What Mega-Rich Homebuyers Get for their Money (in Hong Kong, less space)

The wealthiest billionaires in China, the US, the Middle East and elsewhere are splashing out on one-of-a-kind homes, with US$100 million the new base price for developers catering to this tiny global elite.

PUBLISHED : Tuesday, 14 February, 2017, 12:32pm

When the world’s ultra-rich go shopping for new homes these days, they’re no longer looking for the traditional “palaces”. While decades ago, the ultimate in luxury might have been studies in ornate excess – Trump-esque golden toilets, an aesthetic straight from Versailles – today’s buyer is more likely to go bespoke.

“Very often these properties are expected to be … ultra customised and one-of-a-kind, complete with furnishings, art and vehicles,” says Marc Carver, principal of the Carver Property Group, a luxury real estate company with offices in New York and Atlanta. “As the number of global high-net-worth individuals continues to grow, so will their appetite for more and more exclusive products, particularly real estate.”

That means properties such as the US$125 million Rancho San Carlos in Montecito, Santa Barbara County, Calfornia – one for those with a refined sensibility: there is a linen and sewing room, a children’s wing and, of course, a Scotch whisky pub. Or the La Dune estate in the Hamptons, priced at US$100 million, with sunken all-weather tennis courts and 122-metre stretch of beachfront. Or a sprawling 38,000 sq ft spread in Bel Air, California, with 150 art installations, 12 luxury cars in the garage, a cinema with seats layered with Hermes throws and pillows – and a price tag of US$250 million; it’s a home that the man who developed it, former Hong Kong handbag magnate Bruce Makowsky, says only about 3,000 people in the world could afford.

That, no doubt, includes Shenzhen real estate tycoon Chen Hongtian, who last year reportedly paid about HK$2.1 billion (US$270 million) for a home on The Peak, setting a new record for Hong Kong.

The entrance to the most expensive house in the US, listed at US$250 million, in Bel Air, California. Photo: Berlyn Photography

These 3,000 people are the same ones being courted for other uber-pricey properties, such as The Manor in Holmby Hills, in Los Angeles, on the market for US$200 million, and the US$195 million Gemini house in Manalapan, Florida. A few years ago, the idea of a US$100 million single family house in the US was incomprehensible. Today, it’s the starting point for a thriving category of homes specifically for billionaires.

“The sky is the limit,” says Rick Hilton, chairman of Beverly Hills luxury residential brokerage firm Hilton & Hyland. “Once we hit the US$100 million mark, we broke the glass ceiling – and we’re seeing people comfortable with spending more than that.”

Hilton and other operators in that super-prestige realm are buoyed by the growing ranks of the billionaire set; according to Forbes, 2016 welcomed in another 198 people worth in excess of US$1 billion. These are the people, Makowsky said recently, “who spend US$200 million on a boat and US$100 million on a plane, and yet they’re still living in US$40 million homes. Why wouldn’t your house be as valuable as your plane?”

The former Playboy mansion in Los Angeles recently sold for US$100 million. Photo: Hilton & Hyland

Makowsky and other developers are seeking to redress that imbalance with a new crop of homes that indulge every conceivable fantasy and aesthetic. The Manor has its own nightclub and spa; Hugh Hefner’s Playboy Mansion, recently sold for US$100 million, includes a swimming grotto and a room with a built-in pipe organ; a US$100 million house in Holmby Hills comes with a bar/lounge and hiking trails. And there’s the aforementioned Rancho San Carlos and the Hamptons estate.

Even though there are 3,000 people in the world who could buy [one of these homes], there’s a much smaller list who would buy one.

Gary Gold

Makowsky has made his US$250 million home not just move-in ready, but set up so a buyer can arrive and throw a house-warming bash on the same night: a staff of seven comes with the house for two years from the move-in date, the wine cellar is stocked with 2,500 bottles, and there are three kitchens – one of which has a revamped vintage meat grinder worth six figures.

The bowling alley is equipped with enough shoes for your entire party, and guests can treat themselves to a massage overlooking the pool, browse artworks (such as a US$1 million piece from Chinese sculptor Liao Yibai) or borrow one of the US$30 million worth of cars and motorcycles that are house accessories and bear marques including Bugatti and Lamborghini.

The 38,000 sq ft Bel-Air property includes a classic car collection. Photo: Bruce Makowsky/BAM Luxury Development

Makowsky says he didn’t initially set out to build the most expensive house in America. A few years ago he sold a home he’d built for US$70 million to Markus Persson, who was flush with cash from the sale of his company (which makes the Minecraft game) to Microsoft for US$2.5 billion.

At the time, US$70 million was the most ever paid for a home in Beverly Hills. In the past two years, prices for “trophy” homes in places such as Los Angeles, Miami and the Hamptons have slid up past the US$100 million mark, landing at the historic quarter of a billion dollars that Makowsky is seeking for the Bel Air property, which he built on spec to await a buyer.

Brokers working in the highest echelons of the market are aware of the inherent challenges of selling those properties: even if someone has a couple of hundred million dollars lying around to invest in a new pad, they may not want to. Warren Buffett, worth a reported US$74 billion, has famously lived in the same house since 1958.

The view from beside the swimming pool at the house Makowsky is selling for US$250 million. Photo: Bruce Makowsky/BAM Luxury Development

“Even though there are 3,000 people in the world who could buy [one of these homes], there’s a much smaller list who would buy one,” says Gary Gold, the Beverly Hills realtor who sold the Playboy Mansion last August. The house first went on the market in early 2016 for US$200 million, but sold eight months later for half that price. The global publicity the listing received was helpful, but ultimately, Gold says, he needed to reach out to only a “handful of likely candidates”.

“This was a very specific targeted effort, tweaking the messaging to people so they would understand what we were selling,” he says. The estate was ultimately sold to the head of a private-equity company who happened to already live in the neighbourhood.

Given the pretty finite number of potential buyers, houses in this price range are rarely snapped up in an instant, says Makowsky, adding that developers and sellers have to be patient and that negotiation is part of the deal.

Rancho San Carlos in Montecito, California has its own pub. Photo: Sotheby’s International Realty

Hilton says the Los Angeles market remains undervalued when compared with cities such as London, New York and Shanghai; ultimately, he says, on a per-square-foot basis, there is more value for money in US west coast properties than in other places. He says he’s seeing traction from the Middle East and China, and that the people looking at these US$100 million-plus properties tend to skew younger – typically in their 30s – and want to spend some of their newly acquired wealth.

Makowsky agrees, saying that on a per-square-foot basis, Los Angeles offers far greater value for money than other parts of the world.

“In Hong Kong, this house would cost considerably more than this,” he says. (Indeed, the HK$2.1 billion house on The Peak is just over 9,000 sq ft, less than a quarter of the size of Makowsky’s Bel Air home.)

Still, as far as straightforward investments go, there are probably smarter places to park your money, says Paul Habibi, a professor at the UCLA Ziman Centre for Real Estate. “At that end of the spectrum, when you’re dealing with the uber-wealthy, I don’t know if they’re making decisions with their best economic interests in mind,” he says. “There is such a thing as overconsumption, which this falls into.”

Habibi also says the typical buyers for these homes are new-money rather than old, and fall into two categories: those seeking a repository for funds, and others for whom such a purchase is a “look-at-me” move.

“There are people who have never had this kind of money before, and who are looking to experience it fully for the first time, whether it’s ridiculous or not. When you’re paying a few million just in property taxes every year on a single home, that is not a smart investment,” he says.

Gold says even at that level, pricing is everything. “Sellers are under the impression that whoever the hot buyers are at the moment – the Russians, Middle Easterners, Chinese – are just going to throw their money around and not care about it,” he says. “But nothing could be further from the truth. These are the places in the world where negotiating is a sport. If you price a home too high, you’re not going to get offers.”

http://www.scmp.com/lifestyle/article/2070363/what-mega-rich-homebuyers-get-their-money-hong-kong-less-space

Luxury Add-Ons of Cars, Yachts or Helicopters Don’t Always Make the Sale

Russians turn attention to South Florida real estate, Canadian foreign buyers’ tax gets a caveat, and more news from around the world

BY ANNE MACHALINSKI ORIGINALLY PUBLISHED ON FEBRUARY 03, 2017 | MANSION GLOBAL |

 

The buyer of this 12,385-square-foot mansion will receive a Rolls-Royce Silver Seraph.

DOUGLAS ELLIMAN REAL ESTATE

Buy a condo, get a sports car.

While this sort of two-for-one arrangement has become common in markets where there are a lot of luxury property listings, add-ons like this aren’t always what makes the sale—and in some cases, can actually harm a negotiation, experts say.

In some cases, luxury extras— like six-figure classic cars, yachts, helicopters and fine art—can add value, especially when they’re relevant to the lifestyle of the would-be buyer. Other times, they don’t impact the end deal, but are a way to attract attention and get media coverage. And then there are the cases in which including luxury extras with a listing are seen as a sign of desperation, and a cue for brokers to negotiate hard on price.   

MORE: Click to View a Chelsea Townhouse Comes with a Bentley for the Buyer

“When it comes to these houses that come with a boat or a Porsche, in general, it’s a gimmick,” said Gary Gold, executive vice president of Los Angeles agency Hilton & Hyland. “But if we’re talking about a $25 million house on Kauai that’s fully furnished and comes with cars, or a property on a golf course that includes a bonus golf cart, that makes sense. Those aren’t coming out of left field.”

When Mr. Gold considers where this practice of throwing in an extra car came from, he sees a direct link to how resort homes are generally sold fully furnished with everything you need already there.

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When Los Angeles developers saw how many buyers of homes in the  $10 million to $30 million range were using properties as the equivalent of a vacation home, and only staying there for two or three weeks of the year, they adapted that practice to this market.

It was about five years ago that Mr. Gold noticed that many luxury spec homes in neighborhoods like Beverly Hills and Bel Air were coming fully furnished. Today, he estimates that more than 50% of these properties priced above $20 million come with high-end, modern furniture.

In Manhattan, the developer of a new West Chelsea townhouse, listed for $36.8 million, is applying the same logic, and including a 2016 Bentley, valued at $368,000, as well as modern furnishings, which the client can purchase with the property.   

MORE: U.S.’s Most Expensive Home Hits Market at $250M

“We wanted this mansion to be the complete, turnkey package,” said Compass broker Alyssa Soto Brody in an email. “The home is already breathtaking, but we wanted this home’s buyer to be able to just walk in and start enjoying.” 

A much more extreme example of this same practice is Bruce Makowsky’s 924 Bel Air Road. Listed for $250 million, this 38,000-square foot spec mansion comes with 100 curated art installations, millions of dollars’ worth of classic cars and motorcycles, a deactivated helicopter and a $1 million outdoor TV.

“He did something in an extraordinary way,” Mr. Gold said, “and he’s shooting for a certain type of person that’s going to be completely enamored with the whole thing. I think it’s cool.”

If these are cases where the luxury add-ons make sense from a utility or lifestyle perspective, there are also times when extras are included in an organic way, leading to increased exposure and a sale.

Brad Robson, a listing agent for Place in Brisbane, sold a property that fits that criteria in late-November. The Chelmer house has four bedrooms, three bathrooms, and came with a 1993 Porsche Carrera 911, valued at $100,000. It sold a week before it was meant to go to auction for $2.31 million—an amount that Mr. Robson said the seller was “thrilled” with.

MORE: Buy This Home, Get the Helicopter and Rolls-Royce for Free

“I don’t believe the car was the reason that we sold it for a premium price,” said Mr. Robson, noting that the seller was looking to unload the car at the same time as the house, so they decided to make it a package deal. “What it did was generate a huge amount of interest over and above what we would have gotten without it.”

Because it’s incredibly uncommon to include an extra like this with a sale in Brisbane, Mr. Robson said the curiosity from would-be buyers was genuine. “If everybody was doing things like this, I certainly wouldn’t,” he said.

In the end, the buyer “loves the car, but isn’t sure what he’ll do with it just yet.”

But when the extras are thrown in as an afterthought—neither part of a lifestyle package or included in an organic way—there’s a chance the whole thing will backfire, said Dolly Lenz, the founder of Manhattan-based Dolly Lenz Real Estate.

“As a buyer’s representative, if I see a developer or seller offering a car, trips or other incentives, I see that as a major sign of weakness, and a cue to negotiate hard on behalf of our buyers for those units,” she said. “It’s just so silly. Anyone buying these properties could afford those things on their own.”

Mr. Gold agreed, noting that he recently told a client selling a $3 million West Hollywood house to forget about throwing in a $60,000 car, as he was inclined to do.

MORE: When The House is Just a Starting Point: 3 listings where the perks are plentiful

“That would have been a mistake on so many levels,” Mr. Gold said. “It makes it look like you’re desperate, adds an unnecessary cost, and now, you need to find someone that loves your home and also loves Porsches.”

Not to mention that this type of maneuver can be frustrating when it comes to paperwork tied to the sale. “In general, people don’t want to pay property tax on an extra like a car or artwork,” Mr. Gold said, so they separate the home from the add-on. “You’re basically adding an unnecessary cost that could impact how people look at your house.”    

http://www.mansionglobal.com/articles/52959-luxury-add-ons-of-cars-yachts-or-helicopters-don-t-always-make-the-sale