The recent sale of the legendary, 56,500-square-foot megamansion formerly known as the Spelling Manor in Holmby Hills, CA, for $119.75 million was the priciest residential real estate deal in the history of Los Angeles County.
Which is saying an awful lot in an area where nine-digit listing prices have become the new normal for high-end real estate. There are currently seven homes in the county on the market priced over $100 million.
The 123-room, 14-bedroom, 27-bathroom chateau now simply known as The Manor is one of the largest single-family homes in the U.S., topping the White House by about 1,500 square feet. TV mogul Aaron Spelling built it for his wife, Candy, in 1991.
Candy Spelling put it on the market after Aaron’s death, and originally listed the massive mansion for $150 million. But Petra Ecclestone—daughter of Formula 1 mogul Bernie Ecclestone—snapped it up for $85 million cash in 2011.
Petra Ecclestone has had the lavish estate—with luxuries including a nightclub, hair salon, massage spa, tanning room, bowling alley, wine cellar, championship tennis court, and parking for 100-plus cars—on and off the market for as much as $200 million starting in 2016.
The mansion was listed for $160 million when she decided to accept the nearly $120 million offer.
So is this recent record-breaking ultraluxury sale a fluke? Or does it mean billionaires are back and willing to shell out eye-popping amounts for SoCal luxury?
A flash or a trend?
“This is far from a fluke,” says Shawn Elliott, managing director of the ultraluxury division of Nest Seekers International. Elliott deals with the most prestigious properties in the country, with licenses in Florida, New York, and California. He is currently representing the Bruce Makowsky–designed mansion known as Billionaire, which is on the market for $150 million.
“There’s another sale in that range coming up soon, and with the stock market at all-time highs and interest rates at all-time lows, it’s a great time to be purchasing properties like these,” Elliott adds.
Wait a minute! Interest rates? We assumed billionaires plunked down cash and didn’t bother with the messy business of borrowing money.
“Sometimes they do, and sometimes they pay cash and then turn around and refinance,” says Elliott. “Or they take out a loan for a portion of the price.”
He notes that billionaires often have such tremendous assets they can put up against the loans, they can manage to get rates as low as, say, 2.5%. Which is much, much lower than the mortgage rates the other 99% of us will ever see.
Can $80 million be considered a bargain?
Santiago Arana, who deals in the ultraluxury market for The Agency, agrees it’s a swell time for luxury home sellers.
Speaking of which, there are about 15 mansions on the market in Los Angeles County currently in that price range.
Not that today’s billionaires are exactly ready to dig through the bargain bin.
“L.A. is still a destination for the ultrawealthy,” he says, adding that high net worth buyers are more interested in location, size of lot, the views, and lifestyle—as opposed to saving a few million bucks on a closing price.
“These people are not like the rest of us,” he says. “They travel with an entourage. They have their chefs, drivers, personal assistants, household staffs, security staffs, but they still want their privacy.”
This makes sense as it relates to the gargantuan estate Ecclestone just sold. There’s no single family big enough to fill an estate like The Manor, but it takes a staff of 30 to run the place. Part of the massive 56,500-square-foot home is set aside to accommodate the folks who keep the place (and its owners) humming.
What does it take to catch a billionaire?
Billionaires aren’t accustomed to waiting. So it follows that the properties they purchase must be turnkey, according to Elliott.
“When you spend that much money, you don’t want to wait two or three months and be bothered with renovations, you want to move right in,” he says.
He noted Ecclestone had already put about $20 million into renovations.
Yawar Charlie, an agent with the Aaron Kirman Group at Compass and soon to be on CNBC’s “Listing Impossible,” says that the status conferred with the purchase of a trophy home is also a potent factor.
“When people are spending $80 million or more on a home, it needs to be a marquee home,” he says. “There has to be a bit of cachet with it, either the location, designer, or previous owner.
“Also, having the highest sale in a particular neighborhood, such as this $120 million home, gives the owner a certain level of brand recognition,” he continues
Big Apple or Big Orange?
But it’s interesting to note that L.A. isn’t the most prestigious of all markets in the U.S., at least if you’re going by price. New York City holds the honor of being the location of the most expensive residential property ever sold in the country. In January, billionaire Ken Griffin paid $238 million for a penthouse in the building known as 220 Central Park South.
Martin Eiden of Compass’ sports and entertainment division explains the difference this way: “Manhattan has less land and the housing stock is almost always in mid- to high-rise buildings. With less land and significantly higher construction costs (due to the building type), Manhattan will always be more expensive,” he says.
So who are the people spending hundreds of millions of dollars on both coasts?
Where are all of these billionaires coming from?
Foreign money flooding into the real estate market has slowed, according to Robert Elson of Warburg Realty. It’s becoming increasingly difficult for wealthy Chinese to get money across the border to invest on foreign soil.
“Russia, similar story—very few rubles are being allowed out of the country now,” he explains.
The Middle East is also cutting back on investment, says Elson.
“It used to be Saudi Arabia, UAE, Qatar, with huge cash flows coming into real estate here,” he continues. Because of political and financial constraints, “that has pretty much dried up as well.”
So who, then, is really in the market for these priciest of estates? While foreign influence has waned a bit, Elliott says it’s the same pool of ultrahigh net worth buyers from North America and Europe snapping up homes for record-breaking prices on the East Coast, the West Coast, and the Florida coast.
“And they might also have luxury homes in St-Tropez, London, Tokyo, or Singapore,” adds Arana.
To sum up the question of whether the $120 million sale of The Manor is a flash in the pan or a harbinger of a multi-multimillion-dollar trend, Elliott cites the well-worn phrase, “a rising tide lifts all boats.”
It’s all well and good for international billionaires, but let’s hope it doesn’t trickle down to the rest of us home buyers on the ground floor of starter homes. For most of us, the tide has risen high enough already.