< All Press

$100 Million Homes: In The Stratosphere Of Real Estate, Logic Breaks Down

When it comes to selling real estate, price is everything. Whether a $5 million mansion or a $100,000 fixer-upper, asking prices are usually based on a mix of comparable property listings and sales, house and land size and the property’s condition.

But logic often breaks down with the highest-end trophy homes. By definition they are unique, sometimes one-of-a-kind places for which few (or sometimes no) comparables exist. Value becomes highly subjective.

“I call it pricing using the ‘P.F.A.’ or pull from air,” says Jonathan Miller, chief executive of Miller Samuel, a New York-based appraisal firm. Miller values homes, including trophy properties, and tracks sales data in major markets along the East Coast. “It becomes, ‘find the highest sale you can and come up with any kind of logic to talk yourself into a number that’s 10% to 20% higher.’”

Some luxury realtors agree, though they tend to phrase it differently: find the price it would take for a moneyed buyer to sell.

The world’s wealthiest have been plowing cash into American real estate since late 2010. Some of the biggest sales: a $100 million Silicon Valley mansion, an $85 million Los Angeles manor, and an $88 million Manhattan penthouse. The uptick in trophy home demand has led to a surge in listings by owners who are not necessarily pressed to sell, but would do so for the right price.

Nowhere is this dynamic more evident than in New YorkCity. The recent spate of big-ticket sales has led to the listing of three homes sporting staggering price tags that are only tenuously linked to market comparables. (Miller actually created a fantastic chart of NYC sales prices that can be found here.)

The CitySpire penthouse was listed in July for $100 million, making it America’s most expensive apartment on the market. The octagonal Midtown Manhattan condo is 8,000 square feet stretched across three floors, with a private elevator and 360-degree wraparound terraces 73 floors up overlooking Central Park that are supposedly the highest in the city. The asking price breaks down to roughly $12,500 per square foot, dizzyingly high outdoor space excluded.

Only one property in the history of Manhattan housing has ever fetched a comparable sum: a penthouse in billionaire-centric 15 Central Park West, which went in March for $88 million, or a record-breaking $13,000 per square foot, to a trust held by the daughter of Russian billionaire Dmitry Rybolovlev. That sale has raised eyebrows as an alleged ploy to hide assets in a messy divorce.

“The $88 million sale is an outlier in all the sales activity so it’s somewhat notable that the extended trophy market boom we are now seeing off of it may not be basis for the market,” explains Miller.In other words, pricing a penthouse off of one sale may be overly ambitious. Particularly when that new $100 million listing sits atop an older building from the 1980s, has low ceilings and is in danger of having some of its prized views obstructed by the super luxury high rise One57, which is under construction a few blocks away. One has to wonder how much of a role marketing played in arriving at the price – $100 million gains a lot of attention.

The same might be said of a penthouse listed for $95 million at the Ritz-Carlton at 50 Central Park South. The price is $25 million more than casino billionaire Steve Wynn recently paid for another penthouse in the hotel-condo building that’s double the size. The new listing, which boasts a glass-roofed solarium facing Central Park and a 42 foot-long ballroom, breaks down to roughly $18,000 per square foot, excluding outdoor space. By comparison, Wynn paid about $6,400 per square foot for his new trophy pad.

A few floors below the Rybolovlev penthouse at 15 Central Park West, two side-by-side condos recently were listed together for $95 million. The owner, steel magnate Leroy Schecter, is combining the units into one large apartment that will have five bedrooms, seven bathrooms, a library, a gallery area and access to some of the best building amenities in the city (15 CPW is famous for them). The price per square foot: roughly $18,200. They aren’t even penthouses.

Premium properties around the base of Central Park have generally commanded from $7,000 to $10,000 per square foot over the past year. The average listing price for other units in 15 CPW is $8,856 per square foot, according to Streeteasy.com. Even billionaire Daniel Loeb’s 10,674 penthouse in the building, which reportedlyis being unofficially shopped for $100 million, breaks down to $9,300 per square foot if rumors are true.

And while the two penthouses in up-and-coming One57 are in the process of being sold for more than $90 million each (the exact price details are unknown), their large size (10,923 and 13,554 square feet) means they too will fall somewhere in that territory.

The tippy top of Los Angeles’ high-end market has a similar pricing dynamic. Last year the home formerly known as the Spelling Manor finally found a buyer. Listed for $150 million, it went for $85 million – a price, despite the 43% discount, still likely to cause envy among neighboring Platinum Triangle trophy homeowners. Perhaps that’s one reason the Owlwood Estate in Beverly Hills has been quietly and unofficially shopped around for $100 million, according to one source. The 11-acre estate is the amalgamation of three storied celebrity compounds and has broken sale records before.

Even so, asking for an outrageous price does not mean ye shall receive. Other comparably priced Los Angeles-area palaces have failed to find buyers: Fleur de Lys has graced the sale block since 2007 with a stubborn $125 million price tag and the Beverly House, the bankruptcy-addled William Randolph Hearst estate in Beverly Hills, has been reduced to $95 million after first listing for $165 million in 2007. And in Manhattan, the $90 million Woolworth Mansion continues to patiently wait for a billionaire townhouse enthusiast.

Get Weekly Insights and Research

Housing Notes by Jonathan Miller

Receive Jonathan Miller's 'Housing Notes' and get regular market insights, the market report series for Douglas Elliman Real Estate as well as interviews, columns, blog posts and other content.

Follow Jonathan on Twitter

#Housing analyst, #realestate, #appraiser, podcaster/blogger, non-economist, Miller Samuel CEO, family man, maker of snow and lobster fisherman (order varies)
NYC CT Hamptons DC Miami LA Aspen
Joined October 2007