Institutional Investor's Alpha Magazine - October 2008 - (Page 36)

LUXURY MARKETS / REAL ESTATE Properties at the Highest End Are Still in a Firm Market The luxury real estate market is alive and well at the highest end, even after the turmoil in credit markets has put thousands of high paying jobs in peril. In New York, properties in the $2 million to $10 million range are seeing signs of a downturn, but those priced at $20 million or more are still holding their value. emand is holding up for luxury homes in other parts of the country as well, especially in the best neighborhoods of upscale cities. For example, of the 100 most valuable properties sold in Palm Beach, almost half have addresses on or near the highly desirable Ocean Boulevard or Lake Way. Grand Estates Auction Co. has sold two recordbreaking properties so far this year, one for the highest price per square foot in the area, the other for the highest price ever in its neighborhood. “And both properties sold for about 35 percent more than we had expected,” says Valeria DeVine, chief executive of Grand Estates Auction, which specializes in trophy properties in such upscale resort areas as Aspen, Vail, Hilton Head, Savannah, Naples, Palm Beach, Sarasota, Scottsdale, and Nantucket Island. DeVine says it is still possible to sell top-of-the line properties at a premium, but she has to spend a lot of time managing seller expectations. Properties are not appreciating the way they did in 2006. “Sellers still expect to get 35 to 50 percent appreciation after one year, but that is no longer there,” says DeVine. Nevertheless, she says, sellers she agrees to represent do continue to see appreciation over what their properties were worth two years ago. “Sellers call us because we’re very efﬁcient at exposing the property to the right buyers,” says DeVine. “We insist that the seller put the house in meticulous condition before we put it on the market. As a result, we can be conﬁdent that the bidding reﬂects the true value of the property.” D From top to bottom: Luxury property in Nantucket, MA; and a Naples, FL estate. Both were sold by Grand Estates Auction Co. Creating Buzz While auctions allow a seller to sell a property quietly, without publicity about who the interested parties are, luxury realtors are ﬁnding that a certain amount of “buzz” about a property can help boost both prices and interest. 6 • Alpha Sponsored Report • October 2008 Over the summer, the real estate services company Prudential Douglas Elliman let it be known that it was selling the most expensive New York apartment ever, a condominium listed at $150 million in the new Robert A.M. Stern-designed luxury building at 15 Central Park West. Other apartments in the building are being offered at $80 million to $125 million. So far, the highest price actually paid for a property at 15 Central Park is $45 million, for the penthouse that hedge fund manager Daniel Loeb bought. The building’s closings began in August 2007, and several buyers have already seen major gains at resale – an exception to the general climate around the country. For example, Evan Cole, a co-founder of ABC Carpet & Home, paid $4.8 million for a condo in the building last December and is reportedly selling it for more than $9 million. Another unit sold for $14 million, nearly double the $7.3 million that the original buyer paid. In September, while Congress was negotiating the ﬁnancial services bailout bill, the 5,500-square-foot duplex penthouse on Park Avenue once owned by Broadway playwright and director Moss Hart and actress Kitty Carlisle went on the market at $20 million, and 50 people turned out to have a look. In San Francisco, a 20,000square-foot penthouse at the St. Regis Residences has an asking price of $70 million, one of the highest listings ever in the city. The penthouse occupies two ﬂoors and has four terraces and a two-story waterfall. Palm Beach prices, too, have beneﬁted from Donald Trump’s sale over the summer of his oceanfront estate at 515 N. County Road, which Russian billionaire Dmitry Rybolovlev bought for $95 million. That was a record in the county, beating the $81.5 million sale of the estate of Sydney Kimmel, the billionaire movie producer and apparel mogul, in March. The 30,000-square-foot home was on the market for only 24 days. In Los Angeles, the real estate agency Related Sales achieved a record-breaking price per square foot for a Los Angeles condominium residence in February when a penthouse at The Century, the city’s most luxurious new condominium building, sold for

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - October 2008

Institutional Investor's Alpha Magazine - October 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Process of Evolution The Good Guys: Israel's Champion Interview: Fast Lessons for Hard Times Cover Story: Industry Under Siege The New Hedge Fund Economics Good-Bye, Easy Money Caging the Shorts Strategies: Bottom Fishing Profile: Cult of Personalities Research Center: Alpha Awards: Eye of the Storm Alpha Bytes: Funneling the Chatter Unhedged: Commentary: Attention, Hedge Fund Shoppers

Institutional Investor's Alpha Magazine - October 2008

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