The $60 Million Dream House
Developers bet big on multimillion-dollar spec homes
Jan 10, 2011
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| Five-bedroom, Aspen, Colo. spec home. Photo: David O. Marlow |
A group of wealthy art collectors and philanthropists dined on risotto and listened to chamber music at a 10-bedroom estate on a private island off Florida's Biscayne Bay last month. The mansion isn't owned by a Russian oligarch or a certain NBA player who recently moved to town. It was built purely on speculation by developers in search of a buyer.
Its asking price: $60 million.
Despite the current housing slump, a small but growing group of developers and investors is building multimillion-dollar mega-mansions for wealthy potential buyers who've never seen them. Here's why.
Three years into the housing bust, at a time when home values are hitting new lows in many markets, a small group of developers has plunged into the risky business of betting millions on high-end speculative homes. They are erecting amenity-rich mansions for wealthy buyers that they hope will materialize. While the vast majority of the "spec" market remains moribund, some developers, pointing to a handful of big sales and the recent recovery of the stock market, believe the world's wealthiest buyers are out again shopping for trophy mansions, often as second, third or fourth homes.
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| The lavish home near Aspen was built by investors last year. Photo: David O. Marlow |
While there aren't any national sales statistics for homes in this range, there are signs that purchases by the super-rich have begun to rebound. Though down from the peak three or four years ago, art auctions in New York and London in 2010 brought in total sales that far surpassed 2009, including an all-time auction record of $104.3 million for sale of a Giacometti sculpture in February, topped in May by a $106.5 million sale of a Picasso painting.
The current crop of newly built spec mansions on the market includes a five-bedroom, seven-bathroom ski home on 1.2 acres of land in Aspen, Colo.'s Red Mountain neighborhood. Built by a group of investors last year, it has hand-scraped wide-plank ash floors, an onyx-and-steel chandelier in the dining room and a garage that has a dock for charging hybrid or electric vehicles as well as a dog-washing facility. Price tag: $23.9 million. In New York's Hamptons, an eight-bedroom farmhouse-style home in Sagaponack, built last year, is on the market for $26 million. In Los Angeles, a minimalist house with a 26-foot-long fire trough and a home theater with stadium seating is on the market for $13.7 million.
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| The kitchen of an 8-bedroom home in N.Y.'s Hamptons. Photo: Chris Foster |
Real-estate agents say brand-new construction appeals to those who may already have other homes around the world to maintain. Rob Giem, a broker based inNewport Beach, Calif., says new houses are the most attractive listings for his wealthiest clients, some of whom are older and don't want to spend years dealing with construction headaches. "They've worked very hard and the greatest commodity to them is time," he says.
No mega-mansion is complete without the latest in high-tech gadgetry. Lighting, televisions, heat, hot-tub temperature and security systems can be controlled remotely via an iPad or cellphone, an important convenience for long-distance owners. Some incorporate green technology like hidden solar panels and geothermal heating. Though amenities like bowling alleys, massage rooms and master-suite kitchenettes have become relatively common, the latest crop incorporate a few new ones as well, like in-home beauty salons with manicure, pedicure and hairdressing stations; virtual golf rooms, dockage for super yachts and movie-theater-size screening rooms.
The developers of the $60 million Miami Beach house say the estate, which has cost them $30 million so far, has one of the state's first in-home projection 3-D movie theaters. The home, which was built by developers Shlomi Alexander and Felix Cohen, also has a hidden art vault, an elaborate security system and a wine room that can be accessed only via fingerprint identification. Materials like mother of pearl, rare marble and Austrian oak are used throughout. To find the right gold-flecked marble for the master bathroom, the developers say they flew to Italy to personally pick it out from a quarry. To get inspiration for the home's waterscape and pool, which has a waterfall cascading from the second floor, they visited the Amanyara resort in the Turks and Caicos Islands.
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| Aerial view of farmhouse-style home in N.Y.'s Hamptons. Photo: Alex Ferrone |
Constructed on Indian Creek Island across a series of limestone pavilions, the 30,000-square-foot glass-fronted home is divided by waterways and koi ponds. Its architect, Rene Gonzalez, who was also a project designer on the Getty Museum in Los Angeles, describes it as a "conceptual" house that's supposed to feel like a private resort. There's a central courtyard with landscaped walls and a beach with several tons of sand imported from the Bahamas (chosen over local Florida sand for its pinkish color). Since the potential buyer likely will already own several homes, Oren Alexander, the developer's son and New York-based broker who is marketing the listing to buyers outside Miami, says the home's inclusion of furniture will be a big selling point. "The house is such a unique style I think only the developers can furnish it," he says. "And when somebody's buying a property they want it to be instant satisfaction."
The developers of the Miami home say they're confident that they will not only sell the home for close to asking price, it will be off their hands by the end of the month. The elder Mr. Alexander says, "For this, you need just one guy who believes in it, and wants to buy it for his wife." Baseball player Alex Rodriguez toured the home while it was under construction, says Mr. Alexander, and responded so well to the design that it prompted him and Mr. Cohen to raise the asking price from what they initially planned.
Nelson Gonzalez, a Miami Beach-based broker who handles high-end listings, including Jennifer Lopez's former home, says he has clients looking for newly built homes in the area but doesn't think the house will sell for nearly what the developers are asking. "I think it's very high-priced for what the market is," he says. "I don't think we're there yet."
In Los Angeles, one of the most aggressive spec mansion builders is Mohamed Hadid, who sold an estate in the Bel Air section of Los Angeles for $50 million, one of the highest-priced residential-real-estate transactions in the U.S. last year. Public records listed the buyer as Sarp Turanligil, the owner of a Turkey-based yacht and furniture production company. A representative for Mr. Turnanligil said he was managing some business for a company that bought the home and is no longer affiliated with the property. The home, which Mr. Hadid lived in before it was sold, was initially listed for $85 million.
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| This 27,000-square-foot-house in Palm Beach has parking for 50 cars and six juice bars. Photo: Robert Stevens |
Though he says he's building spec estates at a slower pace than he was several years ago, Mr. Hadid's current crop includes a 100-acre gated community on a mountain ridge in the Beverly Hills Post Office area of Los Angeles that will have six spec homes, each priced between $30 million and $40 million. The development will be heavily secured, he says, and include its own vineyard.
Construction is nearly complete on a 32,000-square-foot, three-story French château-style mansion on 1.2 acres across the street from the Beverly Hills Hotel, which he plans to officially put on the market for about $60 million in March. The house will have three swimming pools (including an Olympic-size one indoors), a ballroom that can hold 150 and a Moroccan-style room meant for entertaining and socializing after relaxing in the home's spa. A home theater will seat 60.
"It will have to be managed like a small hotel," explains Mr. Hadid, who estimates monthly operating costs for the buyer to be around $50,000 to $100,000 in addition to annual taxes.
Another big bet sits on a winding, wooded lot on California's Belvedere Island, just across the bay from San Francisco. During a tour of the home's site a few months ago, Olivia Hsu Decker, the home's listing broker, pointed out a bullet-shaped yacht anchored in the water few hundred feet away. "That could be our buyer," said Ms. Decker, optimistically. (The Phillipe Starck-designed vessel is owned by Russian billionaire Andrey Melnichenko.)
When it's completed next summer, the three-story home, which the developer says likely will list for $45 million, will have a projection-screen theater, a gym with a steam room and sauna and an elevator and sliding glass doors that will open almost the entire back of the house. "People at this end of the market always have money," says Jeff Paster, an investment manager who retired in 2008 and has been building luxury homes for eight years, including the Belvedere Island mansion. But the competition is steep: There are at least five mansions priced around $20 million and above that are officially listed as for sale on Belvedere Island, a rocky landmass that measures less than one square mile.
The risks for speculators are huge. Developers generally have to foot annual tax bills and carrying costs while the home waits for a buyer, which can sometimes take months and run into hundreds of thousands of dollars annually. A number of multimillion-dollar homes built during boom times have taken years for investors to unload, with dozens still left over on the market today at reduced prices. A mansion in the Brentwood neighborhood of Los Angeles now priced at $14 million has been on the market for more than two years and seen several cuts from its original asking price in 2008 of $21.5 million. In Newport Beach, Calif., a Pennylvania Dutch Colonial-style home on just under an acre with elaborate manicured gardens is listed for $23 million, down from its original asking price of $29 million in 2007.
Last month, one of Los Angeles's best-known spec homes sold for $23.5 million, about half its initial asking price of $50 million in 2007. Broker Mauricio Umansky said the singer Prince rented the home for two years while it was on the market, and that he wasn't able to show it often during that time.
Despite the jaw-dropping price tags on these supermansions, many developers aren't asking nearly what they would have during the market's peak. In Palm Beach, Fla., builder Dan Swanson currently has an $84 million home adjacent to a large nature preserve that's been on the market since May. The project began three years ago, when he tore down two homes on a cul-de-sac and built a 27,000-square-foot house that has parking for more than 50 cars, a 60-foot swimming pool and six juice bars spread across the main and guest quarters. The asking price, he says, could have been more than $100 million several years ago.
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