho Low, a young Malaysian financier who has reportedly bought properties at the Time Warner Center and the Park Laurel on behalf of the global superrich who use him and his shell companies “to keep the movement of money opaque.”

Low started his NYC real estate trail with the purchase of a $24 million apartment in the Park Laurel, bought under a shell company connected to him. Three years later, his shell company sold that apartment for $33.5 million in cash to another shell, this one controlled by Riza Aziz, the Malaysian prime minister’s stepson who heads a Hollywood production company. The same transaction sequence happened with a $17.5 million Beverly Hills mansion–Low’s trust sold ownership of his shell company to a corporate entity controlled by Aziz. But legally, the property itself never changed hands.

Next up was a penthouse at the Time Warner Center, once home to Jay Z and Beyoncé. Low bought it in early 2011 for $30.55 million using yet another shell company. Amidst rumors that the prime minister was involved in the deal, Low had said he was representing a group of investors, but he recently changed his story, stating that it was owned by his family’s trust. And just like 75% of the building, the exact owners of the apartment can’t be located in public real estate records.

Whether foreign investors are using shell companies for corruption, tax avoidance, or an innocent investment strategy, the fact remains that in an “ever-more-borderless economy” there are “a proliferation of ways to move and hide assets.”

[Via NYT and NYT]

 

 

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