Secret mansion buyers hide behind LLCs

It seems like every mansion buyer these days shares the same three initials: LLC.

It stands for Limited Liability Company, and it's a private vehicle that allows buyers to keep their identity a secret when buying a megahome. More and more of the wealthy are buying homes through LLCs rather than using their names. It protects them from the prying public at a time when the wealthy have become targets, along with giving them legal protections and tax benefits.


The Fleur de Lys estate in Los Angeles.
Realtor.com
The Fleur de Lys estate in Los Angeles.

Zillow estimated that nearly a third of homes sold for $5 million or more in 2012 were purchased through LLCs, and the number is growing, according to real estate brokers.

Yet the rise of LLCs has also led to a new round of unsolved mysteries when it comes to sales of some of America's most expensive homes. Call it Mansion Denial.

The biggest case of Mansion Denial so far is Michael Milken. This spring, news broke that Fleur De Lys, a mega-estate in Los Angeles' Westside, was sold to an all-cash buyer for $102 million. The buyer was an LLC with no real identifiers. Yet the tax bills were being mailed to an attorney's office at the Milken Institute, Milken's Santa Monica, California-based think tank.

And later reporting showed the sale price to be more in the neighborhood of $88 million, though the real price may have been higher when adding in furniture and other items in the house.

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A representative of the Milken Institute told the Los Angeles Times that neither Milken nor the institute was the buyer. Yet, Variety's Real Estalker column later reported that Milken threw a "massive housewarming party" in the home's downstairs ballroom shortly after the purchase.

Why would Milken not want to be seen buying an $88 million estate? Well, even though he's worked hard to resurrect himself through his think tank, philanthropy and highly popular, prestigious conferences, Milken did serve two years in prison after pleading guilty to six securities violations in 1990 after an insider-trading investigation. He was also banned from the securities industry for life.

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Even though he paid his fine and did his time, Milken might not want to be seen as flaunting his fortune by buying an $88 million mansion.

A more recent case of Mansion Denial is in New York. The New York Post reported that Denise Rich—the multimillionaire socialite and ex-wife of Marc Rich, the late commodities tycoon—bought a $12 million penthouse on Central Park South. It was purchased in the name of an LLC.

The Post cited "multiple sources" saying Rich was the buyer. But Rich told the Post the buyer was actually her boyfriend, Peter Cervinka, who is a real estate investor and financial advisor. (A spokesman for Cervinka didn't return calls.)

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Why would Rich want to avoid attention on the purchase? She renounced her U.S. citizenship in 2012 and now resides in London, where she can avoid certain taxes. Rich said she moved to be closer to her family.

The list of other mystery LLCs is getting long. An LLC called Pilaa International, with offices in Connecticut, has been spending more than $100 million to buy parcels totaling more than 700 acres in a secluded area of the Hawaiian island of Kauai. Pacific Business News reported this month that the likely buyer is Mark Zuckerberg, the Facebook CEO. Facebook has declined comment.

Why would Zuckerberg want to hide the purchase? He's created vast wealth for shareholders, for himself and for charities, so he has nothing to be ashamed about.

Perhaps it's Silicon Valley's conflicted attitude toward wealth and spending ("It's about changing the world, not money.") Or perhaps Zuckerberg isn't done buying yet and doesn't want nearby sellers to learn his identity.

Maybe LLC really stands for—Looks Largely Confidential.