November 24, 2005
High-End Real Estate Market Still Sizzling
By Jim Hopkins
SAN FRANCISCO Real estate broker Olivia Hsu Decker guided guests through an $8 million fixer-upper last weekend at an invitation-only open house in Presidio Heights, one of San Francisco's toniest neighborhoods.
Decker just sold the house with drop-dead San Francisco Bay views to Richard and Barbara Pivnicka, developers who plan a $3 million redo before putting it back on the market next year for perhaps $15 million. Sounds audacious, given mounting evidence of a real estate slowdown amid rising interest rates and fears of a housing bubble.
But the market for homes selling for $10 million or more won't be easily pinched. Supply is tight, and demand nearly insatiable among increasingly rich corporate tycoons. "A great target market," Barbara Pivnicka says.
Ruling over this high-octane world is an elite group of agents such as Decker who've emerged as powerful players in some of the ritziest markets: New York, Palm Beach, Fla., Silicon Valley and San Francisco. These super-agents are skilled at closing all-cash deals hidden from public view. It's a lucrative field. Decker earns as much as 5% commissions, $500,000 on a $10 million sale, money that helps maintain her two 17th-century French chateaux.
In New York, Deborah Grubman of Corcoran Group is helping sell media baron Rupert Murdoch's $27 million SoHo loft, with its own film screening room. Further uptown, Brenda Powers and Elizabeth Sample at Brown Harris Stevens are showing a $70 million apartment on three floors of the Pierre Hotel. In Silicon Valley, Mary Gullixson of Alain Pinel has Oracle CEO Larry Ellison's $25 million estate in Atherton, with waterfalls and a Japanese teahouse.
Business is booming. At least 38 homes sold for $10 million or more through September, vs. 31 homes during all of last year, and just nine in 2001, says an analysis for USA TODAY by researcher DataQuick.
The number of high-end agents is harder to track. Overall, women in the late 1990s solidly took the lead in the share of real estate sales jobs. One of the most famous is Barbara Corcoran, who started her New York firm for $1,000 in 1973 and sold it in 2001 for $70 million. She's now developing a real estate TV show.
Decker, a Shanghai native expecting to sell $80 million worth of homes this year, is a star. Her rise to realty's pinnacle from assistant front desk manager at a Hyatt hotel some 30 years ago reflects the growing clout of women at the industry's high end. Her story also offers a rare glimpse at how some of the priciest properties change hands.
Decker says clients include actress Sharon Stone, tennis ace Andre Agassi and venture-capital kingpin Tom Perkins. "Everybody wants me," she says.
She rewards favored clients with weekends at Chateau de Villette, her 17th-century palace outside Paris that figures in the best-selling whodunit, The Da Vinci Code. (She spent the summer conferring with Ron Howard, who is directing the book's film adaptation starring Tom Hanks.)
At the Presidio Heights house, several neighbors wandered through the three-story Beaux Arts-style home dating to 1900. They sipped white wine and nibbled hors d'oeuvres as Decker and the Pivnickas talked of restoration with an eye to modern living. Would there be six or seven bedrooms? Depends on where the media room goes.
The event itself was unusual. Most wealthy clients don't want the public to know when they're buying and selling. They insist on flying below realty's radar.
Look, for example, at another Presidio Heights home. Former Gap CEO Mickey Drexler sold it last month after putting it on the market for $27 million.
Drexler, now CEO of J. Crew in New York, remodeled the house extensively in the early 1990s. It was originally designed by architect Willis Polk, who also designed the Filoli estate in Silicon Valley's Woodside, the Carrington mansion in the Dynasty TV series in the 1980s.
Public documents show Drexler's home was sold for an undisclosed sum to Jackson Presidio LLC. That corporation shares the same address as Salesforce.com's headquarters, the software company founded in 1999 by Marc Benioff.
Benioff, worth more than $800 million after Salesforce went public last year, said through a publicist that he had not "personally" bought any property. Drexler declined to comment.
Privacy is another reason so many high-end sales are all-cash. Bypassing mortgages means answering fewer questions from nosy bankers. It also means filing fewer public documents with details of an ownership change. Plus, federal law limits the amount of interest deductible from income taxes to a maximum $1 million, so there's no tax advantage to taking out a huge home loan.
In Florida's Palm Beach, 90% of Carole Koeppel's sales are for cash. Koeppel, an agent with Sotheby's International Realty, says half her listings are for $10 million or more.
Sample, with the $70 million Pierre listing, agrees: "They come and sign a check, and it's done."
In some cases, such as Murdoch's, buyers must pay cash. The creator of the Fox News channel is selling his SoHo loft so he and wife Wendi Deng can move uptown to Laurance Rockefeller's $44 million co-op on Fifth Avenue. The co-op's rules forbid mortgages.
The prevalence of all-cash deals also means rising interest rates are less of a factor in the luxury home market, says John Karevoll of DataQuick. Rich buyers are more likely affected by swings in the stock market, and stocks lately have been gaining ground.
High-end sales techniques
These days, Decker zips through a database of 20,000 potential buyers and sellers, many with net worths exceeding $50 million, that she says she assembled in the past three decades.
Next, she arranges for magazine-quality property photos for glossy sales brochures and her website. For Perkins, the co-founder of venture-capital powerhouse Kleiner Perkins Caufield & Byers, Decker says she spent $20,000 on marketing, including a photographer at $350 an hour.
Perkins' $20.5 million home, in a French Normandy manor style, is on top-drawer Belvedere Island, with views of San Francisco's skyline to the south.
Most of Decker's customers are Americans. Yet, she does trade globally, aided by her ability to speak Chinese, Japanese, Italian and some French. Recently, she wore three watches on her wrist to track the time in San Francisco, New York and Paris.
She came to the USA with her then-husband in 1975. They invested in modestly priced homes while Decker worked the Hyatt's front desk.
After the couple divorced, those early investments provided the start-up capital she used to go into business on her own after working for Merrill Lynch's realty arm. She formed her current brokerage, Decker Bullock in Marin County's Mill Valley, in 1990 with partner Bill Bullock.
From the start, she pledged to deal only in homes priced at $1 million or more, a huge sum at the time. "People laughed at me," she says.
She's been laughing all the way to the bank since. In her best year, 1999, she says she sold $120 million worth of homes after the tech boom minted scores of multi-millionaires. That helped pay for the $6 million Paris chateau and provided another $6 million to spiff up its 17 bedrooms and 21 bathrooms. Decker owns a second chateau near Aix-en-Provence, the south of France. Both chateaux are available for rent.
As a child, she longed to peek through the gates of trophy homes with what she calls a "wow" factor. That means a show-stopping location, architecturally significant provenance and extraordinary details such as rare Brazilian hardwoods, or a tennis court, such as the one at Agassi's $22 million estate in Tiburon, north of San Francisco.
Such homes rarely come on the market. Murdoch admired the Rockefeller apartment, with terraces facing Central Park, for years until it became available after Rockefeller's death last year.
Top-of-the-line can take time
And it is such rarities, amid strong demand, that keeps agents busy. If there's any market weakness in New York, says agent Sample, it is properties in the $1 million to $1.5 million range. "That's more interest-rate driven," she says.
Sales of so-called McMansions by new-home builders such as Toll Bros. also might get hit. Toll this month warned that demand for its typical $700,000 homes is weakening.
Optimism about the high end's prospects doesn't surprise luxury consumer expert Pam Danziger. The fabulously wealthy aren't worried about keeping a roof over their heads. "They usually have a home already," she says.
Or several homes. Decker says the owner of her most expensive listing, a $65 million estate in her own Belvedere Island neighborhood, owns nine other homes.
Trophy houses don't sell overnight. Decker and other agents say it can take months, sometimes years, to match buyer to seller. Clients such as Murdoch and Benioff didn't get rich by being stupid.
"They earned every penny," says Danziger. "And they're not about to pay more than they have to."
Buying is just the start, says Adele Cygelman, editor-in-chief of Robb Report Luxury Home/Vacation Homes magazines. Costs for renovation, taxes, security and staff to maintain gardens, pools and indoor gyms run into the millions.
"Trophy properties are like trophy wives," Cygelman says in an e-mail. "Gorgeous to look at, and very high-maintenance."