In a story that perfectly encapsulates the changing fortunes of the world’s wealthiest in the past few years; Russian mogul Mikhail Prokhorov has just lost the 10% deposit he paid towards the purchase of Villa Leopolda, for $525 million from Lily Safra, socialite and widow of banker Edmond Safra.
Prokhorov’s offer was accepted in July 2008. At the time Safra’s camp had said that the villa wasn’t for sale but but Prokhorov’s offer was too rich to ignore. The deposit was paid into escrow the same month by Prokhorov’s holding company, and the sale was due to complete in December 2008.
However, one can only assume that something changed in Prokhorov’s circumstances in those 5 months, because, according to Safra’s lawyers, Prokhorov’s representatives never arrived showed up to complete the arrangements.
Subsequently Prokhorov started a legal action to have the deposit refunded, but Safra refused on principle, and with the publicised intention of paying the deposit to several charities including the Michael J. Fox Foundation for Parkinson’s Research and King’s College in London. Safra has finally won, earlier this month a court in Nice ordered that the money be paid from the escrow to Lily Safra, and further, that Prokhorov must also pay $2 million in damages.
Heiress Safra said after her victory: “By transforming the deposit into an act of giving I would like to encourage all who can do so to support medical research, patient care, education and other humanitarian causes.”
Though Prokhorov has refused to comment on the situation, it is expected that Prokhorov will now appeal against the decision, and that it may well end up in much larger and more expensive courts.
It seems from the outside looking in, the Prokhorov would be better to give up trying to get his deposit back and try to negotiate a reduction in the total cost, but it is probably too late for that now anyway.
Prokhorov is the 39th richest man in the world according to Forbes, and is worth an estimated $13.4 billion. Villa Leopold is currently worth a fraction of the price he agreed to pay, but it will one day be worth even more than that. That is why it seems like the best decision may just be to cut his losses, because the continued publicity of this affair is doing nothing but preventing recovery in the Cote d’Azure property market.
On a final note: it seems that the irresponsible lending blamed for the credit crunch that sparked a global recession, gave birth to irresponsible borrowing and irresponsible buying, and not in the traditional sense; irresponsible buying in that people feel they do not need to honour their agreements simply because the property they put a deposit on has lost its value. Several builders in the UK are currently suing dozens of off plan buyers who want to pull out of their contracts because the completed properties are worth less than the contracted price.