In the past, the most expensive housing in any major city would be connected in some way to the economics of the city itself. If the general market was weak, the high end was also weak. If the general market was strong, then the high end was strong. But increasingly in cities like NYC, Aspen, Dubai, Miami, and elsewhere, the ultra high end exists in a different market, where the rich splash around money at levels which are completely disconnected from the local environment. At these levels, the ultra-wealthy are engaging in a global game of one-upmanship, where a higher price tag, perversely, can make a given property even more tantalizing. On this episode we speak with Hiten Samtani, founder of ten31 Media, which focuses on real estate, about how this market has developed. We talk through the deals, brokers, the buyers, and the general economics of this ultra-premium tier. We also discuss the rise of branded condos -- or those with the Mercedes or Porsche imprimatur -- and how they're reshaping the real estate landscape. This transcript has been lightly edited for clarity.
Key Insights from the pod:
Why all the multi-million dollar luxury towers? — 4:37
Who's developing these properties? — 6:52
What are the profit margins on property like this? — 7:55
What’s in a multi-million dollar property on the market? — 10:22
Growing wealth through real estate development — 11:53
Why do billionaires own so many homes in the same city? — 12:37
Are luxury real estate markets cyclical? — 14:22
How much of luxury real estate is rule of law arbitrage? — 16:16
How are brands changing luxury real estate properties? — 19:29
Effects of luxury development for local residents — 23:58
How big is the global luxury real estate market? — 25:38
What are the risks to the luxury market trends? — 29:07
Can crypto money affect these markets? — 30:45
What is the brokerage community in the luxury market? — 32:20
What’s the next trend in luxury real estate? — 33:38
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Joe Weisenthal (00:43):
Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal.
Tracy Alloway (00:48):
And I'm Tracy Alloway.
Joe (00:50):
We did that episode recently on the big potential development in Northern Egypt. I'm sort of fascinated by these huge gleaming mega-cities, many of them being built in the Middle East, tons of money pouring into these absolutely jaw-dropping skyscrapers, luxury buildings, things like that.
Tracy (01:13):
Yeah, I think we spoke a little bit about it on that episode, but it's sort of the Dubai blueprint that seems to be being copied and multiplied across the Middle East. And the question that always comes up is, well, how big can these markets actually be? Like, how much demand is there for multimillion dollar properties in tax havens? And it seems like the answer is - more than you would think.
Joe Weisenthal (01:38):
These cities are kind of weird to me because I never get the impression that, and you lived in Abu Dhabi, so you could correct me if I'm wrong, but it doesn't seem like there's that much going on, even when I see photos of people there, like friends stopping there - it always looks a little quiet. Am I wrong?
Tracy (01:56):
The way I used to describe living in Abu Dhabi, and I should just add a massive caveat here, which is [that] I left in 2018, and my understanding is that since then, Dubai has been booming. In particular, there's been a lot of immigration from Russia, lots of people moving there as part of the tech industry as well.
But the way I used to describe living in Abu Dhabi was, it was kind of like living in the suburbs of Texas, in the sense that, it's very hot, everyone drives everywhere, you don't really see people walking around on the streets that much. And you spend a lot of time at the shopping mall or the swimming pool.
Joe (02:32):
It doesn't sound so bad. I'd take it.
Tracy (02:33):
It's a nice lifestyle. But yes, there isn't a ton going on, although they have made efforts to change that they've opened museums and things like that.
Joe (02:42):
Yeah, but to the point though, when you see the price tags on what a penthouse in one of these buildings are going for or just, you know, how much money is being developed or to some of these buildings, it's absolutely eye-popping.
Tracy (02:56):
You see these headlines and it's not just like one apartment sold for $100 million, it's like five apartments sold for $100 million. And I think that's the surprising thing. The other thing that's been happening, I don't know if you saw, but in Dubai, they opened that Mercedes-Benz Tower. Did you see that?
Joe (03:14):
No.
Tracy (03:15):
I'm trying to [describe it], this is a difficult topic for me because I think my personal taste veers so far away from this direction, I'm not even going to mention the fact that I obviously couldn't afford any of these properties. But it's an interesting one. I don't know, it's kind of gleaming. It's got lots of lights. If you look at photos of the interior, it's very modern. It's very clean and light, and it has magnificent views of the Dubai skyline. I'm not entirely sure I would want to live there, but again, it's a moot point because there's no way that I would ever be able to afford it.
Joe (03:50):
I looked it up and it definitely looks a lot different than what I imagined - where I've never been - but what I imagine your place out in the middle-of-nowhere in Connecticut looks like.
Tracy (04:00):
Probably the polar opposite.
Joe (04:01):
Okay. I want to learn more about this world of real estate for the ultra-rich around the world and some of these cities and the business behind these extraordinary gleaming towers. Some of them are in nice cone shapes, some of them look a little bit like Jenga towers of some sort.
I'm really excited. We do have the perfect guest. We're going to be speaking to Hiten Samtani. He is the founder of ten31, a new real estate media company, former editorial director at The Real Deal, and knows real estate really well. And people who know real estate say to read Hiten. So thank you so much for coming on Odd Lots.
Hiten Samtani (04:35):
My pleasure guys. Thanks for having me.
Joe (04:37):
What’s going on? What's the deal with all these big towers?
Hiten (04:40):
The way to think about this market is it's not really a local market anymore. I think historically, when we think about luxury prices in New York, in Dubai, in Aspen, we sort of compare them locally. So I haven't opened an economics textbook in a long time, but there used to be this concept of local maximums.
That no longer applies. The markets at the very, very top. I'm not talking about what the well-heeled would buy, but what the well-heeled sort of many, many echelons higher than that would buy has blended. It's become a global little, I call it the parallel universe of this luxury market.
Tracy (05:14):
Okay. So give us some examples of the numbers around this particular segment of luxury real estate. Because again, we're not talking about an apartment in New York that maybe cost $2 million we're talking…
Joe (05:14)
Or $10 million even.
Tracy (05:15)
Yeah, we're talking about apartments that cost like $50 million, $100 million. What have we seen recently in terms of transactions?
Hiten (05:32):
So the Alibaba co-founder bought a penthouse at 220 Central Park South on Billionaire’s Row for $190 million. That was already an apartment that a hedge funder, Daniel Oak, had paid $93 million for just a year and change ago. That's a 100% premium on a pad like that.
Larry Ellison in Florida had bought a Florida estate for $170-odd million and the previous buyer had paid $94 million. So you're talking about these numbers that are just, that defy reality and you can't track it. You can't really map it and say, you know ‘it's growing 10% a year.’ We're talking about a price appreciation of 50% to 75% to more than a 100% within a year sometimes.
Joe (6:14):
Why is that?
Hiten (6:16):
So there's been, it's a hard thing to track because there isn't really any great data that exists in this global sphere, but it seems like there's been a new kind of feudalism that's happening, which is global billionaires are now untethered to places like New York and they're looking to portfolio-shop. So, they're thinking more about their purchases in terms of ‘Okay, I'm a captain of the universe, right? And I want to have my pad in New York where I take my meetings. I want to have my estate in Florida. I also want my ski chalet in Aspen. And guess what? I'm willing to pay not just a little more than the local king of the hill, I'm willing to pay double. So I don't really have competition in that market.’
Tracy (
06:52
):
So who's developing these properties? Are there ultra-luxury specialists or is it [that] the existing normal luxury real estate developers are just building more specialized departments? Who's actually doing it?
Hiten (07:06):
Yeah, so one thing about developers as sort of a species is they're really, really good at rejigging their portfolios to cater to current demand. So in many cases, developers who are building, you know, $20 million apartments are saying, you know, ‘Why not go for the $50 million apartment?’
And in some cases there is a one sort of a unique class of spec-home developer who is saying ‘Okay there's x-amount of billionaires in the world. There's x-amount of the kind of product that they want. Let me go and build.’
So there's a guy called Todd Glaser out of Palm Beach, and he just built, he bought an island, it's called Tarpon Island. It's the only private island in Palm Beach. He paid $85 million for the property, and then he listed it at $185 million after obviously adding tons of bells and whistles. We're talking about 1,300 feet of frontage on the water.
Tracy (07:55):
What are the profit margins like on this kind of property? Because I have to imagine at some point there's a ceiling of how much it would cost to build these things. And so if you're just selling it for more and more money, presumably the margin is getting fatter and fatter. And that's part of what would be driving this activity. But again, I don't know, like I'm happy if my ceiling isn't falling down. So there are probably some very expensive options out there for multimillionaires that can boost the price or the cost of building, but I have to imagine the margins are part of what's driving this.
Hiten (08:26):
The margins are incredible, right? You could make up to $60-$70 million if you do it right, but you have to take into account the incredible risk. You're carrying a spec home, you're hoping that there's a buyer that's out there for it. You're paying a ton of money to buy the property. And there's spec, you know, carrying costs, financing costs, construction costs.
And we have seen some pretty bad flame outs. Los Angeles is a great example of this, where there was a guy called Nile Niami who was trying to sell a home for $500 million and he called it ‘The One’ and foreclosure upon foreclosure upon foreclosure, I think he's lost pretty much all his empire.
Joe (09:03):
Tracy, did you ever watch that documentary, The Queen of Versailles?
Tracy (09:07):
Yes. That was great. That was at the time ,America's, or the world's, most expensive house. Is that right?
Joe (09:12):
Yeah. I thought of all the various films and documentaries that were sort of related to the financial crisis. I actually thought that was the best one because it really got into the financing chain behind this guy who was trying to build like a-half-a-billion-dollar home in Florida. And how changing fortunes quickly changed his ability and I went bankrupt. Do you know what happened with that one?
Hiten (09:35):
I do not, I do not with that one. But I can say that the more success a developer has in a space like this, lenders start to think of it as an asset class. So if someone, like a Todd, is building a home, making a 40% markup, etc., then he might find a conventional lender. He may not need that wildcatting lender anymore. He might be able to find a conventional lender or partners to fund these kind of deals because he could show - to create an asset class is very difficult, but if you do it and you're the first one or one of few, you can make a lot of money.
Joe (10:22):
If I think of like ‘I want to buy a nice condo here in New York City.’ I like my apartment. It has a decent amount of space. It has two bathrooms, that seems, it's enough for me. And then I have friends who have much nicer places and some of them have a backyard and, you know, that seems nice too. But when we're talking about like the $50 million property, what's in there? And if you want to sell to that market, what does it have to have?
Hiten (10:47):
Well, size is very important, right? A lot of these homes will be, if you're talking apartments, we're looking at 5,000, 7,000 square feet of indoor space, a couple thousand square feet of exterior space as well. Private elevators are typically a given. And then depending on the market, it can go completely crazy.
Joe (11:04):
Say more, go! What's the craziest? Just tell us some crazy markets.
Tracy (11:08):
Yeah. Let us live vicariously.
Hiten (11:08):
Some markets have helipads, for example, some homes have helipads, some of them are not operational helipads, but still a billionaire wants a helipad sometimes. Waterfront living is key.
And what tends to happen with some of these billionaires, and I think this portfolio shopping point is very important - Larry Ellison, Malibu, he made his first purchase back in the, I think in, the late ‘90s or early 2000s. Since then, he's bought 35 parcels.
So when you're spending money like that on luxury real estate, you have the ability to not only influence the homes, but the entire landscape of the area. So he, essentially, is responsible for changing the retail makeup of Malibu as well. So don't think just about the homes, think completely about the sort of the area as well - that's important.
Tracy (11:53):
Oh, that's interesting. So you can make an investment if you're a billionaire in a particular area and then kind of develop that area and presumably make more money on your investment?
Hiten (12:03):
Absolutely. And Ken Griffin, what he's doing in Miami is probably a good example of this. He has been buying up, well he said it was for his mom, but it's probably for him, he's been buying up trophy home after trophy home after trophy home.
Now pull together that portfolio. The thing about kings of the hill, and you guys know this better than I do, is that you're a king of the hill until the next King of the Hill shows up, right? So Ken Griffin was the alpha citizen of Miami. And guess who showed up recently? Jeff Bezos, right?
Joe (12:29):
Oh yeah.
Hiten (12:29):
And Jeff Bezos just dropped, I think it was $90 million yesterday, I was telling you, Joe, on an Indian Creek mansion, which is his third purchase in that area.
Joe (12:37):
From the perspective of the billionaire, these kings of the universe, what is the appeal of like, I could see having a place in Miami, and a place in Dubai, and a place in London, and a place in New York, and a place in Malibu, and a place in Hawaii. Why three in Miami?
Hiten (12:52):
I think a lot about it as the new feudalism, right? Okay. You're trying to build this enormous land bank in some of the world's most-coveted markets. There's also, I mean, we can't really deny this - there is some element of schnitzel-measuring here as well, right? There has to be a little bit of that.
Tracy (13:07):
I'm sorry, ‘schnitzel’ measuring?
Hiten (13:08):
Look, I don't know how censored Bloomberg is. That's what I went with. I think there is an element of one-upping the other person here. So, if Ken Griffin goes and buys a $60 million home, guess what? You're going to see someone like Bezos come in.
I think Dubai is a great example of this. If I could get into one specific, by the way I grew up there, so plenty of things we could talk about later, Mo [Mukesh] Ambani, Indian tycoon, comes in and he buys a home for, I believe it was $80 million. Sets a record. This is Palm Jumeirah, which is that man-made island off the coast. Tracy, I'm sure you've probably been there.
So he pays $80 million, smashes the record by a factor of two. Some mystery buyer comes in a few months later and pays $83 million for a home, also on Palm Jumeirah. Now someone like Ambani, that doesn't really sit well with them. And so he comes back a few months later and he pays $163 million for another home on Palm Jumeirah. So that's why I think it's not always [about] investment. It might just be like ‘Hey, I am the guy here.’
Tracy (14:08):
Since you brought up Palm Jumeirah, I mean this is like the original almost extreme luxury development, and what was the one that was shaped like the world?
Hiten (14:18):
Yeah, it was just called The World. But that turned into like the Ponzi of all Ponzis.
Tracy (14:22):
Yeah. So this is exactly what I was going to ask. So I mean, Palm Jumeirah, there were eye-watering prices being paid for those properties. Same thing for The World, but then it all kind of collapsed. There was a big bust in those luxury property markets, at least in Dubai. And then it kind of came back. Are these markets still cyclical or have we kind of gone beyond that level?
Hiten (14:44):
It’s very hard to tell. It's a great question. It's very hard to tell. In a market like Miami or in Dubai, are we just looking at a wildcatting situation or is there something else?
One statistic that might give us some context here: pre-2021, there were four sales of $25 million and up in any given year in Dubai. In 2023, we had 56. So who are we as, you know, snobby New Yorkers to think, is this a market that has legs or not?
I think the Manhattan market was responsible for the bulk of $10 million plus sales for the longest time. It's hard to crunch the numbers because, again, there is no repository of this. But I would imagine that ratio has gone way down. And to your point, I think in these luxury markets, there is a very strong sense that without rule of law, without some recourse in Dubai or the UAE in general, has had pretty spotty sort of issues around credit and debt and all of that.
I think the government there, to its credit, has been taking some really strong steps to make sure this should function like any other market, the courts and there should be recourse and all of that. So I think with that, there will always be a few scams, like The World.
But to your point about Palm, even though the market collapsed for a while -- I'll give you a personal anecdote. An uncle of mine had bought a home on Palm for $1.5 million way back—something like that, $1.5 million or one and change. He recently moved out of his own house to rent a villa somewhere else because a Russian is offering him one third of his purchase price in rent a year. So that kind of gives you a little [idea[…
Joe (16:16):
That's a great cap rate right there. There you go. But actually, I'm glad you brought up rule of law because this is where I want to go next, which is that, look, some places are just really nice, like Aspen. I've never been there, but I'm sure if you like to ski and I'm sure it's very nice. I like Miami. It's very nice by some measures. New York, obviously the greatest city in the world.
But you know, when you think about extreme wealth, particularly in certain countries that don't have great rule of law or where, perhaps if you're out of favor with the leader, you can risk confiscation. So, you know, maybe ultra-rich people in China or ultra-rich people in Russia, etc.
One way that they might want to protect some of their wealth is to put money in a foreign bank account. But there are limits to that, obviously. And that's not always trivially easy. How much is this about, or how much are some of these flows essentially, I don't know, rule of law arbitrage where it's like, how much can you get your wealth into a system that, more or less, has predictable rules?
Hiten (17:20):
Real estate has historically been a very lax KYC type market, right? So to your point, I think capital flight is definitely a big thing. We saw the Dubai property market just absolutely take off once the war in Ukraine happened. A lot of Russians, and I would say, the way I think of it, as Russian adjacent or Kazakhstan, etc., a lot of that money flowed into Dubai because the UAE took a very hands-off approach to judging anyone in this war.
So that turned out really well. The earlier example we talked about, which was the Alibaba co-founder, if you remember the other guy, he sort of went away for a while. Jack Ma, right? He kind of, not disappeared, but he fell out of favor.
Tracy (18:00):
He did disappear, yeah.
Hiten (18:01):
So I'm not in Joseph Tsai’s head, but I'd imagine that part of the reason that he's willing to pay double what was already a crazy price at 220 Central Park South, a lot of that is predicated on this.
Joe (18:16):
Tracy, one thing that makes me wonder is whether the high price itself, becomes part of the selling point. Because the higher the price, the more capacity the market has to take off some of your liquid wealth.
Tracy (18:28):
Oh yeah, absolutely. I think that's part of it. And it's funny, this conversation just jogged my memory. Do you guys remember Arif Naqvi? From Abraaj?
Joe (18:37):
Who was that?
Tracy (18:38):
So Abraaj used to be one of the world's biggest private equity funds with a specialism in emerging markets, based in Dubai. And basically they went bust and Arif, I think is still being prosecuted for fraud and is being extradited to the US, or was at some point.
But, when all of that was going down, I was in Abu Dhabi and I was writing a lot about this. And it turned out that his house in Dubai, Arif’s house, was on the same block as a bunch of dictators’ houses. They had all moved, I can't remember the specific ones, but think African dictators. And they had all bought properties in this one particular neighborhood for the exact, presumably, reasons that we are talking about right now.
Hiten (19:25):
Former prime minister of Pakistan Pervez Musharraf also had a house there, so that makes sense.
Tracy (19:29):
So the other thing I wanted to ask is, in the intro, I mentioned that Mercedes-Benz Tower in Dubai, and this seems to be becoming more of a thing as well, this idea of branded luxury real estate properties. And I have to say, when I think of branded property, the thing I usually think of is the Margaritaville retirement communities in Florida. But this is a whole other level and it seems to be becoming more of a thing. What's going on there?
Hiten (19:56):
So there are, I think, just shy of 200 active branded condo projects in the world. Forty percent of them are in North America, and then they're dispersed in places like Dubai, etc.
What happens, I believe, it's connected to the initial point I made about this dispersion of global wealth. And so, a billionaire who is from New York understands 57th Street. They wouldn't understand what Palm Jumeirah is. They might understand what Cavalli is, or Mercedes-Benz or Bugatti. So there is this coalescing around brands that are already known and you're piggybacking off a luxury brand to create both legitimacy and exclusivity.
Joe (20:33):
That's super interesting. So the Mercedes brand becomes a way as like, well, I know Mercedes makes good stuff. They take care of their brand pretty well. They're probably not going to slap their name on some garbage project. What is the role of the brand though? Is it in the construction of it? Do they have input? Do they have design? Is it purely a licensing deal? But they probably do a lot of vetting, like talk to us about the business from the brand side.
Hiten (20:58):
Fair enough. I will say it is not a coincidence that a lot of these branded projects are in markets where there is a history of pretty sloppy construction and defects and lawsuits and all of that, right? So this is kind of the way to say, ‘Hey, we're different from the other guys.’
But so, the brand's role, I was talking to a couple of developers about this and one opened the kimono on how these deals actually work. And he said, some brands will get really fastidious about the facade. They care about what it looks like on camera, in the artworks and marketing materials.
And they will weigh in, they'll sit with your architect, they'll make you fly to Milan or Stuttgart or wherever, and they'll really weigh in on this stuff. Others are much more obsessed with the interior. So brand by brand, it really depends on that.
But in general, the developer is paying between one and a half to three and half percent depending on how the deal is structured to license the brand's likeness for 25 year deals that can be extended. And that's how it works. So the developer is running point on everything. The brand can choose how nitpicky it wants to be. And that is all kind laid out in the agreement too.
Tracy (22:02):
How do those partnerships actually come into being? Is it the developers approaching the brands or the brands approaching developers? How do they actually meet?
Hiten (22:11):
So one of the pioneers of this is a guy that I hope we can bring into the studio some day, his name's Gil Dezer. He's a Miami developer, and he created this thing called a Porsche Design Tower, which is this black obelisk-type building in Sunny Isles Beach, which is a very Russian-heavy market in south Florida.
And I think he approached Porsche and they created a partnership. It worked out really well. And then you just saw a huge wave of these in the US In other markets, it's unclear whether the brand is trying to plant a flag and then they find the right developer. I'm not quite sure, but in general, I would imagine it's the developer kind of driving this. And you see everything from brands that make sense—there's a Dolce & Gabbana tower coming up in Miami…
Joe (22:51):
Makes sense. Yeah, that makes sense.
Hiten (22:53):
Well, when you look at it, it’ll absolutely makes sense. To some that are a little bit more inexplicable. There is a tower in Dubai that's coming up that is designed by a guy called Jacob the Jeweler. Is anyone familiar with Jacob?
Joe (23:07):
No. Tell us about Jacob the Jeweler.
Hiten (23:08):
So Jacob the Jeweler is sort of this celebrity jeweler, known for those statement pieces, very flashy, etc. And he's teamed up with a developer in Dubai called Binghatti, I think is the name. They're also doing the Mercedes Tower and they're building something together. So, some of these—I don't know how they're going to go.
Joe (23:25):
How many did you say? There's 200 being built in the world?
Hiten (23:27):
They're shy of 200, just shy of 200.
Joe (23:29):
So Dolce & Gabbana…
Hiten (23:30):
Dolce & Gabbana, Mercedes-Benz, I believe there's a Cavalli Tower. And Surfside is going to get a Cavalli tower made by another huge UAE developer called Damac. There is, God, I'm sure there's a Fendi Tower as well. Bentley has a tower as well. Aston Martin residences.
Joe (23:48):
This is so amazing.
Hiten (23:48):
Cipriani.
Joe (23:49):
Really? Bentley Tower. I had no idea about any of this.
Hiten (23:53):
Casa Cipriani. And then obviously there's the more conventional
Tracy (23:57)
Casa Cipriani. Oh my god.
Hiten (23:58)
Ritz Carlton, all of those.
Joe (23:58):
Oh, the Bentley Tower looks like it's going to be nice. 2026. When I was a kid, I used to vacation with my family over Christmas on Sunny Isles and it looked nothing like this. In fact, the old like eighties postcards is really kind of sad.
This is like, you know, people talk about gentrification. This is like gentrification on steroids, right? Like, what is the effect in local communities or people who just lived in these areas when suddenly a neighborhood or an area becomes the arena for a billionaire, uh, schnitzel size contest?
Hiten (24:31):
Well, I think we have a more proximate example, right? What the Hamptons used to be versus what it is today. So there's two ways to look at it. One, life as we know it is completely warped in those markets. If you're in a certain part of Dubai, you are paying double, triple what you used to pay even five years ago. Undeniable.
On the other side, if you were a property owner in some of those places, you probably made a really good amount of money. So I mean, is it like, what sort of change are we against? Are we against capitalism? It's kind of a philosophical question. But yeah, life in a lot of these markets, Miami affordability is at an all-time low, right?
This is a big thing that's come up over and over. Rent prices have gone up 40 odd percent over the last couple years. I think there is some softening now, but life for the average Joe, not you, but the average Joe, is a lot harder than it used to be.
Tracy (25:38):
I want to go back to the question that we started with in the intro, which is, clearly people are making a lot of money off of the ultra luxury segment. And clearly we've seen efforts to replicate the Dubai model, particularly in the Middle East, but you know, some other places are trying it now as well. How big can this market be? Is there room for everyone? Can we have multiple gleaming, shiny Cavalli branded cities in the Middle East and have enough multimillionaires to fill them all up?
Hiten (26:13):
That's an incredible question because I think you have to have a baseline level of desirability in a city to make it work. So somewhere like Jeddah or AlUla, which is that city in Saudi Arabia they're trying to build, it's going to be a long road before they can try to offer a tower like this, right?
But to your broader point, there's so much money in the world, the rich are just getting a lot richer. Knight Frank had a statistic where they define ultra-high net worth as $30 million and up. That jumped by 4% over the year. There's more than 600,000 such people in the world. And again, they're not tethered to their local markets anymore. So if you think of it as like a billionaire hedge fund titan, who's tired of sort of schlepping through New York, they have a lot more options.
In terms of building new cities from scratch, it's really hard. Dubai has a history of being like a mercantile hub. I think Miami, if anything, is the more interesting example where it went from sort of a backwater for vacationing Americans to becoming this global hub. It's always attracted shady money from Venezuela and Latin America, but we're looking at something very different now.
Joe (27:19):
Let's go back to this idea of a real estate market. I mean, going back several years, the most expensive rung of properties in New York would somehow be connected, still, to the New York City property market, right? Like that's the sort of the old paradigm that, you know, you have this spectrum within New York.
And now the idea is that it's global. And so the very top echelon of New York City properties, or the top echelon of Miami properties, don't necessarily have to be connected either cyclically or price wise to the local market. But is this just like this clear break from how these markets used to work in the past?
Hiten (27:58):
I think so, I think that this will prove itself out in the data over time. But let's say you went from Manhattan's first, the record sale that I remember was this fertilizer billionaire paid $88 million at 15 Central Park West. The next record was set by Michael Dell, who paid $100.4 million, so still kind of within the range.
The next one was Ken Griffin, $238 million, right? And that changed everything. So the way I think about it is, if a Michael Dell is willing to pay a hundred million in New York and the highest priced home in Boston is $30 million, a developer might be like, or a sponsor, someone who has a great home might be like ‘You know what? I could probably get Dell to pay $45 [million] for this,’ right?
So it's hard to say when it changed, but I think the pandemic was absolutely a catalyst for this. Where you saw numbers just doubling. Six months, eight months, a year, you would see that. Now the depth of the market is the eternal question, right? There are going to be some developers who price accordingly, who buy land accordingly, who build and finish out apartments and homes to this level, hoping to find that billionaire who then never shows up.
Tracy (29:07):
It's so weird talking about these numbers because they're so detached from the day-to-day reality of most people. It's almost like talking about monopoly money or something like that. You mentioned the pandemic just then, what are the risks to this trend or this sort of, it almost feels like it's reinforcing so, the wealthy get wealthier, they have more money to spend on these things, and so we see more of this luxury property being developed. Is the risk something like a pandemic that would curb individual mobility even if you're a billionaire? Or is it something like, I don't know, global tax reform?
Joe (29:47):
Or local anger in some of these things?
Tracy (29:48):
Revolution? I don't know.
Hiten (29:51):
So I don't think mobility has ever been an issue for billionaires, right? Even at the height of the pandemic, you had Barry Sternlicht capping out in Miami Beach and you had people flying all over. So I think this class of people is somewhat insulated from mobility issues.
Now, absolutely, these countries could come up with some sort of pricing or taxation mechanism that would make this more difficult. KYCs are another problem. If there is somehow some kind of global consortium saying ‘We need to know who this is, how much they've paid and where that money came from,’ but the odds of that happening are really slim.
Markets like South Florida, markets like the UAE and other countries that want this kind of wealth to sort of insulate themselves from the humdrum of the average folk, it's very unlikely that they're going to collude and come up with, I don't know, some sort of international organization of sorts.
Joe (30:45):
Out of curiosity, is crypto money big enough that it moves the dial in some of these markets?
Hiten (30:50):
A hundred percent. I think there was a big wave of crypto money coming into, absolutely in South Florida. Certainly in the Middle East. And the volatility -- I think about this a lot -- how much money do you need to be able to afford a $40 million apartment?
Joe (31:08):
Oh yeah. What are the condo fees? What are the fees on that?
Hiten (31:10):
Well, not even the fees. I don't actually know the fees. So not even the fees. It's more about how much liquid do you need, right? And so when you've made your money, when it's easy come, it's easy go. So people who've made their money in the last year, 18 months, they made it through crypto, they're much more willing to pay $40 million even if they just have $70 [million].
Joe (31:31):
Interesting.
Hiten (31:32):
It's that sort of threshold of ‘Yeah, you know what? I made the money, YOLO.’
Tracy (31:37):
I'm guessing they have a whole support network of people who are actually looking after the apartments as well when they're not there, which would seem to be a lot of the time.
Hiten (31:46):
Yeah, I think the infrastructure around this new market is fascinating. So, you do see brokers who are now on, what I call, the circuit. So skiing in Aspen, the F1 race in Melbourne, etc. And this is where the buyers are, right?
They’re following, they've kind of created this lifestyle traveling around with these people. And so they can often shepherd in, not only deals in their market, but then connect them with the brokers and the property managers and the wealth managers and all that. So there will be this new class of, not billionaires, but millionaires, whose sole job is to cater to the international property portfolios of the billionaires.
Joe (32:20):
I've never gone to an F1 race, I'm not really into F1, but I also feel like I only want to do it if I can be in some billionaire box. I don't just want to be in the stands. Like I only want to get a really great view. The brokerage community around this, are there legacy brokers building out tiers or divisions or are there new entrants into the space that are disrupting the traditional industry in some way?
Hiten (32:45):
It depends on the market. So in Palm Beach a lot of the, because this kind of real estate is such a high touch business, you often have to take 20 calls a day from the billionaire. In places like Palm Beach, which is traditionally sort of an enclave but not a dynamic market in the way it's been, I think there's been what? More than 10, 20, eight, nine- figure sales recently. I don't have the stats in front of me.
But in markets like that, it's the old guard that is cleaning up. So there's a guy called Larry Moens, who I believe has brokered pretty much all the hundred-million-dollar deals in the last few years. Then you have some of the new people, the brokers, who've built this infrastructure that combines media and combines global – so Ryan Serhant, I believe, had sold something for $120 million in Palm Beach. So you are getting these upstarts coming into these markets, but oftentimes, they're teaming up with the old hand.
Tracy (33:38):
What's the next leg of this trend? So, you know, we talked about, going from luxury to ultra-luxury. So maybe before you would have a really nice apartment, but now you have a really nice apartment with a helipad, or maybe you had a nice, non-branded apartment and now you have a Mercedes-Benz apartment or whatever. What's the next thing that people are— I'm trying not to say schnitzel —but what's the next competitive goal or target here?
Hiten (34:07):
I think there's actually going to be a little bit of a throwback to the roots. And I think rustic luxury is going to be quite a big trend now.
Joe (34:13):
Now you're speaking more Tracy's language. You could live in luxury rustic…
Tracy (34:15):
Yes, I like this.
Joe (34:16):
What does that look like? Are there any examples?
Hiten (34:19):
So I haven't seen a listing that sort of falls into this, but a giant sort of an old school tree house. That’s not the right…
Tracy (34:28):
Oh. No, I don't have a tree house.
Hiten (34:29):
But I'm talking about a log cabin, let's say in a prime market, like Aspen for example, that may have sold for a couple million back then, but now, guess what? Jeff Bezos wants to return to his roots, wants to find some nature. He's willing to pay something like $20 million for it, right? So I think the -- and I haven't seen many of these homes, I don't really run into them -- but I would think that the sort of return to roots, farmland, etc., is going to be a big thing.
Tracy (34:54):
Part of this is climate change concern, right? So you see people who have grown up in desert areas who might be interested in buying huge tracks of land in Maine or something like that.
Hiten (35:05):
Yeah, there is just a fascinating and probably concerning feudalism happening where a lot of these guys are just making incredible land bank purchases and now some of the biggest developers in New York City are also the biggest landowners in America.
Joe (35:21):
Just in terms of acreage?
Hiten (35:23):
Yeah. Just thousands and thousands of acres across Montana, Wyoming…
Joe (35:27):
Oh, so companies that had been developers in New York City are now doing this different play of just land accumulation?
Hiten (35:27):
Absolutely.
Tracy (35:35):
And they get tax breaks as well, don't they? If they l keep it in environmental trust. That's the other kind of interesting wrinkle.
Hiten (35:42):
Yeah, there are a lot of taxation gymnastics around buying tracks of land in random spots.
Joe (35:47):
Tracy, at some point, I want to do an episode, well, we talked about when we were in Jackson Hole, last year this came up. I know it comes up in, I used to live in Vermont when I was younger, and I know that one of the things the rich do is they have tons of land and then they get this big tax break with this commitment to never develop it, which helps them cut down on taxes, it also causes everyone else to be short on housing. So I really don't see…
Tracy (36:13):
Especially in Jackson Hole, yeah.
Joe (36:14):
Yeah. So I don't really see how it benefits everyone except them, but you know, I guess it's good for, supposedly, it's good for the greenery. So last question. This idea it’s very disconnected, these markets. What happened though in 2022 when we did see, you know, a pretty big fall in the stock market, we saw the crypto crash, we saw a lot of tech money vanish. Like, was there a cyclical effect? Did it slow down any of this activity when we did have this sort of contraction in other asset values?
Hiten (36:42):
So the deal volume may have fallen in terms of number of transactions, but the price points did not, right? So a lot of these transactions I brought up — Larry Ellison paying $170 million, I believe that happened in 2022. Mukesh Ambani paying $163 million, that happened in 2022.
So I think when you're at that level of the game, you're not as worried about this. Now, as a market in terms of number of transactions, yes, there may be a slowdown. We're definitely seeing a slowdown now, but I think right before I came into the studio, there was a hundred million dollar deal in Aspen as well.
Joe (37:14):
All right. This was a fantastic conversation. Hiten Samtani, thank you so much for coming on Odd Lots.
Hiten (37:20):
My pleasure guys. Thank you.
Tracy (37:21):
Thank you Hiten. That was great.
Joe (37:22):
That was really fun.
Joe (37:40):
Tracy, I want to go back to Sunny Isles in Florida, which used to be this very sort of sleepy area, like north of Miami, and check out the Bentley Tower. It looks really nice.
Tracy (37:48):
Uuuh. Sure Joe, you do that. No, I haven't spent much time in Miami, so I don't have a good frame of reference. It does, part of this conversation is kind of depressing in the sense that it feels like the rich get richer, a lot of this wealth feeds off of itself, as we were discussing.
So this idea of you build a portfolio of properties, you can basically become a developer yourself, pour money into a particular area, see the market value go up, and then maybe crystallize that gain and buy even more properties. It doesn't seem like there's a circuit breaker for a lot of this.
Joe (38:24):
Yeah, no, that's exactly right. And it really does seem like in many respects, the high price is part of the appeal. Because A) you have the competitive aspect, so you want to one up the billionaire, you know, who bought in that neighborhood. It's like ‘Oh, they just paid a hundred million, I'm going to pay $125 million.’
And then, you know, if you do have $5 billion or billions of dollars, and you want to get it out of the country, and you want to deploy it in real estate, well, it's pretty inefficient to go buy like a thousand different houses in places. Where[as], if you have one, you know, $150 billion, or sorry, $150 million apartment, that can absorb that capacity, that can solve your problem of needing to diversify your portfolio in a way that a cheaper place just couldn't.
Tracy (39:11):
No, absolutely. And I do think the taxation and the capital controls and that aspect of it is certainly a driver. And that's one reason why we've seen it really take off in places like Dubai and maybe to some extent Miami. There doesn't seem to be a lot of incentive for tax havens, like maybe Saudi Arabia or the UAE, to not want to have this particular business.
Joe (39:35):
Yeah, why would you give up on that?
Tracy (39:35):
Yeah, exactly. Like, the city is basically built on absorbing that kind of global wealth and they seem to be doing a good job of it so.
Joe (39:45):
We also live in an area—we didn’t really get into this—where I feel like many of the ultra-rich, despite having been successful and things working out for them, feel a certain sense of like victimization, a certain level of being aggrieved. And so if there are cities that are sort of built around the premise that you can be really rich and you don't have to apologize for it and it's okay to even flaunt it, that seems like, I guess I get the appeal.
Tracy (40:11):
Yeah. You're right. Like there are a lot of multi-billionaires who complain about their tax rate or complain about being shunned by society …
Joe (40:20):
Yeah, or that people don't retweet them!
Tracy (40:22):
That's right. Actually, you know, we could solve the global property crisis by, I don't know, retweeting billionaires and satisfying their, um, schnitzel cravings, let's put it that way.
Joe (40:33):
Should we leave it there?
Tracy (40:34):
Yes. Oh my God.
You can follow Hiten Samtani at
@hitsamty
.