Mystery Mayfair property deals show gaps in UK transparency drive

The sale in May of a sprawling Mayfair office block, once billed as the world’s most expensive, marked the latest in a long line of big-ticket property sales in London.

The roughly £100mn deal for the leasehold of 77 Grosvenor Street, now owned by Canadian investment group Brookfield, was unremarkable save for one fact: the people who ultimately stand to benefit from the sale remain private, obscured by a complex offshore ownership structure. 

A short walk from the Grosvenor Street building stands the palatial 50 St James’s Street. The former casino was bought in late 2021 by Ukrainian mining tycoon Kostyantyn Zhevago for about £80mn, according to people familiar with the matter, without the deal appearing in the Land Registry, which typically records property sales in England and Wales.

The secretive top end of the UK capital’s property market — both commercial and residential — has long drawn many super-rich British and overseas buyers.

London has also attracted some kleptocrats and criminals seeking to launder ill-gotten gains. But the property market has come under greater scrutiny since Russia’s full-scale invasion of Ukraine last year, which prompted the UK to freeze the assets of close associates of President Vladimir Putin.

The government last year introduced long-promised transparency legislation, requiring offshore companies that own property in England and Wales to name their ultimate owner in a register of overseas entities.

When the owner of the company is a trust, the law requires that it inform the government of the beneficiaries behind it, although that information does not always appear in the register. The ultimate owner of a property can also be obscured by using a so-called nominee agreement, where an adviser might be listed as the owner in the register.

In August last year Lord Martin Callanan, then business minister, said at the launch of the register that it would lift “the curtain on those criminals attempting to hide their illicitly obtained wealth”.

But despite some success, the government’s drive for greater transparency for the public about who owns property in the UK remains incomplete, as the Mayfair deals show. There is no suggestion of wrongdoing in either case.

“While the new transparency register has provided the public with important information, it still has several shortcomings, including the use of trusts and nominees to hide who really owns overseas entities,” said Ben Cowdock, head of research at Transparency International, a campaign group. “That it’s so easy to maintain anonymity undermines the effectiveness of the new law.”

As of mid-April, 15 per cent of the 32,440 overseas companies that own properties in Britain had failed to register their beneficial owner, according to Companies House, the UK’s corporate registry. Transparency International estimates almost 6,900 companies in the UK are owned through a trust structure.

The gaps in the law that established the register have led some politicians and transparency campaigners to propose amendments to legislation that would force property owners obscured by trusts to disclose their identities publicly.

The freehold, or outright ownership, of 77 Grosvenor Street, which measures about 60,000 square feet, is held by Grosvenor, the Duke of Westminster’s property company.

Between December 2009 and the sale in May, the building’s leasehold was owned by Wilbur Real Estate 5. The company had paid £89mn to acquire the lease and was incorporated in the Cayman Islands, according to corporate filings and the Land Registry.

The property, whose current tenant is investment group Bluebay Asset Management, was put up for sale last year and offered to potential buyers for up to £100mn, said people briefed on the situation.

Records filed under the new transparency law identify the owner of Wilbur Real Estate 5 as Lansac Limited, whose sole shareholder is a Cypriot trust service provider called Page Trustees. But Lansac was set up only 18 months ago, some 12 years after Wilbur acquired the lease for 77 Grosvenor Street. Page Trustees did not respond to a request for comment.

There is little publicly available information on Wilbur Real Estate 5. A similarly named Cayman company — Wilbur Real Estate 7 — formed part of Kazakh businessman Bulat Utemuratov’s family office Verny Capital.

A senior executive from Verny Capital was involved in talks to sell the building, according to a person familiar with the matter.

A spokesperson for Verny Capital said it was not the seller. He declined to comment on whether Utemuratov was the ultimate beneficial owner of 77 Grosvenor Street before it was sold to Brookfield.

Wilbur Real Estate 5 did not respond to a request for comment submitted through Maples, its Cayman Island corporate agent.

People involved in the sale said potential buyers of 77 Grosvenor Street were required to sign non-disclosure agreements preventing them from naming the seller of the building.

Brookfield purchased the property through its reinsurance arm, according to Land Registry filings and one person briefed on the deal. Brookfield declined to comment. React News first reported Brookfield as the buyer.

In the case of 50 St James’s Street, the Land Registry records the building as having last been sold in 2012. Its last publicly identified owner was Russian property investor Andrey Goncharenko, according to 2014 press reports.

Three people with knowledge of the transaction said Zhevago bought the building in late 2021, paying about £80mn according to two of the people.

The owner of the property is still identified in the Land Registry as Larkstone Limited, a Gibraltar-based company, which acquired it for £70mn in 2012. 

However, corporate records show that, in October 2021, Larkstone was sold to a company controlled by a trust.

The beneficiaries of the trust are Zhevago and two of his relatives, according to company filings by Ferrexpo, the London-listed Ukrainian mining group. Zhevago is a controlling shareholder in Ferrexpo.

Zhevago was detained at a ski resort in France late last year at the request of Ukrainian authorities in an embezzlement and money laundering probe. He denies wrongdoing in relation to the probe, and lawyers for Zhevago declined to comment on the property deal.

In May, Larkstone registered as an overseas entity with Companies House, for the first time. It listed its “beneficial owner” as a Singapore-based trust.

The Labour party supports the case for closing what it regards as loopholes in the current UK disclosure regime, and wants to review the ability of overseas entities to own assets through trusts.

The party said: “Labour would bring forward much needed reforms to Companies House and keep under review the register of overseas entities to ensure the right balance is struck between privacy and the public interest.”

In a House of Lords debate in April, former Tory minister Lord Theodore Agnew said the current rules limited disclosure to the “name of the trustee”, restricting the public’s knowledge of who ultimately owns trusts and properties. It is known that “bad actors” can be hiding behind that, he added. 

On Wednesday, the Lords voted in favour of an amendment by Agnew to the government’s economic crime bill, which would require Companies House to make public information about the beneficiaries of trusts.

Lord Dominic Johnson, business minister, told peers the government, which opposed Agnew’s amendment, had instead introduced a “public interest access amendment” to allow “investigative journalists and other specific entities to access and make inquiries as to the beneficial ownership of trusts”. The government would consult this year on how to further improve the transparency of trusts, he added.

Johnson also said some trust beneficiaries would be “vulnerable people” whose privacy needed to be protected. Agnew’s amendment is now set to considered by the House of Commons.