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The art of spotting a fake billionaire

By Konrad Putzier

When Adelaide Polsinelli recently got a call from a banker representing a wealthy foreigner, she was skeptical.

Due diligence is the key to  knowing a buyer.
Due diligence is the key to knowing a buyer.

The caller told her his client was moving to New York and wanted to invest in commercial real estate, but Polsinelli, a top broker at Eastern Consolidated, has been in the business long enough to not immediately trust such claims.

Years earlier a caller claiming to be Dubai royalty had duped her into thinking he had $90 million to spend on New York real estate. The client had been referred to her by an acquaintance and sent bank statements to prove his wealth. They turned out to be forged.

In this case, Polsinelli knew the banker well and didn’t think his client was a fraud. But she still decided to wait and see. “I am waiting for him to finalize a small transaction for an apartment,” she explained. If he can close on that, she thinks, odds are higher he will also close on an investment-grade purchase.

One month after the banker’s call, she is still waiting. “Everything is moving forward,” she said. “But until he closes, I can’t commit to saying he is for real.”

Adelaide Polsinelli
Adelaide Polsinelli

Polsinelli’s dilemma is typical for commercial brokers in a globalizing real estate market. The recent influx of foreign capital has brought in lucrative commissions, but language barriers and physical distance have also made it harder to assess which clients are legitimate and which aren’t.

This creates serious risks for New York brokers. Following false leads is not only a waste of time, but can also lead to embarrassment.

What if a complicated deal falls through at the last minute because a supposedly rich buyer turns out to not be that liquid or serious after all? Part of the blame would fall on the broker.

Brokers interviewed by Real Estate Weekly said they often rely on their instincts, but in the end they usually have to go through a tedious process of due diligence before deciding who to work with.

Bob Knakal, chairman of the commercial brokerage Massey Knakal, said he gets calls from representatives of wealthy foreigners every day, but only about 20 percent of them turn out to be as claimed.

“Half the time you can tell immediately if someone is not a real buyer, but some people do a great job of telling you everything you want to hear,” he said. Knakal explained that callers often come up with elaborate excuses for why they can’t show proof of funds. Usually these people lie because they want to get started on a deal now in the hope of finding the necessary capital later.

Bob Knakal
Bob Knakal

“When you have people who have money they tend to show you within a few hours. When you don’t, they usually start telling stories,” he said.

But sometimes, patience can be worthwhile and Knakal said he makes sure to vet prospective clients even if it is tedious. One month ago, a Chinese investor called him looking to spend $250 million on New York commercial real estate. When asked for proof of funds, the caller sent over six pages of documents in Chinese. Knakal hired a translator, did due diligence and found out that his caller had a net worth of $2 billion. They started working together and are currently nearing deals on two sites, Knakal said.

Marcella Fasulo, first vice president at CBRE’s Investment Properties/Institutional Group team, also said she carefully vets prospective clients to avoid any embarrassment. “We definitely get phone calls trying to register clients that are not legitimate or investors we already know,” she said.

Fasulo explained that these callers often try to register investors with whom CBRE already has contact. She recalled being contacted by a person claiming to represent a wealthy foreign investor on a CBRE exclusive deal. It turned out that investor had already signed a confidentiality agreement on that deal with CBRE.

Marcella Fasulo
Marcella Fasulo

“When I told him that, he called me a moron,” she recalled. “Then he called our client, who ended up yelling at him.”

Fasulo explained that most of her foreign clients are institutional investors and that she rarely gets approached by legitimate foreign billionaires she or the CBRE Global Transaction Team hasn’t worked with in the past.

To make sure she doesn’t miss out on the few exceptions, she researches prospective clients online.

Like Knakal and Fasulo, Eastern Consolidated’s Adelaide Polsinelli said she regularly gets calls from foreigners looking to invest with her help and usually asks them for banking and business references.

But doubts sometimes linger, hence the hesitation over her recent foreign contact. “You have to be fearful,” she said.

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