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July 2009


REAL ESTATE

Deeds & Don'ts
by Scoop Drummond and the HC&G Staff

INSIDE STORIES BEHIND AREA REAL ESTATE DEALS

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MY LIPS ARE SEALED
In the wake of the Great Recession, extreme discretion has become the modus operandi for Hamptons deals. No person of means-—whether buying, renting or selling—wants the general public to know one iota of any personal financial transactions that might smack of excess. Not for lack of perturbation, it's difficult to be discreet in the Hamptons, with its well-earned moniker of Cash Hamptons.

To be sure, excess is still very much in the Hamptons index of overindulgence—except it's not being talked about as lustily as before; what does transpire stays close to the vest. In a recent mega-sale in East Hampton, for example, the buyer requested that all information regarding his purchase be under seal. Brokers were asked to delete the listing from their systems as though it never existed. Another example included a high-octane rental wherein the owner didn't want the house listed. Its whereabouts were to be kept secret and all potential renters had to be specially vetted before any pertinent information would be forthcoming. Discretion, it turns out, is the new excess.

ME, WORRY?
What's at play here are several factors. For one, participants don't want to appear hard up for money if they're suddenly renting or selling their property. They may not be. But that's the first assumption these days, especially if it concerns a homeowner who's never put his property on the market before. It's like unexpectedly finding yourself in a room full of Madoff victims when you'd rather be with Genghis Khan. Speaking of Madoff, speculation is rampant as to the number of homes currently for sale in the Hamptons as a result of his Ponzi scheme. Best guess is about five, including, we assume, Madoff's own Montauk abode. Palm Beachers fared worse. Estimates are that four apartments in Breakers Row had to be sold immediately, as well as a half dozen Palm Beach homes. Probably double that number of homes had to be sold in Boca Raton and several more properties in Miami.

These days, dealmakers who are buying or renting significant properties seem to be very sensitive to peer pressure and opinion. Before, one would boast about a grand acquisition unabashedly. Now it's "mum's the word."

Many listing brokers are having a tough time getting personal information on prospective customers to qualify them when co-brokers ask to show their exclusives. That these identities are being so closely guarded can get ridiculous. Often the person in question is hardly a household name but rather your run-of-the-mill mega-millionaire with an inflated aversion to wagging tongues. "Pity the poor rich," in some instances may be getting too literal. The rivers still run deep with new fortunes, but they're not being floated so gustily, instead staying deep in the shadows, not the limelight.

The ersatz brokerage community is getting its comeuppance, too. It's no accident that ad pages are down in most area magazines and newspapers (with the possible exception of this one). Those brokers who continually plastered the public with their digitally enhanced poses can no longer spend as freely as in past years.

THE GOOD OLD DAYS
The great spree of brokerage acquisitions that occurred earlier in this decade are unraveling somewhat. All those far-flung corporate entities ruling heretofore local real estate offices are cutting back. Such brokerage houses are suffering during these extreme times when there are fewer commissions earned to support multiple offices that seem to sprawl from here to eternity. It's no surprise to find brokers moving around looking for better deals and cuts, too. Many long for the return of the carriage trade rather than the mass transit that prevails.

What does this do to a region known as a perennial Playland? Did similar shenanigans of restraint keep parties and galas at bay in Palm Beach this winter? We're told it was still a glamorous scene there—just not as effulgent as before. The likes of such canny billionaires as Wilbur Ross and his ilk appear not to have suffered; in fact, some prospered.

What is also happening is that the heretofore high-flying 30-somethings have lost luster—a bit of their swagger if not their careers in money manipulation, where being on Wall Street is no longer a guaranteed ticket to privilege and wealth. Some, in fact, are shucking their MBAs and Wharton degrees and going green—either raising heritage chickens in the sticks or writing action novels in search of Dutch silver, if those windmill-dotted properties are now out of reach.

Replacing them are the old guard who have stayed on the sidelines, quietly protecting their hundreds of millions earned during the last decade. These are the 60-somethings who are beginning to return to the scene with their wit and wisdom intact—with the only social bravado on display being decorum.

What some people forget is that you don't need oodles of cash to live well. Granted, a splendid amount helps as happily as strolling to a matinee, but less can go a long way nowadays since, for now, it costs less to own or rent in the Hamptons compared to times past. Many argue this will be a temporary phenomenon—buy now before it's too late. The next comparable percent-off sale may not occur for another 10 or 15 years so act fast!

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DEJA VU
Assuredly, regeneration of wealth with high hopes and habits of spending it greedily and gaudily will return with a vengeance. But if global warming doesn't cause the obliteration of our coastline as we know it—or if a critical mass isn't somehow kept at bay so as not to inundate our streets and byways as inexorably impassable—then places such as the East End will remain a magnet for folks who like to play hard and fast with fistfuls of cash. —S.D.

STATE OF THE MARKET:

GET REAL
With a nod to William Shakespeare, the "winter of discontent" for local brokers appears to be over. The freeze experienced from December through late March has thawed. Many brokers are finally experiencing a summer of some content. "A year ago, prices were high and buyers weren't ready to step up to the prices sellers were asking," offers Corcoran broker Michael Schultz. "Sellers began dropping their prices and suddenly everything changed." Schultz is happy to report that he closed on one house in May and has three more in contract. His rentals picked up, too. "The real reason so many people are coming to the Hamptons again is that their kids are here, their friends are here—and there's no place else luring them. We all prefer to go where our friends are."

Corcoran broker Susan Breitenbach agrees that the winter past was like "experiencing the perfect storm." She says she'd never seen anything as devastating in her 20 years of marketing properties. Breitenbach can now pose as the Poster Girl for the turnaround. She enjoyed $32 million in volume in May. To what does she credit her success? "I work three times harder than anyone," she says. But she also augmented her marketing strategy, spending more money and energy on her website while buying banner ads online. "I've done a lot of sales recently now that buyers and sellers have become realistic," she adds. Although you won't hear it from her, Breitenbach is rumored to be the broker behind this summer's top rental, the Sagaponack home of Joanne Corzine, ex-wife of the New Jersey Governor, which went for an impressive $900,000.

TIP TOP BROKERS
Sotheby's Bridgehampton manager Aspasia Comnas is proudly beaming about a recent report listing Sotheby's Manhattan broker Serena Boardman as number one broker in the US. It should be noted that Corcoran Group on the East End had members in the Top 10, as well, including Susan Breitenbach and Gary de Persia. "Our office has been busy lately," says Comnas, "And in all price ranges (at least up to $10 million)," she adds. "For the first time in years, we're seeing potential buyers losing out to superior offers." Comnas argues that housing prices are now so competitive that shoppers who have been trying to purchase at the bottom are being overbid by value shoppers who have already done considerable homework and are ready to pounce. "This is indeed a buyer's market," says the industry veteran. "But I think the need for additional discounting may have gone by."

WHAT A DIFFERENCE A YEAR MAKES
Ask most brokers about business and you'll probably hear something like this: "We're seeing green shoots—verdant little signs of life that the market is recovering." There's also anecdotal evidence of a pickup in current demand from clients. Take the case of developer Jay Furman, who, two years ago, purchased and since rebuilt the Water Mill retreat of Wall Street tycoon Ted Forstmann. The estate was known for hosting the annual Huggy Bear Invitational, where charity viewers could watch tennis pros take down friends and neighbors. The new owners rebuilt the original estate and fashioned it into a stunning new residence. Mrs. Furman was most anxious to move in and begin entertaining.

"Not so fast," said her husband, "We're not moving until we sell our existing house." Their home had lingered on last year's market for some time. This season, it sold in a wink. After a year of no lookers and no takers, everything changed. The new buyers wanted immediate occupancy. Champagne flutes are now being filled at Chez Furman. And it looks as if they will be inviting the Huggy Bear crowd to return this year, as well.

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NEW RULES
Stuart Epstein of Devlin McNiff rejects the old wisdom that customers look for housing in spring because they want to be in by summer and come back in mid-August when they begin looking for next year. "No more," he says, "We're showing property every day." People are still renting, he adds. "Renters are out every weekend. A completely different market from what we've experienced before in the Hamptons."

BANKS ARE BACK
One of the factors helping drive recent home sales is the ability of buyers to obtain financing. The Wells Fargo Bank in Southampton has been active here. Larger banks are tiptoeing back into jumbo mortgage lending. Bank of New York Mellon's wealth management division reported a 32 percent volume increase for the first five months of the year over last in this category. Mellon's Erin Gorman says Mellon was among the few "go-to" banks for jumbos earlier in the recession. That's helping drive new business now as activity increases from competitors. Even smaller regional banks such as the Smithtown Bank have been reporting increased activity.

NOT QUITE MADOFF
While home sales for individual homeowners continue to be no cause for joy, some developers are experiencing more serious grief. William Landberg, of the firm West End Financial Advisors, had his developmental finger in a number of pots out east, including the purchase of the former estate of Tavern on the Green owner Warner LeRoy in Amagansett. Landberg and his investors shrewdly sold off the main house and some acreage. He teamed up with local builder Rich Gherardi of Sand Dollar Development Corp. to build spec houses on the property. (One of which was a former HC&G Idea House.)

Last year, the pair teamed up again to offer a high-end spec house in Sagaponack, which served as the Southampton Hospital Showhouse. Alas, pressures of leverage caused Landberg to make some financial moves that ended up hospitalizing him with a nervous breakdown. Gherardi acknowledges his partner's woes but believes some sort of financial workout for Landberg's investment funds can be accomplished.

SPEC-TACULAR
Farrell Building, whose upscale, gabled spec houses are a reminder of the South Fork's real-estate salad days, hasn't been crushed by the credit crunch, but that doesn't mean owner Joe Farrell doesn't feel the squeeze. His newest projects, both south of the highway, will be offered for under $5 million. "All anybody seems to be interested in is price," he says. "So I'm taking advantage of deep discounts—sheet rock, labor, copper, wire, everything's cheaper. Even labor's cheaper." He says he's concentrating on buying land that's steeply marked down, "and I'm passing on my deals to new buyers."

Farrell closed on two of his former spec homes in mid-June, both of which had been sitting on the market, breaking even on one on the North Fork and losing three or four percent value on one on Burkeshire Drive in Southampton. (The buyer, David Silver, could use the discount—he's a Madoff victim.) Farrell's expecting to sell one on Bailey Road in Southampton Village mid-build for $2.999; he would have priced it at $4.3 last year, he says. Another on Bridge Lane in Bridgehampton will be priced at $4.95. "I don't want to be out there selling $12 million houses right now." For his own home, he'll make an exception. The recently completed 31,000-square-foot "Sandcastle" manse recently upped its asking price to a cool $59.5 million.

Editor's Note: Scoop's opinions do not reflect the view of C&G.

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