Multimillion dollar estates move even in a slow market

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by Lisa Antonelli Bacon

Four years ago when Middleburg landowner Zohar Ben-Dov learned that his neighbors planned to sell their lush rolling land, he was concerned that a new owner might come in and spoil the pristine views surrounding Kinross, his 587-acre horse farm. The solution? Buy the 150 acres on the block. But before Ben-Dov could get to the bargaining table, a local developer snapped up the property, with plans to subdivide it and build a half-dozen or more homes. 

“He beat us to it,” recalls Sam Gunter, CFO for Kinross Farm, a Thoroughbred and cattle-raising facility. 

The new owner was in the process of surveying the land when Ben-Dov offered significantly more than he would’ve paid just a couple of months earlier. That closed the deal.  “Even if [development] hadn’t spoiled the view for us, which it would have,” says Gunter, “it certainly would’ve spoiled the whole area.”

The tract, known as Poplar Grange, is across the road from Atoka Farm, the former home of Sen. John Warner. To protect it from future subdivision, Ben-Dov, a New York real estate investor who has lived in Middleburg for years, has established easements. And he built a 12,000-square-foot speculative home on 102 of the acres, siting it to protect the views from Kinross.  With a caretaker’s cottage, a barn and landscaped and irrigated lawns, Gunter expects the place to fetch about $13 to $15 million. He won’t say whether the deal is a money-maker or a wash. Either way, he says, it was worth it to save the land from development. 

In the rarefied air occupied by the ultra-wealthy, large real estate purchases may be made less for financial gain than for convenience and enjoyment. Even in the sagging real estate market that saw primary residence sales fall 10 percent between 2006 and 2007, that thin slice of the market — where millions of dollars change hands in a single transaction — has slowed only a tad.

“While the higher-end estate market is somewhat insulated from the ups and downs of the wider real estate troubles, it’s clear that a number of would-be buy ers have been waiting and watching the market,” says Peter Wiley of Frank Hardy Inc. Realtors in Charlottesville. He and his brother Justin represent a number of high-end properties in Central Virginia, from horse farms to waterfront properties to historic estates.

Other real estate agents, however, report no slowdown. “I think when you get into the extraordinary properties it doesn’t matter if the mortgage rates are up or down, if the market is slow. When these people want to buy, they buy,” says Cindy Barnett, an associate broker in the Richmond office of Select Properties of Virginia, an affiliate of Christie’s Great Estates.

Barnett’s company holds the exclusive listing on Point Farm, a $41.7 million estate overlooking the Chesapeake Bay. Located in Northampton County on Virginia’s Eastern Shore, the waterfront home has been on the market since last summer. “We’ve had lots of interest in it, mostly from right here in the United States,” says Barnett. Flush with amenities, “It could be a corporate retreat,” she adds.

The estate belongs to Daniel A. Hoffler, chairman of Armada Hoffler, a development and construction company in Virginia Beach. It sits on 130 acres, including 2.5 miles of shoreline with a 20,000-square-foot manor house, a pool, tennis court, 16-stall horse stable and fenced riding rink, salt-water stocked fishing ponds, three piers and a boathouse. Only pre-qualified buyers armed with a financial statement from their banker are eligible for a showing.

Marching to a different drummer
Sales of homes ranging in price from $1 million and up account for only about 2 percent of the residential market. “So when you get into multimillion dollar properties, it’s a fraction of a percent,” says Walter Molony, an economist with the National Association of Realtors. “It’s too small to measure.”

For most Americans, discretionary purchases — whether it’s a vacation home or just a vacation — are the first items to go in a recession. And in today’s slowing economy, many people are holding onto money that just five years ago would’ve flown out the window for investments or luxuries. In that upper-end market, though, homes priced in the double-digit millions usually are second, third or fourth homes that function as primary residences; not investments or vacation homes. “That piece of the market does march to a different drummer,” says Molony. “It seems to be dependent more on stock wealth, not on people qualifying on traditional loans.”

One measure of the minor dent in the elite market is an increased emphasis on international marketing.  Real estate brokers and agents say they are reaching out to international buyers hoping to take advantage of the weak dollar. “The number of Europeans coming to look has picked up considerably,” says Diane Bellaschi of Long & Foster in McLean.  And the draw doesn’t stop there. Late last year, Dubai, an emirate in the United Arab Emirates, bought a McLean property with two kitchens and a terrace pool overlooking the river for a little more than $11 million. 

In the past Frank Hardy Realtors Inc. relied largely on regional and national marketing, but it, too, is broadening advertising efforts to include Europe, the Middle East and Asia.  “To increase the pool of potential buyers, we have shifted a large portion of our advertising overseas,” says Wiley.

Helping foreign buyers

In fact, there is an emerging industry of businesses designed to make private overseas real estate transactions smooth and easy. Companies, like HIFX Inc. in San Francisco offer a white-glove list of services that first-time foreign buyers and sellers might fail to consider, such as locking in the dollar’s exchange rate. The concept originated in England where foreign exchange with continental currencies is a daily activity.

In addition to helping buyers navigate the labyrinth of legal and financial issues associated with a foreign buy, HIFX President Ward Naughton says companies like his are more economical than letting the bank handle transactions. “We get the difference from what we get the funds at versus what we sell them to you for,” he says. “We take a lot lower spread than the banks do.”

Facing a possible recession in an already lethargic market doesn’t have upper-end real estate brokers worried. According to Bellaschi, the length of time on the market for high-end properties hasn’t changed much.  Properties of more than $5 million tend to stay on the market longer than those with lower prices, she says. Yet, wealthy sellers may not feel the pressure or the pinch when their estate sits for a while. “Some can be on the market for six months or more. It depends on how well-priced it is.”

Some brokers are beginning to see an upswing in the market for high-end homes.  “We seemed to be at a little bit of a lull there for a while,” says Bellaschi. “It’s picking up now. People are seeing it’s an opportune time to buy.” 

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