Steven Shane had a twisted holiday this year. The Aspen, Colo., real estate broker, who graduated from selling snowboards to multi-million dollar ski chalets, handled one of the most complex deals of his real estate career over the holidays. End of the year, the rich go shopping for real estate. The sale of a simple duplex turned into a six-sided transaction worth nearly $12 million and dragged in buyers from the United Kingdom, California and Colorado. All that to unload one little half-duplex in Aspen, CO.
It is no secret that the second home market is hurting — hemorrhaging — even more than the primary residential market.
Terry Weaver, chief sales officer and partner in 3rd Home, says 79 million baby boomers reached their earning peak in 1997 and began to buy second homes. Home values skyrocketed, creating a bubble, as buyers bought for investment, not enjoyment. Weaver told journalists at recent panel discussion of the vacation-home market during the annual conference of the National Association of Real Estate Editors in San Antonio that the last four years have been the biggest challenge ever for this market. EVER.
To be sure, few second home developments are starting. I was talking to Dallas Addison today, shareholder/parter at the Addison Law Firm that handles not only golf and resort assets across the country, but also invests in luxurious second home developments. The firms’ latest is one I am dying to see and bring to these pages: The Preserve at Flathead Lake near Kelispell, Montana — the largest natural freshwater lake west of the Mississippi, a Glacier lake. Or as Dallas describes it, a Cowboy Lake Como.
Most golf clubs in the U.S. right now are under some kind of financial pressure, says Addison, though he has seen bright spots, one being a golf resort in Amelia Island, Florida that members took out of bankruptcy and turned around, and another in Scottsdale. The key seems to be in demographics: those half million dollar home buyers are having a tough time now, but the multi-millionaires are doing just fine, thank you.
Which brings us back to Steve Shane and Aspen, a bellwether for the luxury second home market. Buyers with big bucks to spend are back, said Shane at that NAREE panel discussion of the vacation-home market. Proof: 18 properties priced at or above $5 million sold in Aspen this year, 2011, versus 14 sales at that price point in 2010. Meanwhile, 26 properties in that bracket are under contract, according to his brokerage, SDS Real Estate. Even better, it’s summer and the Texans are crawling all over Aspen.
Shane told Mary Umberger of Inman News that asking prices have adjusted down in the range of 25 to 30 percent. And the sweetest news: high net worth people who have been on the sidelines for a couple of years are finally getting back in the game.
Like most of the wealthy’s playgrounds, Aspen has never really suffered. In 2009, while the financial world tanked, Forbes magazine declared the town’s 81611 ZIP code to be the most expensive neighborhood in the country. Median sales price: $6.5 million. (Snowmass and Snowmass Village also landed on the magazine’s Top 10 of priciest ZIPs.) But Forbes also said that $2 billion in home sales in the area in 2007 was down 50 percent two years later, in gloomy 2009. In April 2010, Dallas energy exec Kelcy Warren bought BootJack Ranch, listed at $68 million, $88 million originally, for $46.5 in what was 2010’s biggest real estate deal of the year.
Shane thinks we are seeing the beginning of the upswing now: first-quarter sales in Pitkin County are up 39 percent over the same period in 2010; Aspen leads the county in dollar volume, with more than $58 million in sales.
Who’s buying? Take a guess: people in the financial industry, the private-equity guys, the hedge-fund boys, anybody on Wall Street, Silicon Valley. In San Antonio, Shae told us there is a veritable steady stream of private jets from Chicago to Aspen at any given time.
Shane is listing golfer Greg Norman’s 11,000-acre Seven Lakes Ranch in Meeker, Colo. for $55 million. The estate has been for sale for about a year, but he has identified a buyer, and it may be close to a deal, he said.
What’s it like selling to celebs and the super rich? Shane, who’s wife is Christie Brinkley’s sister, says that when working with high-net-worth buyers and sellers, he usually deals with the folks they’ve entrusted to help them run either their business or their personal lives, such as money managers and in-house counsel.
And even the rich, when they want to buy a vacation home in Aspen, have to unload another property somewhere else. Which brings us back round to Shane’s holiday.
Seems a Hollywood producer owned a half-duplex in Aspen, but wanted to trade up. Shane said he didn’t see anything suitable in the MLS, so he contacted the owner of a home not listed, asked if he’d consider selling. He took the half duplex and some cash in trade for his home. But the buyer didn’t want the half-duplex, which almost sounds like having half a trust fund in Aspen. He asked Shane to sell it for him.
Shane knew someone in London looking for a good deal, who he called, who bought the half-duplex, sight unseen.
In dollar terms, he explained, the sale of that half-duplex — by the way all three transactions closed on the same day — Shane represented buyer and seller in each for a total of six transaction “sides”. Total sales about $11.9 million.
Sure beats selling snowboards. Shane says his life as an Aspen agent to the rich and famous requires a pricey overhead to maintain. After all, to serve the rich one needs to be wrapped in their circle of trust (funds). These are not the type of people who drink $25 bottles of wine, Shane told Umberger.