Posted by Leonard Steinberg on January 3rd, 2014
The subject of Russian oligarchs and Chinese billionaires buying $ 20m+ apartments has reached a fever pitch: many New Yorkers are OUTRAGED that we do not impose some form of punishment to these people for buying here. It is probably true that some of these buyers earned their money under dubious (semi-legal)circumstances (surely these people are inferior to some of our American lottery winners, talent-challenged pop stars, corrupted titans, etc, etc) and it is almost certain that they are buying to place some of their money in a solid economy and safe-harbor country and city (why can’t we take that as a compliment?).
These buyers pay an extraordinary amount of real estate taxes, yet most do not use our schools, subways, busses, or many of the things that taxes are supposed to pay for. They also pay massive taxes upon closing (transfer taxes and mansion taxes) not to mention the economic activity they generate through decorating, shipping at Bergdorf’s and Barney’s, staffing, catering, entertainment, cars with drivers, art purchases, etc, most of it producing huge sales tax revenues and jobs.
There is one other reason theses foreign billionaires may be buying these mega apartments: the crazy-high cost of high end Manhattan hotels (including the HUGE taxes paid on these room nights). For example, if you rented a 3 bedroom suite at the Mandarin Oriental Hotel (possibly of the same caliber and size of one of these mega-apartments) the nightly cost is about $28,000.00 PLUS a 14.75% city/state tax PLUS nightly occupancy tax, which ranges from $3.50 to 9.50. If you visited New York for 5 nights a month, the annual cost would be around $2 million PER YEAR, making the cost of owning a 20 million apartment (that has a historically solid chance of escalating in value over time) a relative bargain and a wise purchase.
So yes, I agree with Mayor Bloomberg: lets encourage MORE oligarchs and foreign billionaires to buy an apartment in Manhattan. It is not only good for developers and the thousands employed building these buildings, it is GREAT for the coffers of New York City……its actually better than great!