Luxury real estate ownership in America has never been more secretive
by Megan Willett at Business Insider

On Saturday, The New York Times released a fantastic investigation into the influx of foreign wealth in the New York City luxury real estate market.

25 Columbus CircleStreetEasyAt a time when luxury real estate is dominating the New York skyline, LLCs and trusts are getting a closer look.

Looking at more than 200 limited-liability corporations (LLCs) and trusts, The Times’s Louise Story and Stephanie Saul attempted to unravel who exactly lived in the Time Warner Center and other “Billionaires’ Row” highrises.

The report took 13 people an entire year to put together, which they did 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,” the reporters wrote.

That alone should put into perspective how slippery real estate LLCs and trusts have become. Thanks to these types of shell companies and the lack of incentive to regulate them, luxury real estate has never been more secretive.

Take for example One57, home to the city’s first apartment to sell for over $100 million. Of the 27 units that have been sold so far, over half of them are owned by LLCs and trusts to maintain the owners’ privacy.

This is happening elsewhere in Midtown, too. According to The Times, Bloomberg Tower is 57% owned by LLCs or trusts, The Plaza’s ownership is 69% such arrangements, the Time Warner Center is at 64%, and 15 Central Park West is at 58%.

At some of these residences, only a third of the owners actually live there at any one time, the Times reports.

These secretive ownership arrangements are not limited to the glossy penthouses of Manhattan. According to data from First American Data Tree that The Times analyzed, 44% of sales over $5 million in the US were to shell companies.

The fact that the world’s 1% are using real estate purchases as their own private bank accounts is nothing new. New York’s real estate in particular is a prime option because it leads to such stable returns.

new york apartments compared to nasdaq chartCourtesy of Wei Min TanThe returns on luxury apartments are very stable, making them a safe investment choice.

But what The Times points out in its investigation is that these secretive purchases can allow corrupt officials and billionaires to keep their assets hidden away from victims and foreign governments.

Even if you were to somehow pin down a name associated with an owner (or their relatives or lawyers), the fact remains that trusts and LLCs can transfer ownership without any real estate record. Many of the sales are also in cash, according to The Times, so there are no mortgage statements or public documents.

Though there have been a few attempts to make real estate ownership more transparent, the main argument against doing so is that it could hurt the economy. If these wealthy individuals didn’t feel safe buying property in America, they would just spend their money elsewhere.

one57 rendering viewCourtesy of One57The view that the owner of One57’s penthouse will have of Central Park.

The hope in New York is that despite rising rents, a homeless crisis, and a lack of affordable units, the money from these multi-million penthouses and pieds-à-terre will eventually trickle down.

And in the meantime, luxury buildings will continue to rise and court the mega-wealthy from around the world.

“I don’t see some kind of global effort to stop all this because the money’s too good,” said David M. Crane, a Syracuse University law professor, told The Times.

Read more: http://www.businessinsider.com/luxury-real-estate-owned-by-trusts-and-llcs-2015-2#ixzz3RHJZQQBF

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