The ultrarich are buying up big, and using shell companies to hide it
Across the country, the wealthy are increasingly creating schemes to shield real estate transactions from view. And with it, creating a whole new industry.
Across from Bondi Icebergs, with a sweeping and unobstructed view across the iconic Sydney beach, is a nondescript apartment block. Unit by unit, over a decade, it has been acquired by STM 123 No 11 Pty Ltd.
The company now owns seven of the eight two-bedroom units inside the building. Each unit is now worth between $3 million and $10 million, based on the sales of similar apartments along the same street over the past year. So who is behind STM 123 No 11? The company can be traced back to Vaughan Blank, a former Glencore executive who now owns a swath of luxury real estate.
From STM 123 No 11 to Lavender Pty Ltd and Sirgrey Pty Ltd, the wealthy are increasingly hiding behind corporate entities and trusts as they snap up high-end properties. Of the 50 most expensive properties sold last year, almost a quarter were acquired in this way. In 2018, this figure was only 12 per cent.
Piercing the secrecy of these companies shows a growing industry – from buyer’s agents to lawyers, accountants and realtors – devoted to obscuring the true owners of high-end property.
David Morrell, a buyer’s agent who specialises in prestige Melbourne property, says the wealthy are increasingly creating schemes to shield their real estate transactions from view, although he adds that this is largely not for any nefarious reason.
“These very wealthy people, the wealthier they are, the more they value their privacy,” Morrell says. “Privacy is the main driver, but I’m sure there is a seedier side. I’m seeing more and more people using a company vehicle to purchase properties.”
Along Sydney Harbour, from Circular Quay to Barangaroo, a slew of apartments in the Crown Residences, Bennelong Apartments, Macquarie Apartments and Opera Residences are held by shell companies – vehicles that lawfully hide the identity of their owners.
At the Crown Residences, the soaring building in Barangaroo shared with the eponymous casino, 16 per cent of its apartments are owned by corporate entities. It’s a similar proportion at other harbour buildings like the Macquarie Apartments and Bennelong Apartments, commonly referred to as “the toaster”. At the Opera Residences, where almost $500 million in property was sold within hours of the apartments coming onto the market in 2021, the figure is almost double at 28 per cent.
Crown Residences is one of the country’s priciest buildings. When it opened in 2021, with 76 units, the starting price was $9.5 million. And it is not difficult to see why. Minutes from the city, the building has some of the best views of Sydney Harbour.
One purchaser was Clanricarde Investments. Clanricarde is owned by Stanwill Nominees. Stanwill is ultimately owned by Robert Whyte, a professional investor and confidante of the late media mogul Kerry Packer with a fortune of $989 million, according to The Australian Financial Review Rich List this year.
Whyte is far from alone in using a corporate vehicle to buy into Crown Residences. At least $70 million of real estate in the tower is owned by wealthy Malaysians Nur Jannah Ong and Saiful Ong. These apartments are all owned by Lavender Pty Ltd.
Another luxury apartment inside the residences is owned by a shell company called 5D Inertia, which belongs to brothers William and Calvin Lau. The Laus quietly divested the apartment, along with four others in and near the Sydney CBD, for $0 to the shell company in late November 2021.
According to regulatory filings, both Lavender Pty Ltd and 5D Inertia are run by an accountant called Shuo Cheng. Cheng works at a local accountancy firm in Sydney’s inner west called Hannan Partners. He declined to comment.
And while it is sometimes clear who the ultimate owner is – whether the Laus or the Ongs – at other times it is far more opaque. Last year, Sirgrey Pty Ltd bought into Crown Residences for $17.5 million. Sirgrey’s only director is Ayhan Baba, a lawyer, who took over from retired accountant Steven Calfas. Neither own the apartment and Baba declined to comment.
How the rich hide their properties
The easiest way to keep a property purchase away from prying eyes is to put it in someone else’s name. Nicole Kidman, for instance, owns a three-bedroom apartment in Latitude, a Milsons Point apartment block, which she purchased for $7.7 million last year. The property, however, was bought in the name of the Hollywood actress’s childhood friend, Annette Rechner.
A more complicated approach is to use a shell company, often linked to a trust, says family office consultant Joanna Sun.
“If you see someone from a law firm on the company, it will be very difficult to find out who actually owns it – it’s under layers of shell companies and discretionary trusts,” Sun says. “You can dig, but it’d be difficult to find out. At the same time, the lawyers who advise won’t be out there too much and go to different events. It exposes them in a way that family offices don’t like.”
Purchases are also often made on behalf of groups of investors or numerous family members. And directorships of these companies can change quietly, marking a sale of the property. “Unless you’re monitoring a specific company’s every movement, it’s very difficult to see even when the ownership changes,” Sun says.
Laws regulating the purchase of properties also allow buyer’s agents to pay for deposits under their own name, rather than their clients. They can decide where to redirect the assets afterwards, right until two weeks before the property settles.
“I pay for the deposit, and it’s my name on the cheque, so you can’t find it that way. If they want to keep it completely silent, then it’s put into a company trust and the directors are usually one of the partners of the senior law firm – and only me and the partner ever knows who bought it,” Morrell, the buyers’ agent, says.
It’s not just apartments that are being snapped up in discreet ways – mansions in some of the country’s coveted locations were also being acquired through these means.
A Sunshine Beach, Queensland house – at 33 Ross Crescent – sold for $28 million in December. The asset settled under 33 Ross Street Holdings Pty Ltd, which lists David Turner as its director. Turner runs an accountancy specialising in family offices.
In Melbourne’s Armadale, a five-bedroom mansion at 52 Hampden Road sold for $26.5 million in 2022 – also to a mystery wealthy buyer through a shell company called 52 Ohana Pty Ltd that pays share interests to accounting firm Pitcher Partners.
An MCG-sized gap
But there is a darker side of this hidden luxury property market. Federal police last year dismantled an alleged Chinese-Australian money laundering organisation that moved an estimated $10 billion offshore while amassing a blue-chip property portfolio which included Sydney mansions, a luxury city building and hundreds of acres of land near the city’s second airport.
Transparency International Australia chief executive Clancy Moore says there are still billions of dollars of Australian assets out there that have been acquired with dirty money due to limited checks on the cash that flows into shell companies.
Real estate agents, accountants and lawyers do not have to make money laundering reporting obligations for transactions of more than $10,000, meaning Australia is a hotbed for billions of dollars of dirty money. Australia is one of just five countries – alongside Haiti, Madagascar, the United States and China – that still oppose regulating lawyers and other service providers.
“This MCG-sized gap in Australia’s anti-money laundering laws means that the door is wide open for organised crime gangs and corrupt officials to wash their dirty money in luxury real estate and property in Australia,” Moore says.
“This is often enabled by lawyers and accountants who either unknowingly, or actively, set up opaque complex corporate structures to allow criminals to hide their identities, avoid detection and profit from their ill got gains.”
Moore says the government needed to toughen reporting obligations and create a public beneficial ownership register, which would show who ultimately owns, controls or receives profits from a company or trust in Australia.
In many ways, both major political parties have turned a blind eye to the source of cash used to buy some of Australia’s most luxurious homes. A report recommending more disclosure handed to the Coalition in 2016 was not enacted. It was only in May that Labor allocated $166 million to expanding reporting obligations to real estate agents, accountants and lawyers.
Real estate and legal lobby groups have argued that these checks will do little to create more transparency and will only create an overwhelming burden on these professions. Real Estate Institute of Australia chief executive Leanne Pilkington says the government should instead expand reporting obligations for land registry bodies rather than real estate agents and lawyers.
Labor did commit, before the election to creating a beneficial ownership register. Andrew Leigh, the Assistant Minister for Treasury, says the government still plans to push through the register, and will start consulting on the scheme this year.
“A stronger beneficial ownership regime will assist regulators and law enforcement agencies to address tax evasion, money laundering and other financial crime facilitated by complex legal structures and arrangements, and will help align Australia with international approaches to enhancing transparency of beneficial ownership,” Leigh says.