Oligarchs in Israel: top property purchases by Russia’s wealthiest men

199 views · Updated on

Oligarchs from Russia and CIS have developed a taste for Israeli real estate. These unique High-Net-Worth Individuals (HNWI), known for their expensive taste and lavish lifestyles, have become more conspicuous on the market as they pick up more and more property in the country’s prime locations.

Choosing Israel as a second home offers Russian tycoons good weather and legal protection

About 20% entrepreneurs on the Forbes “200 richest business people of Russia” (2015) are Jewish, so it’s no surprise that they choose the Holy Land for a second home. The attraction lies in certain legal guarantees enshrined in Israeli law rather than lucrative investment prospects however. In particular, it does not extradite its citizens to other states. Some of Russia’s most famous HNWIs have bought homes in Herzliya Pituach, Northern Tel Aviv, Ramat Aviv Gimmel, setting records on local real estate markets.

Men making waves in the property pool

Roman Abramovich and Varsano Hotel, Tel Aviv: $25M

Businessman Roman Abramovich, number 12 on the Forbes list, bought the Varsano Hotel in Tel Aviv's high-end neighbourhood Neve Tzedek and the land under it in April 2015 for $25,000,000. The owner of Chelsea Football Club also bought 1,500 square metres of adjacent land.

Abramovich’s property is in Neve Tzedek, one of Tel Aviv's most prestigious neighbourhoods

Varsano, the first property to be bought by Mr Abramovich in Israel, is expected to become his private residence while he develops his local investment portfolio (focused on high-tech start-ups). The businessman had earlier intended to buy the Shlush house in the same district, but could not agree upon the price with the owners.

Valeriy Kogan, the Tel Aviv penthouse and Caesarea villa: $128.5M

Valeriy Kogan, billionaire co-owner of Domodedovo Airport in Moscow, has invested about $128.5M in Israeli real estate since 2009 when he landed with a splash on the Tel Aviv market. Back then, he made headlines by purchasing a record-breaking penthouse in the Sea One residential complex for about $28.5M which takes up the whole twenty-second floor.

Kogan’s Sea One penthouse is located in an exclusive Tel Aviv district along the coast

Mr Kogan didn’t stop setting records there: he bought 11,000 sq m of land under five villas for $17M in Caesarea and bulldozed the buildings to erect a huge mansion. Construction on Israel’s biggest and most expensive villa has finally started with total costs estimated at $100,000,000. Once completed, Mr Kogan will be neighbours with Israeli Prime Minister Benjamin Netanyahu.

Shalva Chigirinsky and his budget-friendly penthouse, Tel Aviv: $1–2M

Shalva Chigirinsky, billionaire who made his money in real estate and oil, escaped to Tel Aviv whilst under investigation for expropriation of funds by Russia’s prosecutor’s office. There he bought a modest 113 sq m penthouse in the city centre and waited out the legal turmoil until he had paid back his debts.

Mr Chigirinsky sold his luxury penthouse at half its market value to repay his debts

When Mr Chigirinsky put this property up for sale, local realtors were shocked by the asking price: just $1,070,000. Experts say the asking price was 50% lower than market rates at the time.

Leonid Nevzlin: the most expensive apartment in Jerusalem: $13.7M

Leonid Nevzlin, one ex-leader of Russia’s defunct oil giant YUKOS, settled in Israel in 2003. Now a citizen of the country, he bought a villa for $3.7M in the upmarket neighbourhood of Herzliya Pituach. In 2014, he set a record for the most expensive apartment purchase in Jerusalem when he spent $10,000,000 on a 496 sq m flat in the Waldorf Astoria development.

Wanted oligarch Leonid Nevzlin bought the most expensive apartment in Jerusalem in 2014

Mr Nevzlin, not unlike Mr. Chigirinsky, came to the Holy Land seeking protection as the YUKOS dismantling scandal raged. He has been on Russia’s wanted list since 2005 and two extradition requests from Russia were refused by Israel.

Invasion of Gaydamaks

Israeli mass media has dubbed the increasing interest of Russian tycoons in local real estate as “the invasion of Gaydamaks” after businessman Arkadi Gaydamak. The latter became actively involved in politics and public affairs after moving to Israel, creating much debate over the country’s need for Russian tycoons and their money.

The current high-tolerance policy to the capital of any origin has led to doubt and controversy over Israel’s financial repatriation laws and money laundering. Meanwhile, these massive capital inflows targeting prime property have caused intensive price growth: real estate prices have risen 67% on average, 91% in Haifa and 84% in Tel Aviv.

Israel increased the tax on second home purchases in 2015 in a bid to make housing more affordable and scale back the appetite of foreign investors. Second homes worth over ILS 4,800,000 ($1,300,000) are now taxed at 8% or even 10% for more expensive properties.

Michael Pakshin, director at real estate agency Damida Estate, is not convinced this new tax will be particularly successful as Russia’s international policies continue to generate controversy in the West. Mr. Pakshin explained: "after a number of headline transactions there are fewer buyers in the prime real estate market. However, now Israel expects yet another wave of repatriation from Russia and the Ukraine: many consider emigration with further naturalisation due to the deteriorated political and economic environment in these countries. This will drive up the demand for affordable and mid-priced property in Israel."

Ivan Chepizhko, Tranio