Why are Kazakhs buying up luxury real estate in Germany?

The interior of Schloss Seelach is nothing short of stunning, boasting frescoes, majestic lights, stucco and fine wood ceiling panels. The select few who've been allowed to view the refurbished property say it's one of the most remarkable edifices in the German city of Baden-Baden.

The spa town in southwestern Germany, steeped in tradition with ties to what was once czarist Russia, remains a place of longing for multimillionaires from the post-Soviet realm.

During the 19th century, Schloss Seelach served as the summer residence of Mikhail Khreptovich, a well-respected Russian diplomat. Afterward, the grandiose building remained vacant for several decades and fell into disrepair, until it was bought up and restored to its former glory by "Kazakh investors," as local newspapers reported at the time.

The new Kazakh owners spent ten years developing the property, constructing several large residential buildings beside the historic palace, and creating a vast garden complete with a water fountain. They also had a 1,000 square meter underground spa built on the grounds; a glass dome covering the 25-meter-long swimming pool is so big it can be spotted on satellite imagery.

Investments totaling €100 million

The German commercial registry indicates that Schloss Seelach GmbH, which holds and manages the property, saw an increase in share capital of €60 million ($52 million).

"They spent a lot of money," a Baden-Baden source told DW. The individual, who wishes to remain anonymous, was involved in developing the property several years ago. He says plenty of photos were taken to document the progress and sent to the owners.

"One time, they were disappointed with one of the frescoes, so everything had to be done over, although €150,000 had already been paid [for the job]", a different source told DW.

DW found that the Kazakh investors own three additional properties in the region, among them two outstanding edifices under special protection: a villa once owned by architect Gustav Stroh, built in the early 20th century; and Schlosshotel Bühlerhöhe. In total, the Kazakh owners invested over €100 million in four villas, as the German commercial registry shows.

Estates fit for a president

"All this is owned by one family; by the family, if you know what I mean," one source told DW. The man, who wishes to keep his identity secret, once worked for the Kazakh investors. He only alludes to what he knows.

Lowering his voice, as if fearing someone may be eavesdropping, he told DW: "All this is fit for a president."

Kazakhstan-based Verus Praedium International, in turn owned by the Kazach Kipros company, is a shareholder in the Schloss Seelach Invest GmbH. The German transparency registry — established only a few years ago as part of an EU-wide drive to combat money laundering — reveals Timur Kulibayev to be the beneficial owner of this network of companies.

He is married to ex-president Nursultan Nazarbayev's daughter Dinara, making him his son-in-law.

A national cultural monument

The transparency registry shows that Timur and his wife are joint beneficial owners of a second German company, the Bühlerhöhe Castle Invest GmbH. Mercury Properties, a Kazakh real estate company, is a shareholder in Bühlerhöhe Castle Invest GmbH, and owns two hotels near Baden-Baden.

One of them, Schlosshotel Bühlerhöhe, is listed as a national cultural monument. Germany's former chancellor, Konrad Adenauer, was a regular at this establishment. 

In late 2013, the hotel was purchased by Kazakh investors, making it the fourth and final property to change hands. For a long time, Nazarbayev's connection to this small real estate empire remained unknown.

It was, however, known that Kazakh oil magnate Yakov Tskhay was a shareholder in companies owning the various German hotels and palaces. A Kazakh ministry of finance database shows that he acted as a junior partner alongside Timur Kulibayev and his wife Dina in various real estate deals.

Oil magnate transfers ownership

The 71-year-old Yakov Tskhay was the ideal candidate for making such vast investments without attracting attention. Indeed, you cannot even find a picture of Tskhay on the internet.

For years, millions flowed through Tskhay's Dostar-Invest holding and Dostar Oil Service into Baden-Baden properties. The commercial registry shows Tskhay's German real estate companies saw their share capital grow to over €100 million ($113 million). 

In 2020, when all construction work on Schloss Seelach was completed, Tskhay transferred his shares in Schloss Seelach Invest GmbH to Verus Praedium International, owned by Timur Kulibayev. One year earlier, he had similarly transferred 90% of shares held in Bühlerhöhe Castle Invest GmbH — owner of Bühl Schlosshotel — to Mercury Properties, a Kazakh company owned by Timur Kulibayev and his wife.

DW reached out to the real estate company in question to learn about the reasons for the ownership transfer, yet received no reply*. According to the Mercury Properties websites, the company has no German hotels in its real estate portfolio.

A powerful son-in-law

Sandschar Bokajev, a well-known Kazakh investigative blogger and political commentator, believes Timur Kulibayev is little more than a straw man. He says there is a significant risk of corruption when influential Kazakh businessmen maintain such close ties to Nursultan Nazarbayev's family.

"Nazarbayev's family members and individuals close to them have been privatizing the oil and gas sector, but also other natural resources as well as metallurgy," Bokajev told DW. He continued to say that "everybody in Kazakhstan knows that without Timur Kulibayev's permission nobody can get involved in the oil industry."

Kulibayev chairs Kazenergy, an association representing Kazakhstan's oil, gas and energy companies. Until January this year, he also served as chairman of Atameken, the Kazakh chamber of industry and commerce, which commands considerable economic as well as political influence.

Timur Kulibayev and his wife are the country's richest couple. Forbes estimates that together, the two own almost $6 billion (€5,29 billion). Their rise began when Nursultan Nazarbayev became president in 1991. He remained in office until 2019, when he began gradually handing over power to his close ally Kassym-Jomart Tokayev.

Inequality driver of recent protests

To many people in Kazakhstan, the wealth amassed by the Nazarbayev family epitomizes the inequality that blights the country, says political scientist Dosym Satpayev. This gap between rich and poor was one of the drivers of the recent unrest that shook the country, until a brutal government crackdown ended the protests in January. Hundreds of people died.

"While the elite with ties to Nazarbayev grew richer, poverty grew as well," Satpayev told DW. The energy sector, which boasts considerable oil reserves, has produced great wealth for the ruling elites, while workers have regularly gone on strike over low pay, he explained.

Some of the protesters were also aimed at former president Nazarbayev, who subsequently stepped down as chairman of the Security Council of Kazakhstan. His son-in-law Timur Kulibayev similarly stepped down as chairman of Atameken. President Kassym-Jomart Tokayev vowed to curtail the power of the country's oligarchs.

Opposition calls for asset freeze

Kazakh opposition lawmakers, some of whom have moved to Europe fearing repercussions, have for years demanded that foreign bank accounts and assets linked to the Nazarbayev family be frozen.

"We demand sanctions against Nazarbayev's family members and his closest allies for human rights violations and corruption, their asserts must be frozen," London-based dissident Akeschan Kaschegeldin told DW in January. In February, several Kazakh activists took to the streets in Berlin with similar demands.

Sandschar Bokajev says freezing the assets of the former president and his family members would send a signal. "It will only become clear that the Nazarbayev era has ended when the money his family has moved abroad flows back."

Billions moved abroad

The Organized Crime and Corruption Reporting Project recently revealed that charitable foundations controlled by Nursultan Nazarbayev controlled global assets worth some $8 billion (€7 billion). Radio Liberty found that the Nazarbayev family owns luxury properties across Europe (excluding Germany) and the US worth some $800 million (€705 million).

Formally speaking, there is nothing illegal about the Kulibayevs investing in Germany. Doing so would count as illegal money laundering only if the funds originate from criminal activities in Kazakhstan.

As such, from a legal perspective, there is little to criticize about the investments, says Thomas Helm of the German-Kazakh Association. "In terms of seizing property, we can only consider measures in line with the rule of law; we need to prove everything."

Stashing away money

What do the owners plan to do with their German properties? Kazakh real estate company Mercury Properties won't comment.

"It looks like they are simply trying to stash away money," Bühl mayor Hubert Schnurr told DW. He is disappointed, as no money has gone towards modernizing the two Bühl hotels that have remained shuttered for years.

While documents show the new owners invested €20 million to buy both properties, they have done nothing to reopen to establishments. Over the past years, the only persons that have stayed in them were some 100 Lithuanian construction workers, who were tasked with renovating the Kazakh-owned villas.

"I constantly receive emails from German investors looking to buy the hotels," Mayor Schnurr told DW. "But the Kazakhs never reply to my inquiries."

*30.03.2022 Subsequent addition: Representatives for Mr. Kulibayev have communicated that his purchase of shares in Bühlerhöhe Castle Invest and Schloss Seelach Invest through Mercury Properties LLP and Verus Praedium International in 2019 and 2020, respectively, was done at arm's length on an entirely commercial basis. Independent valuer, Baker Tilly Gmbh, valued the properties prior to the transactions taking place, representatives of Mr. Kulibaev reported to DW.

This article was translated from German.