Fight, For The Right, To Dig Sand Without Feeling Shame.

August 13, 2024
  • Malibu Is The Source Of An Epic Housing Battle Over Use Of Public Sand
  • Reality Shows, And The Siloing Of The Uber Wealthy Has Jettisoned Shame
  • Celebrity Real Estate Legal Battles Are Becoming More Common Place

What is in the water in Malibu, California? Public sand is in the water, and the right to use it is being litigated. The Son of KKR co-founder Kohlberg is suing the Milwaukee Brewers owner for digging up public beach sand for his home renovation. I had long believed that the uber-wealthy class mostly handled their disputes privately, but the transcendent rise of super luxury real estate in the public eye seems to have normalized the airing of dirty laundry. This time, it’s literally sand. Public spats of the high net worth class are becoming a new form of “aspirational pricing” to flex. Legal battles can draw attention to real estate holdings, as mere mortals never seem to tire of the soap operas that ensue.

About a decade ago, I coined the phrase “aspirational pricing” in luxury real estate. I noticed it first in The Hamptons market, which is joined at the hip with Manhattan in New York City via Wall Street. An aspirational pricing scenario goes like this: A buyer pays $5 million for a home and renovates it at a cost of $5 million for a $10 million total investment. The owner lists the newly renovated home for $50 million, but it never sells. Then, the neighbors around the property list their similar-sized homes for around $50 million, and they, too, are not able to sell their homes. A celebrity article in a magazine or tabloid then refers to the owner, mentioning their $50 million home in the Hamptons, and voila, the owner becomes a “bold-faced name” by being linked to a $50 million property. The absurd asking price is “normalized” by all the other properties being priced similarly, even though they all never sell. The most important ingredient for this type of pricing behavior is the lack of shame for being so delusional about the value. I think this is likely fueled by the long-term infusion of reality television into our culture.

The Malibu Sandbox Spat

However, not all “aspirational priced” homes are incorrect. At the very top of the market, valuations have been reset across the U.S. I observed this pivot about a decade ago.

There is a $300 million home coming to market in Malibu, and in the past couple of years, there have been a lot of national home price records set there, as described below:

A 9.5-acre oceanfront estate sold in June for $210 million, the most ever for a California residence. It surpassed the high mark set just last year by superstars Beyoncé and Jay-Z, who paid $190 million for a sprawling Malibu compound. Nearby is a home purchased in 2021 by Silicon Valley luminaries Marc Andreessen and Laura Arrillaga-Andreessen for $177 million, a state record at the time.

Bloomberg

Two grown Malibu men are now fighting about the use of beach sand – chronicled by Bloomberg in one of the most famous luxury locations in U.S. residential real estate. Here’s an overview of the case (click to explore).

It was a permitted action, but the plaintiff sued and took videos of the work being done.

Source: Bloomberg

The Paradise Cove neighborhood of Malibu has been the location of choice for the wealthy and has seen some of the highest prices paid in the U.S., if not the world. The Wall Street Journal’s piece explains: Inside ‘Billionaires’ Bluff’: Why Paradise Cove Keeps Drawing the Superrich.

While this is my anecdotal take, more and more celebrity real estate seems to be the source of more and more litigation. Perhaps the media is getting more skilled at digging lawsuits up. While privacy seems to have less currency with the wealthy class than it used to, high-net-worth individuals are less incentivized to worry about the pettiness and shame of it all in a 24-hour news cycle. Kanye West, Katy Perry, Nick Jonas, and others have been very public about their property-related litigation, for example.

Super Luxury Remains Detached From Local Housing

CNBC used my super luxury sales data in their piece: Sales of $100 million homes set to double this year as trophy properties recover. The key point made is that the market for these super luxury properties has little, if anything, to do with a local housing market. This is happening in my trifecta of markets, including LA/Malibu, Palm Beach/Miami, and Manhattan/Hamptons. If the pace of sales of $100 million home sales (or $50 million home sales) continues at the current pace, 2024 will be the highest on record, while U.S. home sales have been lackluster this year.

Siloing The Uber Wealthy From Housing Society

A friend of mine recently shared an insight into the separation of the wealthy from the rest of us that I thought was brilliant. Using my beloved New York Yankees as an example, the separation created in the access to the Champion Level Suites at Yankee Stadium.

We were isolated from the rest of the stadium in those seats. We entered in a separate way, our food is separate, there’s no walkway or stairs to reach us, our bathrooms are separate. There’s no point in our experience that we have to interact with anyone who isn’t in our seats.

By living in an isolated world, the power of shame for the uber-wealthy has been diminished (as has for some of the brokers that sell these properties). The pettiness these cases can exude has been lost in translation to the masses. Oof.

Did you miss yesterday’s Housing Notes?

August 12, 2024

What If Rates Don’t Fall? ‘Plan B is drink our own urine or our competitors’ blood, stay in the foxhole.’

Image: Chat & Ask AI

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