If the housing market as a whole has been limping back to health, the super luxury end has been sprinting. Chalk it up to billionaires bullish on real estate. From coast to coast, 2012 has welcomed a slew of record-breaking home sales as the world’s richest have snapped up multi-million dollar penthouses and mansions in major U.S. cities.
Take Miami. Despite the fact that foreclosure filings remain high and home prices are still roughly 40% lower than their 2007 peak, the luxury market clocked a series of stratospheric transactions that signify not only a resurgence in the Magic City’s high-end but the emergence of a new mind-bogglingly big price tier.
In 2011, four ultra wealthy buyers spent about $20 million apiece on Miami homes; in 2012, two buyers shelled out drastically more. In March, hedge fund billionaire Eddie Lampert spent $38.4 million on a 17,700-square foot Neo-Palladian villa on exclusive Indian Creek Island. It was arguably the largest transaction for a home in Miami-Dade County ever. In August, an anonymous Russian buyer plunked down $47 million for a 30,000-square foot Modern mansion just a few doors down at 3 Indian Creek. Touting amenities like an entire “spa pavilion” and an auto showroom, the $47 million compound now holds the title for most expensive home sale in the history of the county. Even in the luxury condo market, a series of apartment sales have dashed records, the most expensive title currently belonging to a triplex penthouse in the Continuum building that fetched $25 million (the full asking price) in May.
“There is a trend of high-net worth people who have always been associated with Palm Beach now choosing Miami,” says Oren Alexander, co-founder of the Alexander Group at Douglas Elliman Real Estate and one of the real estate agents involved in the $47 million sale. “In regards to these record purchases, I think high-net worth people have started to realize there is a market for $40 million-plus homes here.”
Alexander chalks up the wildfire appeal to several factors: the city’s rapid transformation into a global destination (thanks to a burgeoning foreign buyer base and the advent of billionaire-centric festivals like Art Basel), a very limited number of opulent digs (meaning demand could outpace supply, pushing prices higher, therefore representing a good investment), and Florida’s lack of a state income tax (which arguably has played a role in Northeasterners like Eddie Lampert relocating here).
Still, no other U.S. city has come even close to the dizzyingly high prices of New York. Manhattan apartment buildings hugging Central Park have commanded the highest prices, starting with the $88 million penthouse that Russian billionaire Dmitry Rybolovlev scooped up for his daughter Ekaterina Rybolovleva in February. At about $13,000 per square foot, the transaction didn’t just set a new city record, it became the most expensive price paid per-square-foot anywhere in the U.S.
That staggering sale set the tone for Manhattan’s super luxury market in 2012. Extell Development immediately hiked asking prices in its nearby, up-and-coming residential high rise One57 (of dangling crane infamy). And uber wealthy buyers paid them: the company hit $1 billion in sales this past May, including two penthouses that fetched more than $90 million apiece. Among the billionaires snapping up unfinished units sight unseen in the brand new building are Lawrence Stroll and Silas Chou, business partners behind the IPO of fashion label Michael Kors. Both purchased full-floor apartments for around $50 million apiece.
Condos have been appealing among rich foreign buyers this year, but posh co-ops (which typically sell only to U.S. citizens) have garnered huge sums too. At 740 Park Ave, a notoriously exclusive co-op building that’s already home to billionaires like Stephen Schwarzman and Ronald Lauder, Oaktree Capital Management billionaire Howard Marks amassed two side-by-side, uncombined units in an all-cash transaction in May that, at $52.5 million, represented the most expensive co-op price ever paid in New York and likely the U.S. Combined, the space spans 30 rooms including eight bedrooms, 10 baths, two libraries, and formal and informal dining rooms. In November, Dreamworks co-founder David Geffen paid even more for a 12,000-square foot penthouse in the nearby Parc Cinq building: $54 million. Boasting three kitchens, staff quarters, an exercise room with adjoining beauty salon and a recording studio, the Central Park-facing flat now represents the highest price ever paid for a co-op unit stateside.
“Luxury real estate in 2012 has become the new global currency,” says Jonathan Miller, chief executive of Miller Samuel, a New York City-based appraisal firm. “It’s become all about capital preservation as opposed to seeking out returns — and markets with upper-end housing stock are clearly benefitting.” He explains that, starting in 2011, international buyers fueled the super luxury surge, seeing U.S. real estate as essentially “on sale.” As they scooped up mega mansions, supply dwindled, propelling national buyers to step into the market this year.
In response to the billionaire buying frenzy, a wave of outrageously priced homes have recently come to market (with even more to being shopped around privately), with sellers hoping to capitalize on the high-end inventory crunch. In New York City, for example, four have debuted with $95 million-plus price tags on the Multiple Listing Services since August. (In fact, the luxury activity helped crown a Manhattan ZIP code the country’s most expensive.)
No matter what the city, one factor has contributed the most to outrageous sale prices: location. Billionaires have been willing to pay top dollar for coveted addresses, stellar views, and security-enforced exclusivity. Among Miami’s hot spots are Indian Creek, Star Island, and the swanky condo buildings along Miami Beach. All are close to restaurants and retail, all are positioned waterfront with expansive views, all boast serious security. In New York City, the big sales have been clustered around the middle of Manhattan, in notoriously exclusive white-glove co-ops and amenity-laden trophy condo towers. Every single big-ticket ($40 million-plus) apartment peddles Central Park Views.
In Los Angeles, the so-called Platinum Triangle of Bel Air, Holmby Hills and Beverly Hills have yielded the highest sales prices as well as Malibu. In L.A. County there have been 16 sales priced $20 million and higher this year, according to Mauricio Umansky of luxury real estate firm The Agency, and several more are expected to close before December 31. Compare that to eight sales in 2011, seven in 2010, and about 16 in 2006, during the housing peak.
Among Southern California’s biggest this year: the $34.5 million Wehba Mansion that sold to an anonymous Chinese investor in May; the $38 million Hollywood Hills mansion that also recently sold to a foreign buyer; Ryan Seacrest’s $37 million purchase of Ellen Degeneres’ Beverly Hills compound in May; and tech billionaire Larry Ellison’s $36.9 million Carbon Beach compound purchase in Malibu in September.
“Views have been important in terms of achieving the highest price-per-square-foot values,” explains Umansky, whose firm has been involved in several of these major sales this year. So is security — more so even than space — which is why gated communities in these areas have commanded roughly $3,500 per square foot — a lofty sum even for Tinseltown.
The coasts have welcomed the most action from rich house hunters, but luxury real estate in Chicago is setting its own city records. In November Citadel founder Ken Griffin snapped up the Park Tower’s 66th floor penthouse the very same day it listed. The 7,900-square foot unit has three bedrooms, four full baths, five half baths, a private terrace and three garage spaces in the building’s parking lot. The hedge fund billionaire already owns the penthouse directly above it. At $15 million, the sale sets a new record as the highest price ever paid for an apartment in the Windy City.
Many billionaires are spending exorbitant sums because certain properties still represent relative bargains. Such is arguably the case with John Paulson, the hedge fund titan who famously made his fortune shorting subprime securities in 2007. In June he dropped $49 million on the 90-acre Hala Ranch and a neighboring 38-acre parcel called Bear Ranch. Located in the gated Starwood community, the combined property has a 56,000-square foot main house with 15 bedrooms including a master suite equipped with a beauty parlor and barber shop, 16 bathrooms, a water treatment plant and a mechanical shop with gas pumps and car wash. It had originally been listed for $135 million in 2006. Paulson got the trophy compound for nearly 65% less.
In addition to massive estates, some billionaires have been buying up straight land. In June, Oracle chief Larry Ellison purchased a controlling stake of the Hawaiian island Lanai. The deal, estimated to have cost as much as $600 million in cash, entails a 98% ownership cut of 141 square miles that includes two vacation resorts, two golf courses and a variety of residential and commercial buildings, and a resident population of 3,200 people. The tech titan purchased Hawaii’s sixth largest island from another billionaire, David Murdock of Dole Foods, via real estate outfit Castle & Cooke and is likely the most expensive single island transaction in history.
In November real estate mogul Stan Kroenke purchased the Broken O Ranch in Montana for an undisclosed price. Listed for $132.5 million, the 124,000-acre operational ranch was assembled over the course of 25 years by the late founders of the Kelly-Moore Paint Company. Kroenke’s new acquisition accounts for 700,000 bushels of small-grain crops, 25,000 tons of alfalfa hay and about 4,500 cattle per year. It makes him the seventh largest private landowner in the country.