Investors circling Russian assets as sanctions tighten

With the invasion of Ukraine, Roman Abramovich is selling Chelsea Football Club after rejecting past offers

Mar 10, 2022

BLOOMBERG - ROMAN Abramovich has for years ignored attempts to buy his Chelsea Football Club, even as the UK made it hard for him to visit London to watch the team.

Now, in the wake of Russia's invasion of Ukraine, he will sell the club - though his advisers want at least £3 billion (S$5.36 billion).

In the world of the ultra-rich, phones are lighting up and Zoom calls are being initiated about possibly purchasing assets at risk from sanctions at potentially bargain levels.

Opportunistic investors and real estate agents are asking: Who's selling, and at what price?

One call came from a UK staffer at HIG Capital, a Miami-based private equity firm, according to a person with knowledge of the matter. Optimus Capital, a London-based corporate advisory boutique that works with wealthy individuals and family offices, also showed interest, said the person, who asked not to be identified as the information isn't public.

HIG, owned by billionaires Sami Mnaymneh and Tony Tamer, denied that it has any interest in "acquiring Russian-owned or Russian-based assets or in any investment opportunities that may arise as a result of the situation in Ukraine", the firm said in a statement. "We are horrified by the war and resulting humanitarian crisis in Ukraine." Optimus, has not, is not currently, nor will it in the future be involved in transactions for any Russian-owned assets or Russian-based assets or any investment opportunities that may arise as a result of the situation in Ukraine," Martin Newson, the firm's chief executive officer, said in a statement.

Russia's invasion of Ukraine has highlighted the fast-moving nature of a geopolitical crisis that has seen Vladimir Putin's country choked off from the global financial system and erased more than US$90 billion from the fortunes of Russia's wealthiest elites.

Russia's central bank closed stock trading on the Moscow exchange for the third-straight day on Wednesday (Mar 9), the longest since the country's 1998 crisis.

The London Stock Exchange has also suspended dozens of Russian depositary receipts after the Dow Jones Russia GDR Index tumbled 98 per cent in 2 weeks.

Yet the assets facing the sharpest scrutiny from government leaders are the real estate, private jets and super-yachts controlled by Russia's oligarchs.

French customs officials have already blocked a giant boat owned by Rosneft CEO Igor Sechin from leaving port.

The US Justice Department on Wednesday announced details of a "KleptoCapture" task force to enforce sanctions and export restrictions and seize those kinds of luxury assets, following a similar move from the UK.

"We're coming for your yacht. We're coming for your jet. We're coming for your ledger. That's the key message," deputy Attorney General Lisa Monaco said in an interview on Wednesday with Emily Chang on "Bloomberg Technology".

The UK has become a hot spot for rich Russians in recent years, with many lured to the English capital for its abundance of luxury real estate as well as the city's private hospitals and schools. Popular areas include Eaton Square in Belgravia - sometimes called "Red Square" - and St George's Hill in Surrey, where most homes are priced at more than £10 million.

But now some Russian owners of London real estate are struggling to refinance their expiring mortgages, according to a person familiar with the matter.

Banks are concerned about their exposure to Russian individuals and are refusing to lend, forcing the property holders to consider selling, said the person, who asked not to be identified, citing confidentiality agreements.

Abramovich, who hasn't been sanctioned by the UK, is seeking to sell his London properties, British MP Chris Bryant said in Parliament.

The property he was referring to is a mansion at Kensington Palace Gardens, according to a person familiar with the matter, and the flat referenced is a penthouse at Chelsea Waterfront. As for Chelsea FC, the Russian billionaire released a statement on Wednesday on the club's website that said he would sell the team and has instructed the board to set up a charitable foundation that will receive all net proceeds from the sale.

"The foundation will be for the benefit of all victims of the war in Ukraine," Abramovich said in the statement.

"Please know that this has been an incredibly difficult decision to make, and it pains me to part with the club in this manner."

The other obvious trophies of Russia's ultra-rich are their super-yachts, the symbols of their extravagant wealth.

About 7 per cent to 10 per cent of the global fleet is owned by Russians, according to industry watcher Superyacht Group. But they typically take several months to sell, at a minimum.