Speaker 1: Hey there, I'm Joe Wisenthal and I'm Tracy Allaway. We
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Speaker 1: Hello and welcome to another episode of the Odd Lots podcast.
Speaker 2: I'm Joe Wisenthal and I'm Tracy Alloway.
Speaker 1: Tracy, we did that episode recently on the big potential
Speaker 1: development in northern Egypt. Yes, and I'm sort of fascinated
Speaker 1: as a topic by these like huge, gleaming megacities, many
Speaker 1: of them being built in the Middle East, tons of
Speaker 1: money pouring into these sort of just absolutely jaw dropping skyscrapers,
Speaker 1: luxury buildings, things like that.
Speaker 2: Yeah, I think we spoke a little bit about it
Speaker 2: on that episode, but it's sort of the Dubai blueprint
Speaker 2: that seems to be being copied and multiplied across the
Speaker 2: Middle East, and the question that always comes up is, well,
Speaker 2: how big can these markets actually be? Like how much
Speaker 2: demand is there for multimillion dollar properties in tax havens?
Speaker 2: And it seems like the answer is more than you
Speaker 2: would think.
Speaker 1: These cities are kind of weird to me because I
Speaker 1: never get the impression that And you lived in Abu Dhabi,
Speaker 1: so you could correct me if I'm wrong, But does
Speaker 1: it seem like there's like that much going on? Even
Speaker 1: when I see like photos of people there, like friends stopping,
Speaker 1: They're like, it always looks a little quiet. Am I wrong?
Speaker 2: The way I used to describe living in Abu Dhabi?
Speaker 2: And I should just add a massive caveat here, which
Speaker 2: is I left in twenty eighteen, and my understanding is
Speaker 2: that since then Dubai has been booming. In particular, there's
Speaker 2: been a lot of immigration from Russia, lots of people
Speaker 2: moving there as part of the tech industry as well.
Speaker 2: But the way I used to describe living in Abu
Speaker 2: Dhabi was it was kind of like living in the
Speaker 2: suburbs of Texas in the sense that it's very hot.
Speaker 2: Everyone drives everywhere. You don't really see people walking around
Speaker 2: on the streets that much, and you spend a lot
Speaker 2: of time at the shopping mall or the swimming pool.
Speaker 1: It doesn't sound so bad. I'd take it.
Speaker 2: It's a nice lifestyle. But yes, there isn't a ton
Speaker 2: going on, although they have made efforts to change that.
Speaker 2: They've opened museums and things like that.
Speaker 1: Yeah. No, But to the point though, like when you
Speaker 1: see the price tags on what a penthouse in one
Speaker 1: of these buildings are going for, or just you know
Speaker 1: how much money is being developed or to some of
Speaker 1: these buildings, Like it's absolutely eye popping.
Speaker 2: You see these headlines and it's not just like one
Speaker 2: apartment sold for one hundred million, it's like five apartments
Speaker 2: sold for one hundred million. And I think that's the
Speaker 2: surprising thing. The other thing that's been happening. I don't
Speaker 2: know if you saw that in Dubai they opened that
Speaker 2: Mercedes Benz tower. Did you see that? No, I'm trying
Speaker 2: to This is a difficult topic for me because I
Speaker 2: think my personal taste veers so far away from this direction.
Speaker 2: I'm not even gonna mention the fact that I obviously
Speaker 2: couldn't afford any of these properties. But it's an interesting one.
Speaker 2: I don't know. It's kind of gleaming. It's got lots
Speaker 2: of lights. If you look at photos of the interior,
Speaker 2: it's very modern. It's very clean and light, and it
Speaker 2: has magnificent views of the Dubai Skyline. I'm not entirely
Speaker 2: sure I would want to live there, but again it's
Speaker 2: a moot point because there's no way that I would
Speaker 2: ever be able to afford it.
Speaker 1: It definitely now, I looked it up and it definitely
Speaker 1: looks a lot different than what I imagined where I've never been.
Speaker 1: But what I imagine your place out in the middle of
Speaker 1: nowhere in Connecticut.
Speaker 2: Probably the polar opposite.
Speaker 1: Okay. I want to learn more about this sort of
Speaker 1: this world of real estate for the ultra rich around
Speaker 1: the world, and some of these cities and the business
Speaker 1: behind these extraordinary gleaming towers. Some of them are a
Speaker 1: nice cone shape, some of them look a little bit
Speaker 1: like Jenga towers of some sort. I'm really excited. We
Speaker 1: do have the perfect guest. We're going to be speaking
Speaker 1: to Hitten some Tani. Here's the founder of ten thirty one.
Speaker 1: It's a new real estate media company, former editorial director
Speaker 1: at the Real Deal, and knows real estate really well,
Speaker 1: and people who know real estate say to read hit tend.
Speaker 1: So thank you so much for coming on odlats.
Speaker 4: My pleasure, guys, thanks for having me.
Speaker 1: What's going on? What's the deal with all these big towers.
Speaker 4: The way to think about this market is, it's not
Speaker 4: really a local market anymore. I think historically when we
Speaker 4: think about luxury prices in New York, in Dubai and Aspen,
Speaker 4: we sort of compare them locally. So I haven't opened
Speaker 4: an economics textbook in a long time, but there used
Speaker 4: to be this concept of local maximums that no longer applies.
Speaker 4: The markets that the very very top I'm not talking
Speaker 4: about what the well healed would buy, but what the
Speaker 4: well healed sort of many many echelons higher than that
Speaker 4: would buy has blended. It's become a global little I
Speaker 4: call it the parallel universe of this luxury market.
Speaker 2: Okay, so give us some examples of the numbers around
Speaker 2: this particular segment of luxury real estate, because again, we're
Speaker 2: not talking about like an apartment in New York that
Speaker 2: maybe costs two million dollars. We're talking yeah, we're talking
Speaker 2: about apartments that cost like fifty one hundred million. What
Speaker 2: have we seen recently in terms of transactions.
Speaker 4: So the Ali Baba co founder bought a penhouse in
Speaker 4: two twenty Central Park South on Billionaire's Row for one
Speaker 4: hundred and ninety million. That was already an apartment that
Speaker 4: a hedge funder, Daniel Oak, had paid ninety three million
Speaker 4: for just a year and change ago. So there is
Speaker 4: you can't really that's one hundred percent premium on a
Speaker 4: pad like that. Larry Ellison in Florida had bought a
Speaker 4: Florida estate for one hundred and seventy odd million and
Speaker 4: the previous buyer had paid ninety four million. Talking about
Speaker 4: these numbers that are just that defy reality and you
Speaker 4: can't track it. You can't really map it and say,
Speaker 4: you know, it's growing ten percent a year. We're talking
Speaker 4: about a price appreciation of fifty to seventy five to
Speaker 4: more than one hundred percent within a year. Sometimes, why
Speaker 4: is there so there's been It's a hard thing to
Speaker 4: track because there isn't really any great data that exists
Speaker 4: in this global sphere. But it seems like there's been
Speaker 4: a new kind of feudalism that's happening, which is global
Speaker 4: billionaires are now untethered to places like New York, and
Speaker 4: they're looking to portfolio shops. So they're thinking more about
Speaker 4: their purchases in terms of Okay, I'm a captain of
Speaker 4: the universe, right, and I want to have my pad
Speaker 4: in New York where I take my meetings. I want
Speaker 4: to have my estate in Florida. I also want my
Speaker 4: ski shale and aspen. And guess what I'm willing to
Speaker 4: pay Not just a little more than the local king
Speaker 4: of the hill, I'm willing to pay double. So I
Speaker 4: don't really have competition in that market.
Speaker 2: So who's developing these properties? Are there ultra luxury specialists
Speaker 2: or is it you know, the existing sort of normal
Speaker 2: luxury real estate developers are just building more specialized apartments.
Speaker 2: Who's actually doing it?
Speaker 4: Yeah, So one thing about developers as sort of a
Speaker 4: species is they're really really good at rejigging their portfolios
Speaker 4: to cater to current to man. So in many cases,
Speaker 4: developers who who are building, you know, twenty million dollar
Speaker 4: apartments are saying, you know, why not go for the
Speaker 4: fifteen million dollar apartment? And in some cases there is
Speaker 4: a one sort of a unique class of spec home
Speaker 4: developer who was saying Okay, there's x amount of billionaires
Speaker 4: in the world, there's x amount of the kind of
Speaker 4: product that they want, let me go and build. So
Speaker 4: there's a guy called Todd Glazier out of Palm Beach
Speaker 4: and he just built. He bought an island. It's called
Speaker 4: Tarpin Island. It's the only private island in Palm Beach.
Speaker 4: He paid eighty five million for the property and then
Speaker 4: he listed it at one hundred and eighty five million,
Speaker 4: after obviously adding tons of bells and whistles. We're talking
Speaker 4: about thirteen hundred feet of frontage on the water.
Speaker 2: What are the profit margins like on this kind of property,
Speaker 2: because I have to imagine at some point there there's
Speaker 2: a ceiling of how much it would cost to build
Speaker 2: these things, and so if you're just selling it for
Speaker 2: more and more money, presumably the margin is getting fatter
Speaker 2: and fatter, and that's part of what would be driving
Speaker 2: this activity. But again, I don't know. I'm happy if
Speaker 2: my ceiling isn't falling down. So there are probably some
Speaker 2: very expensive options out there for multimillionaires that can boost
Speaker 2: the price or the cost of building. But I have
Speaker 2: to imagine the margins are part of what's driving this.
Speaker 4: The margins are incredible, right, you could make up to
Speaker 4: sixty seventy million dollars if you do it right. But
Speaker 4: you have to take into account the incredible risk. You're
Speaker 4: carrying a spec home. You're hoping that there's a buyer
Speaker 4: that's out there for it. You're paying a ton of
Speaker 4: money to buy the property, and there's you know, carrying costs,
Speaker 4: financing costs, construction costs, and we have seen some pretty
Speaker 4: bad flameouts. Los Angeles is a great example of this,
Speaker 4: where there was a guy called Nil Niami who was
Speaker 4: trying to sell a home for five hundred million dollars
Speaker 4: and he called it the one and foreclosure upon foreclosure,
Speaker 4: upon foreclosure. I think he's lost pretty much all his empire.
Speaker 1: Tracy, did you ever watch that documentary The Queen of Versailles?
Speaker 2: Yes, that was great. That was at the time America's
Speaker 2: or the world's most expensive house. Is that right?
Speaker 1: Yeah? I thought of all the various films and documentaries
Speaker 1: that were sort of related to the financial crisis, I
Speaker 1: actually thought that that was the best one because it
Speaker 1: really got into the financing chain behind this guy who
Speaker 1: is trying to build like a half a billion dollar
Speaker 1: home in Florida, and how like changing fortunes quickly changed
Speaker 1: his ability and I went Bagram. Do you know what
Speaker 1: happened with that one?
Speaker 4: I do not do not with that one. But I
Speaker 4: can say that the more success a developer has in
Speaker 4: a space like this, lenders start to think of it
Speaker 4: as an asset class. So if someone like a Todd is,
Speaker 4: you know, building a home making a forty percent markup,
Speaker 4: et cetera, then he might find a conventional lender. He
Speaker 4: may not need that wildcatting lender anymore. He might be
Speaker 4: able to find a conventional lender or partners to fund
Speaker 4: these kind of deals because he could show that there's
Speaker 4: to create an asset class. It's very difficult, but if
Speaker 4: you do it, and you're the first one or one
Speaker 4: a few, you can make a lot of money.
Speaker 1: If I think of like I want to buy a
Speaker 1: nice condo here in New York City. I like my apartment.
Speaker 1: You know, it has a decent amount of space, has
Speaker 1: two bathrooms. It seems it's enough for me. And then
Speaker 1: I'm you know, I have friends who have like much
Speaker 1: nicer places than some of them, like have a backyard,
Speaker 1: and you know that seems nice too. But when we're
Speaker 1: talking about like the fifty million dollar property, what's in
Speaker 1: there and what is like if you want to sell
Speaker 1: to that market, what does it have to have?
Speaker 4: Well, size is very important, right so there generally a
Speaker 4: lot of these homes will be if you're talking apartments,
Speaker 4: we're looking at five thousand and seven thousand square feet
Speaker 4: of indoor space, a couple thousand square feet of exterior
Speaker 4: space as well. Private elevators are typically a given, and
Speaker 4: then depending on the market, it can go completely crazy.
Speaker 1: Sare go, what's the craziest Just tell us some craziestrea.
Speaker 4: Yeah, some markets of helipads, for example, some homes of helipads.
Speaker 4: Some of them are not operational helipads, but still a
Speaker 4: billionaire wants a helipad. Sometimes waterfront living is key and
Speaker 4: what tends to happen with some of these billionaires. And
Speaker 4: I think this portfolio shopping point is very important. Larry
Speaker 4: Allison Malibu, he made his first purchase back in the
Speaker 4: I think in the late nineties or early two thousands.
Speaker 4: Since then he's bought thirty five parcels. So when you're
Speaker 4: when you're when you're spending money like that on luxury
Speaker 4: real estate, you have the ability to not only influence
Speaker 4: the homes, but the entire landscape of the area. So
Speaker 4: he essentially is responsible for changing the retail makeup of
Speaker 4: Malibu as well. So don't think just about the homes,
Speaker 4: think completely about the sort of the the area as well.
Speaker 4: That's important.
Speaker 2: Oh, that's interesting. So you can make an investment if
Speaker 2: you're a billionaire in a particular area, and then kind
Speaker 2: of develop that area and presumably make more money on
Speaker 2: your investment.
Speaker 4: Absolutely, and Ken Griffin what he's doing in Miami is
Speaker 4: probably a good example of this, right. He has been
Speaker 4: buying up well, he said it was for his mom,
Speaker 4: but it's probably for him. He's been buying up trophy
Speaker 4: home after trophy home after trophy home. Now pool together
Speaker 4: that portfolio. The thing about kings of the hill, and
Speaker 4: you guys know this better than I do, is that
Speaker 4: you're a king of the hill until the next king
Speaker 4: of the hill shows up, right, So Ken Griffin was
Speaker 4: the alpha citizen of Miami. Guess who showed up recently?
Speaker 4: Jeff Bezos. Oh, Jeff Bezos just dropped. I think it
Speaker 4: was ninety million yesterday. I was telling you Joe on
Speaker 4: an Indian Creek mansion, which is his third purchase in
Speaker 4: that area.
Speaker 1: From the perspective of the billionaire, these kings of the universe,
Speaker 1: what is the appeal of Like I could see having
Speaker 1: a place in Miami, in a place in Dubai, and
Speaker 1: a place in London, in the place in New York,
Speaker 1: in a place in Malibu, in a place and why
Speaker 1: three in Miami.
Speaker 4: I think a lot about it as the new feudalism. Right,
Speaker 4: You're trying to build this enormous land bank in some
Speaker 4: of the world's most coveted markets. There's also, I mean,
Speaker 4: we can't really deny this. There is some element of
Speaker 4: Schnitzel measuring here as well. Right, there has to be
Speaker 4: a little bit of that.
Speaker 2: I'm sorry Schnitzels.
Speaker 4: I don't know how censored Bloomberg gets. That's what I went.
Speaker 4: I think there is an element of one upping the
Speaker 4: other person here. So if Ken Griffin goes and buys
Speaker 4: a sixty million dollar home, guess what you're going to
Speaker 4: see someone like Bezos come in. I think Dubai is
Speaker 4: a great example of this, if I could get into
Speaker 4: one specifically. Yah, By the way I grew up there
Speaker 4: so plenty of things we could talk about later, Mokashambani,
Speaker 4: Indian tycoon, comes in and he buys a home for
Speaker 4: I believe it was eighty million dollars, sets a record.
Speaker 4: This is Palm Jamera, which is that man made island
Speaker 4: off the coast trace. I'm sure you've probably been there.
Speaker 4: So he pays eighty million, smashes the record by a
Speaker 4: factor of two. Some mystery buyer comes in a few
Speaker 4: months later and pays eighty three million for a home
Speaker 4: also on Palm Jamera. Now someone like Ambani, that doesn't
Speaker 4: really sit well with them, and so he comes back
Speaker 4: a few months later and he pays one hundred and
Speaker 4: sixty three million for another home on Palm Jamera. So
Speaker 4: that's why I think it's it's not always investment. It
Speaker 4: might just be like, hey, I am I am the guy.
Speaker 2: Here, since you brought up Palm Jamera. I mean this
Speaker 2: is like the original almost extreme luxury development that and
Speaker 2: what was the one that was shaped like the world.
Speaker 4: Yeah, it was just called the World the world that
Speaker 4: turned into like the Ponzi of all possible.
Speaker 2: Yeah, so this is exactly what I was going to ask. So,
Speaker 2: I mean Palm Jamia, there were eyewatering prices being paid
Speaker 2: for those properties, same thing for the world, but then
Speaker 2: it all kind of collapsed. There was a big bust
Speaker 2: in those luxury property markets, at least in Jubai, and
Speaker 2: then it kind of came back. Are these markets still
Speaker 2: cyclical or have we kind of gone beyond that level?
Speaker 4: It's very hard to tell. It's a great question. It's
Speaker 4: very hard to tell in a market like Miami or
Speaker 4: in Dubai. Are we just looking at a wildcatting situation
Speaker 4: or is there something else one statistic that might give
Speaker 4: us some context here. Pre twenty twenty one, there were
Speaker 4: four sales of twenty five million in in any given
Speaker 4: year in Dubai. In twenty twenty three we had fifty six, Right,
Speaker 4: So who are we, as snobby New Yorkers to think?
Speaker 4: Is this a market that has legs or not? I
Speaker 4: think the Manhattan market was responsible for the bulk of
Speaker 4: ten million dollars plus sales for the longest time. It's
Speaker 4: hard to crunch the numbers because again there is no
Speaker 4: repository of this, but I would imagine that ratio has
Speaker 4: gone way down. And to your point, I think in
Speaker 4: these luxury markets there is a very strong sense that
Speaker 4: without rule of law, without some recourse in Dubai or
Speaker 4: the UA in general has had pretty spotty sort of
Speaker 4: issues around credit and debt and all of that. I
Speaker 4: think the government there too, its credit has been taking
Speaker 4: some really strong steps to make sure, Hey, this should
Speaker 4: function like any other market, the courts and there should
Speaker 4: be recourse and all of that. So I think with that,
Speaker 4: there will always be a few scams like the world.
Speaker 4: But to your point about Palm, even though the market
Speaker 4: collapsed for a while, I'll give you a personal anecdote.
Speaker 4: An uncle of mine had bought a home on Palm
Speaker 4: for one point five million way back, something like one
Speaker 4: point five million dollars or one and change. He recently
Speaker 4: moved out of his own house to rent a villa
Speaker 4: somewhere else because the Russian is offering him one third
Speaker 4: of his purchase price in rent wow a year. So
Speaker 4: that kind of gives you a little bit.
Speaker 1: It's a great cap rate right there.
Speaker 4: There you go.
Speaker 1: But actually, I'm glad you brought up rule of law
Speaker 1: because this is where I want to go next, which
Speaker 1: is that like, look, some places are just really nice,
Speaker 1: like Aspen. I've never been there, but I'm sure if
Speaker 1: you like to ski, and I'm sure, it's very nice.
Speaker 1: I like Miami. It's very nice by some measures in
Speaker 1: New York obviously the greatest city in the world. But
Speaker 1: you know, when you think about extreme wealth, particularly in
Speaker 1: certain countries that don't have great rule of law, or
Speaker 1: where perhaps if you're out of favor with the leader,
Speaker 1: you can risk confiscation. So you know, maybe alter rich
Speaker 1: people in China or alterra rich people in Russia, et cetera.
Speaker 1: One way that they might want to sort of prote
Speaker 1: some of their wealth to put money in a foreign
Speaker 1: bank account. But there are limits to that obviously, and
Speaker 1: that's not always trivially easy. How much is this about
Speaker 1: or how much are some of these flows? Essentially, I
Speaker 1: don't know rule of law arbitrage, where it's like how
Speaker 1: much can you get your wealth into a system that
Speaker 1: more or less has predictable rules.
Speaker 4: Real estate has historically been a very lax kyc type market, right,
Speaker 4: So to your point, I think capital flight is definitely
Speaker 4: a big thing. We saw the Dubai property market just
Speaker 4: absolutely take off once the war in Ukraine happened. A
Speaker 4: lot of Russians, and I would say the way I
Speaker 4: think of it as Russian adjacent Kazakhstan, etc. A lot
Speaker 4: of that money flowed into Dubai because the Yuei took
Speaker 4: a very hands off approach to judging anyone in this war,
Speaker 4: So that turned out really well. The earlier example we
Speaker 4: talked about, which was the Ali Baba co founder, if
Speaker 4: you remember the other guy, he sort of went away
Speaker 4: for a while, Jack Ma, Yeah, right, he kind of
Speaker 4: not disappeared, but he was off. He fell out, he
Speaker 4: did disappear. Yeah, So I don't I'm not in Joe
Speaker 4: size head, but I'd imagined that part of the reason
Speaker 4: that he's willing to pay double what was already in
Speaker 4: crazy price at two twenty Central Park South, A lot
Speaker 4: of that is predicated on this tracy.
Speaker 1: One thing that makes me wonder is whether the high
Speaker 1: price itself becomes part of the selling point, because the
Speaker 1: higher the price, the more capacity the market has to
Speaker 1: take off some of your liquid wealth.
Speaker 2: Oh yeah, absolutely, I think that's part of it. And
Speaker 2: it's funny. This conversation just jogged my memory. Do you
Speaker 2: guys remember rf knock fee from a braage?
Speaker 4: It's a key mad Yeah.
Speaker 2: So, Abroge used to be one of the world's biggest
Speaker 2: private equity funds. With specialism in emerging markets based in Dubai,
Speaker 2: and basically they went bust. And r If, I think
Speaker 2: is still being prosecuted for fraud and is being extradited
Speaker 2: to the US, or was at some point. But when
Speaker 2: all of that was going down, I was in Nabu
Speaker 2: Dhabi and I was writing a lot about this, and
Speaker 2: it turned out that his house in Dubai. RF's house
Speaker 2: was on like the same block as a bunch of
Speaker 2: like dictators houses they had all moved. I can't remember
Speaker 2: the specific ones, but think African dictators, and they had
Speaker 2: all bought properties in this one particular neighborhood for the
Speaker 2: exact presumably reasons that we were talking about.
Speaker 1: Right.
Speaker 4: Former Prime Minister of Pakistan, Pervesbashariff also at a house there.
Speaker 2: Yeah, So the other thing I wanted to ask is,
Speaker 2: you know, in the intro I mentioned that Mercedes Benz
Speaker 2: Tower in Dubai and this seems to be becoming more
Speaker 2: of a thing as well, these idea of branded luxury
Speaker 2: real estate properties. And I have to say, when I
Speaker 2: think branded property, the thing I usually think of is
Speaker 2: the Margaritaville retirement communities in like Florida. But this is
Speaker 2: a whole other level, and it seems to be becoming
Speaker 2: more of a thing. What's going on there?
Speaker 4: So there are I think Jesshi, of two hundred active
Speaker 4: branded condo projects in the world, forty percent of them
Speaker 4: are in North America, and then they're dispersed in places
Speaker 4: like Dubai, et cetera. What happens I believe it's connected
Speaker 4: to the initial point I made about this dispersion of
Speaker 4: global wealth. And so a billionaire who is from New
Speaker 4: York understands fifty seventh Street. They wouldn't understand what Palm
Speaker 4: Jamera is. They might understand what Cavali is, or Mercedes
Speaker 4: Bench or Bugati. So there is this coalescing around brands
Speaker 4: that are already known, and you're piggybacking off a luxury
Speaker 4: brand to create both legitimacy and exclusivity.
Speaker 1: That's super interesting. So the Mercedes brand becomes away, It's like, well,
Speaker 1: I know, Mercedes makes good stuff. They take care of
Speaker 1: their brand pretty well. They're probably not going to slap
Speaker 1: their name on some garbage project. What is the role
Speaker 1: of the brand though, as in the construction of it,
Speaker 1: did they have input, do they have designed It's purely
Speaker 1: a licensing deal, but they probably do a lot of vetting,
Speaker 1: like talk to us about the business from the brand side.
Speaker 4: Fair enough, I will say say, it is not a
Speaker 4: coincidence that a lot of these branded projects are in
Speaker 4: markets where there is a history of pretty sloppy construction
Speaker 4: and defects and lawsuits and all of that. Right, so
Speaker 4: this is kind of the way to say, hey, we're
Speaker 4: different from the other guys. But so the brand's role.
Speaker 4: I was talking to a couple of developers about this
Speaker 4: in one open the kimono on how these deals actually work,
Speaker 4: and he said, some brands will get really fastidious about
Speaker 4: the facade. They care about what it looks like on camera,
Speaker 4: in the artworks and marketing materials, and they will weigh in.
Speaker 4: They'll sit with your architect, they'll make you fly to
Speaker 4: Milan or Stuttguard or wherever, and they'll really weigh in
Speaker 4: on this stuff. Others are much more obsessed with the interior.
Speaker 4: So brand, bride brand, It really depends on that. But
Speaker 4: in general, the developer is paying between one and a
Speaker 4: half to three and a half percent, depending on how
Speaker 4: the deal is structured, to license the brand's likeness for
Speaker 4: twenty five year deals that can be extended and that's
Speaker 4: how it works. So the developer is running point on everything.
Speaker 4: The brand can choose how nitpicky it wants to be,
Speaker 4: and that is all kind of laid out in the
Speaker 4: agreement too.
Speaker 2: How did those partnerships actually come into being? Is it
Speaker 2: the developers approaching the brands or the brands approaching developers.
Speaker 2: How did they actually meet.
Speaker 4: So one of the pioneers of this is a guy
Speaker 4: that I hope we can bring into the studio someday.
Speaker 4: His name's Gildsert. He's a Miami developer and he created
Speaker 4: this thing called a Porsche Design Tower, which is this
Speaker 4: black obelisk type building Sunny Aisles Beach, which is a
Speaker 4: very Russian heavy market in South Florida, and I think
Speaker 4: he approached Porsche and they created a partnership. It worked
Speaker 4: out really well, and then you just saw a huge
Speaker 4: wave of these in the US in other markets. It's
Speaker 4: unclear whether the brand is trying to plant a flag
Speaker 4: and then they find the right developer. Not quite sure,
Speaker 4: but in general I would imagine it's the developer kind
Speaker 4: of driving this. And you see everything from brands that
Speaker 4: makes sense. There's an adult chain Gabana tower coming up
Speaker 4: in Miami.
Speaker 1: Correct sense, We got them.
Speaker 4: Well, when you look at it, it will absolutely make
Speaker 4: sense to some that are a little bit more inexplicable.
Speaker 4: There is uh a tower in Dubai that's coming up
Speaker 4: that is designed by a guy called Jacob the Jeweler.
Speaker 4: Is anyone familiar what you know?
Speaker 1: Tell us about Jacob the Jeweler.
Speaker 4: So, Jacob the Jeweler is sort of the celebrity jeweler
Speaker 4: that known for those statement pieces, very flashy, et cetera.
Speaker 4: And he's teamed up with a developer in Dubai called
Speaker 4: Bin Bin Rutti I think is the name. They're also
Speaker 4: doing a Mercedes tower and they're they're building something together.
Speaker 4: So some of these I don't know how they're going
Speaker 4: to go.
Speaker 1: How many did you say? There's two hundred?
Speaker 4: They're shy of two Hundreddulgien, Gabana, Mercedes, Benz. I believe
Speaker 4: there's a Kovali tower. Yeah, And Surfside is going to
Speaker 4: get a Kovali tower made by one of another huge
Speaker 4: Yui developer called Demac. There is god, I'm sure there's
Speaker 4: a Fendi tower as well. Bentley has a tower as well, Aston.
Speaker 1: Martin Residencesani Really Yeah, Bentley Tower. I had no idea
Speaker 1: about any of.
Speaker 4: This, And then obviously there's the more conventional Ritz Carlton,
Speaker 4: all of those.
Speaker 1: Oh, the Bentley Tower looks like it's gonna be nice
Speaker 1: twenty twenty six. When I was a kid, I used
Speaker 1: to vacation with my family over Christmas and sunny aisles
Speaker 1: and it was nothing like this. In fact, the old
Speaker 1: like eighties like postcards is really kind of said what
Speaker 1: happens though, Like this is like, you know, people talk
Speaker 1: about gentrification. This is like gentrification on steroids, right, Like,
Speaker 1: what is the effect in local communities or people who
Speaker 1: just lived in these areas when suddenly a neighborhood or
Speaker 1: an area becomes the arena for a billionaire uh Schnitzel
Speaker 1: size content.
Speaker 4: Well, I think we have a more proximate example, right,
Speaker 4: what the Hamptons used to be versus what it is today.
Speaker 4: So there's two ways to look at it. One, life
Speaker 4: as we know it is completely warped in those markets.
Speaker 4: If you're in a certain part of Dubai, you are
Speaker 4: paying double triple what you used to pay even five
Speaker 4: years ago, undeniable. On the other side, if you were
Speaker 4: a property owner in some of those places, you probably
Speaker 4: made a really good amount of money. So I mean,
Speaker 4: is it like, are we what is the like? What
Speaker 4: sort of chain are we against? Are we against capitalism?
Speaker 4: It's kind of a philosophical question, but yeah, life in
Speaker 4: a lot of these markets, Miami, affordability is at an
Speaker 4: all time low. Right, This is a big thing that's
Speaker 4: come up over and over. Rent prices have gone up
Speaker 4: forty over the last couple of years. I think there
Speaker 4: is some softening now, but life for the average Joe,
Speaker 4: not you, but the average show is a lot harder
Speaker 4: than it used to be.
Speaker 2: I want to go back to the question that we
Speaker 2: started with in the intro, which is clearly people are
Speaker 2: making a lot of money off of the ultra luxury segment.
Speaker 2: And clearly we've seen efforts to replicate the Dubai model,
Speaker 2: particularly in the Middle East, but you know some other
Speaker 2: places are trying it now as well. How big can
Speaker 2: this more market b Is there room for everyone? Can
Speaker 2: we have multiple gleaming, shiny Kvali branded cities in the
Speaker 2: Middle East and have enough multimillionaires to fill them all up.
Speaker 4: That's an incredible question because I think you have to
Speaker 4: have a baseline level of desirability in a city to
Speaker 4: make it work. So somewhere like Zada or Alula, which
Speaker 4: is that city in Saudi Arabia they're trying to build.
Speaker 4: It's going to be a long road before they can
Speaker 4: try to offer a tower like this, right. But to
Speaker 4: your broader point, there's so much money in the world.
Speaker 4: The rich are just getting a lot richer night Frank
Speaker 4: had a statistic where they basically they define people. I'll
Speaker 4: try at Wheorth there's thirty million and up that jump
Speaker 4: by four percent over the year. There's more than six
Speaker 4: hundred thousand such people in the world. And again, they're
Speaker 4: not tethered to their local markets anymore. So if you
Speaker 4: think of it as like a billionaire hedge fund titan
Speaker 4: who's tired of sort of schlepping through New York, they
Speaker 4: have a lot more options in terms of building new
Speaker 4: cities from scratch. It's really hard. Dubai has a history
Speaker 4: of being like a mercantile hub. I think Miami, if anything,
Speaker 4: is the more interesting example where it went from sort
Speaker 4: of a backwater for you know, vacationing Americans to becoming
Speaker 4: this global hub. It's always attracted shady money from Venezuela
Speaker 4: and Latin America. But we're looking at something very different.
Speaker 1: Now, let's go back to this idea of like a
Speaker 1: real estate market. I mean you talked about, you know,
Speaker 1: going back several years, the most expensive wrong of properties
Speaker 1: in New York would somehow be connected still to the
Speaker 1: New York City property market, right Like that's like the
Speaker 1: sort of the old paradigm that you know, you have
Speaker 1: this like spectrum within New York, And now the idea
Speaker 1: is it's a it's global, and so the very top
Speaker 1: echelon of New York City properties are the top echelon
Speaker 1: of Miami properties don't necessarily have to be connected either
Speaker 1: cyclically or price wise to the local market. But it's
Speaker 1: just like this, like this sort of like clear break
Speaker 1: from how these markets used to work in the past.
Speaker 4: I think. So I think that this will prove itself
Speaker 4: out in the data over time. But let's say you
Speaker 4: went from Manhattan's first the record sale that I remember
Speaker 4: was this fertilizer billionaire paid eighty eight million at fifteenth
Speaker 4: Central Park West. The next record was set by Michael Dell,
Speaker 4: who paid one hundred point four million, so still kind
Speaker 4: of within the range. The next one was what Ken
Speaker 4: Griffin two hundred and thirty eight million, right, and that
Speaker 4: changed everything. So the way I think about it is
Speaker 4: if a Michael Dell is willing to pay one hundred
Speaker 4: million in New York and the highest priced home in
Speaker 4: Boston is thirty million, a developer might be like or
Speaker 4: a sponsor someone who has a great home might be like,
Speaker 4: you know what, I could probably get Dell to pay
Speaker 4: forty five for this.
Speaker 1: Right.
Speaker 4: So it's hard to say when it changed, but I
Speaker 4: think the pandemic was absolutely a catalyst for this. Where
Speaker 4: you saw numbers just doubling six months, eight months a year,
Speaker 4: you would see that now the depth of the market
Speaker 4: is the eternal question, right. There are going to be
Speaker 4: some developers who price accordingly, who buy land accordingly, who
Speaker 4: build and finish out apartments and homes to this level,
Speaker 4: hoping to find that billionaire who then never shows up.
Speaker 2: It's so weird talking about these numbers because they're so
Speaker 2: detached from the day to day reality of most people.
Speaker 2: It's almost like talking about monopoly money or something like that.
Speaker 2: You mentioned the pandemic, just then what are the risks
Speaker 2: to this trend or this sort of like it almost
Speaker 2: feels like it's reinforcing, So you know, the wealthy get wealthier,
Speaker 2: they have more money to spend on these things, and
Speaker 2: so we see more of this luxury property being developed.
Speaker 2: Is the risk something like a pandemic that would curb
Speaker 2: individual mobility even if you're a billionaire, or is it
Speaker 2: something like I don't know, global text.
Speaker 1: Or anger and some revolution.
Speaker 4: I don't know, So I don't think mobility has ever
Speaker 4: been an issue for billionaires. Right, even at the height
Speaker 4: of the pandemic, you had a barrier stern link camping
Speaker 4: out in Miami Beach and you had people flying all over.
Speaker 4: So I think this class of people is somewhat insulated
Speaker 4: from mobility issues. Now, absolutely these countries could come up
Speaker 4: with some sort of pricing or taxation mechanism that would
Speaker 4: make this more difficult. Kycs are another problem if there
Speaker 4: is somehow, some kind of global consortium saying we need
Speaker 4: to know who this is, how much they've paid, and
Speaker 4: sort of where that money came from. But the odds
Speaker 4: of that happening are really slim. Markets like South Florida,
Speaker 4: markets like the UAE and other countries that want this
Speaker 4: kind of wealth to sort of insulate themselves from the
Speaker 4: humdrum of the average folk. It's very unlikely that they're
Speaker 4: going to collude and come up with like a I
Speaker 4: don't know, some sort of international organization of sorts.
Speaker 1: Out of curiosity. Is crypto money big enough that it
Speaker 1: moves the dial in some of these markets?
Speaker 4: One hundred percent. I think there was a big wave
Speaker 4: of crypto money coming into absolutely in South Florida, certainly
Speaker 4: in the Middle East, and the volatility I think the
Speaker 4: beyond and I think about this a lot. How much
Speaker 4: money do you need to able to be able to
Speaker 4: afford a forty million dollar apartment? And the answer is,
Speaker 4: what are.
Speaker 1: The condo feesh yeah, what are the fees on that?
Speaker 4: Well, not not even the fees. I don't actually know
Speaker 4: the fees, not even the fees. It's more about like
Speaker 4: how much liquid do you need? Right? And so, when
Speaker 4: you've made your money, when it's easy come, it's easy go.
Speaker 4: So people who've made their money in the last year,
Speaker 4: eighteen months, they made it through crypto, they're much more
Speaker 4: willing to pay forty million, even if they just have seventy.
Speaker 2: Right.
Speaker 4: It's that sort of threshold of yeah, you know, I
Speaker 4: made the money, yolo.
Speaker 2: I'm guessing they have a whole support network of people
Speaker 2: who are actually looking after the apartments as well when
Speaker 2: they're not there, which would seem to be a lot
Speaker 2: of the time.
Speaker 4: Yeah, I think the infrastructure around this new market is fascinating.
Speaker 4: So you do see brokers who are now on what
Speaker 4: I call the circuit so Skiing and Aspen, the F
Speaker 4: one race in Melbourne, et cetera. And this is where
Speaker 4: the buyers are right, they're following. They've kind of created
Speaker 4: this lifestyle traveling around with these people, and so they
Speaker 4: can often shepherd in not only deals in their market,
Speaker 4: but then connect them with the brokers and the property
Speaker 4: managers and the wealth managers and all that. So there
Speaker 4: will be this new class of not billionaires, but millionaires
Speaker 4: whose sole job is to cater to the international property
Speaker 4: portfolios off the billionaires.
Speaker 1: I've never gone to an F one race. I'm not
Speaker 1: really into F one, but I also feel like I
Speaker 1: only want to do it if I can be in
Speaker 1: some like billionaire box. I don't just want to be
Speaker 1: in the stand, like I only want to get a
Speaker 1: really great view the brokerage community around this. Are there
Speaker 1: legacy brokers building out tiers or divisions, or are there
Speaker 1: new entrants into the space that are disrupting the traditional
Speaker 1: industry in some way.
Speaker 4: It depends on the market. So in Palm Beach, a
Speaker 4: lot of the because this kind of real estate is
Speaker 4: such a high touch business, you often have to take
Speaker 4: twenty calls a day from the billionaire in places like
Speaker 4: Palm Beach, which is traditionally sort of an enclave, but
Speaker 4: not a dynamic market in the way it's been. I
Speaker 4: think there's been what more than ten twenty eight nine
Speaker 4: figure sales recently. I don't have the stats in front
Speaker 4: of me, But in markets like that, it's the old
Speaker 4: sort of guard that is cleaning up. So there's a
Speaker 4: guy called Larry Mownes, who I believe has brokeered pretty
Speaker 4: much all the one hundred million dollar deals in the
Speaker 4: last few years. Then you have some of the new people,
Speaker 4: the brokers who've built this infrastructure that combines media and
Speaker 4: combines glopzo Ryan Starhant I believe it's sold something for
Speaker 4: one hundred and twenty million in Palm Beach. So you
Speaker 4: are getting these upstarts coming into these markets, but oftentimes
Speaker 4: they are teaming up with the old hand.
Speaker 2: What's the next leg of this trend? So you know,
Speaker 2: we talked about going from luxury to ultra luxury. So
Speaker 2: maybe before you would have a really nice apartment, but
Speaker 2: now you have a really nice apartment with a helipad.
Speaker 2: Or maybe you had a nice non branded apartment and
Speaker 2: now you have a Mercedes Benz apartment or whatever. What's
Speaker 2: the thing that people are where. I'm trying not to
Speaker 2: say Schnitzel, but what's the next competitive like goll Or
Speaker 2: Target here.
Speaker 4: I think there's actually going to be a little bit
Speaker 4: of a throwback to the roots, and I think rustic
Speaker 4: luxury is going to be quite a big trend.
Speaker 1: Now you're speaking more traces, Yeah, I like this. What
Speaker 1: does that look like?
Speaker 4: Examples sort of I haven't seen a listing that sort
Speaker 4: of falls into this, but a giant sort of an
Speaker 4: old school treehouse or oh that's not the right now. No,
Speaker 4: I don't have a true but I'm talking about a
Speaker 4: log cabin, let's say in a prime market like Aspen,
Speaker 4: for example, that may have sold for a couple million
Speaker 4: back then. But now, guess what. Jeff Bezos wants to
Speaker 4: return to his roots, wants to find some nature. He's
Speaker 4: willing to pay something like twenty million for it, right,
Speaker 4: so I think the and I haven't seen many of
Speaker 4: these homes, I don't really run into them, but if
Speaker 4: you were, I would think that the sort of return
Speaker 4: to roots, farmland, et cetera is going to be a big.
Speaker 2: Part of this is climate change concern, right, So you
Speaker 2: see people who have grown up in desert areas who
Speaker 2: be interested in buying huge tracts of land in Maine
Speaker 2: or something like that.
Speaker 4: Yeah, there is a just a fascinating and probably concerning
Speaker 4: feudalism happening where a lot of these guys are just
Speaker 4: making incredible land bank purchases. And now some of the
Speaker 4: biggest developers in New York City are also the biggest
Speaker 4: landowners in.
Speaker 1: America just in terms of acreage.
Speaker 4: Yeah, just thousands and thousands of acres across Montana, Wyoming.
Speaker 1: And oh so it's companies that had been developers in
Speaker 1: New York City are now doing this different play of
Speaker 1: just land accumulation.
Speaker 2: Absolutely, and they get tax breaks as well, don't they
Speaker 2: if they keep it in environmental trust. That's the other
Speaker 2: kind of interesting rinkle.
Speaker 4: Yeah, there are a lot of taxation gymnastics around buying
Speaker 4: tracks of land in random spots.
Speaker 1: Tracy, at some point I want to do an episode. Well,
Speaker 1: we talked about when we were in Jackson Hole last year.
Speaker 1: This came up. I know it comes up in I
Speaker 1: used to live in Vermont when I was younger, and
Speaker 1: I know that one of the things the rich do
Speaker 1: is the tons of land and then they get this
Speaker 1: big tax break with this commitment to never develop it,
Speaker 1: which doesn't help them cut down on taxes. It also
Speaker 1: causes everyone else to have shorter, be short on housing.
Speaker 1: So I really don't.
Speaker 2: See it, especially in jacksonvill Yeah.
Speaker 1: Yeah, so I don't really see how it benefits everyone
Speaker 1: except them. But you know, I guess it's good for
Speaker 1: the supposedly it's good for the greenery. So last question,
Speaker 1: this idea, it's very disconnected these markets. What happened though
Speaker 1: in twenty twenty two when we did see you know,
Speaker 1: pretty big fall in the stock market, we saw the
Speaker 1: crypto crash, We saw a lot of tech money vanished, Like,
Speaker 1: was there a cyclical effect? Did it slow down any
Speaker 1: of this activity when we did have this sort of
Speaker 1: contraction in other asset values?
Speaker 4: So the deal volume may have fallen in terms of
Speaker 4: number of transactions, but the price points did not. Right,
Speaker 4: So a lot of these transactions. I brought up Larry
Speaker 4: Ellison paying one hundred and seventy million. I believe that
Speaker 4: happened in twenty two location Bonnie paying one hundred and
Speaker 4: sixty three million. That happened in twenty two. So I
Speaker 4: think when you're at that level of the game, you're
Speaker 4: not as worried about this now as a market in
Speaker 4: terms of number of transactions. Yes, there may may be
Speaker 4: a slowdown. We're definitely seeing a slow down now, but
Speaker 4: I think right before I came into the studio there
Speaker 4: was one hundred million dollar deal in Aspen as well.
Speaker 1: All Right, this was a fantastic conversation. Attend some Tommy,
Speaker 1: thank you so much for coming on odlock my pleasure.
Speaker 2: Guys, thank you, thank you attend. That was great.
Speaker 1: That was really fun, Tracy. I want to go back
Speaker 1: to Sunny Isles in Florida, which used to be this
Speaker 1: very like sort of sleepy area like north of Miami,
Speaker 1: and check out the Bentley Tower. It looks really nice.
Speaker 2: Uh, shorty, Joe, you do that. No, I haven't spent
Speaker 2: much time in Miami, so I don't have a good
Speaker 2: frame of reference.
Speaker 3: It does.
Speaker 2: Part of this conversation is kind of depressing in the sense,
Speaker 2: but it feels like the rich get richer. A lot
Speaker 2: of this wealth feeds off of itself. As we were discussing,
Speaker 2: so this idea of you build a portfolio of properties,
Speaker 2: you can basically become a developer yourself, pour money into
Speaker 2: a particular area, see the market value go up, and
Speaker 2: then maybe crystallize that gain and buy even more properties.
Speaker 2: It doesn't seem like there's a circuit breaker for a
Speaker 2: lot of time.
Speaker 1: Yeah, no, that's exactly right, and it really does seem
Speaker 1: like in many respects, the high price is part of
Speaker 1: the appeal because a you have the competitive aspect, so
Speaker 1: you want to one up the billionaire or you know
Speaker 1: who bought in that neighborhood. It's like, oh, they just
Speaker 1: paid one hundred million, I'm going to pay one hundred
Speaker 1: and twenty five million. And then you know, if you
Speaker 1: do have five billion dollars or billions of dollars and
Speaker 1: you want to get it out of the country and
Speaker 1: you want to deploy it in real estate, well like
Speaker 1: it's pretty inefficient to go buy like a thousand different
Speaker 1: houses in places where if you have a one, you know,
Speaker 1: one hundred and fifty billion dollars one hundred fift million
Speaker 1: dollar apartment that can absorb that. That could solve your
Speaker 1: problem of needing to diversify your portfolio in a way
Speaker 1: that a cheaper place just couldn't.
Speaker 2: No, absolutely, and I do think like the taxation and
Speaker 2: the capital controls and that aspect of it is certainly
Speaker 2: a driver. And that's one reason why we've seen it
Speaker 2: really take off in places like Dubai and maybe to
Speaker 2: some extent, Miami. There doesn't seem to be a lot
Speaker 2: of incentive for tax havens like maybe Saudi Arabia or
Speaker 2: the UAE to not want to have this period.
Speaker 1: Why would you give up on that area?
Speaker 2: Yeah, exactly, Like you know, the city is basically built
Speaker 2: on absorbing that kind of global wealth, and they seem
Speaker 2: to be doing a good job of it.
Speaker 1: So we also like to live in an area leader
Speaker 1: again in this where I feel like many of the
Speaker 1: ultra ridge, despite having been successful and things working out
Speaker 1: for them, feel a certain sense of like victimization, a
Speaker 1: certain level of being aggrieved. And so if our city
Speaker 1: that's sort of built around the premise that you can
Speaker 1: be really rich and you don't have to apologize for it,
Speaker 1: and it's okay to even flaunt it. That seems like,
Speaker 1: I guess I get the appeal.
Speaker 2: Yeah, you're right, Like there are a lot of multi
Speaker 2: billionaires who complain about their tax rate or complain about
Speaker 2: being shunned by society.
Speaker 1: There are the people. Don't retweet them.
Speaker 2: That's right. Actually, you know, we could solve the global
Speaker 2: property crisis by I don't know, retweeting billionaires and satisfying
Speaker 2: their Schnitzel cravings. Let's put it that way, sure, there, yes,
Speaker 2: Oh my god, Okay, this has been another episode of
Speaker 2: the Oudlots podcast. I'm Tracy Alloway. You can follow me
Speaker 2: at Tracy Alloway and.
Speaker 1: I'm Joe Wisenthal. You can follow me at the Stalwart.
Speaker 1: Follow our guest Hit ten some Tommy He's at hit
Speaker 1: samt Y. Follow our producers Carmen Rodriguez at Kerman Ermann Dash,
Speaker 1: Ol Bennett at Dashbot, and kil Brooks at keil Brooks.
Speaker 1: Thank you to our producer Moses Onam. And from our
Speaker 1: Oddlot's content, go to bloom slash odd Lots, where you
Speaker 1: have transcripts, a blog, and a newsletter and you can
Speaker 1: chat about this topic and many others. Twenty four to
Speaker 1: seven in the Oddlots Discord, Discord, dot gg, slash odlts.
Speaker 1: Maybe we'll get a hit ten to come in there
Speaker 1: and do an AMA for people. If he's down for that,
Speaker 1: he's giving the thumbs up, so we'll have him do that,
Speaker 1: and then you can ask him more questions about the
Speaker 1: world of ultra luxury real estate.
Speaker 2: Oh, that'd be fun, all right. And if you enjoy
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