Don’t they know

It’s  The End of the World? (click)

Picture this:

“So many hedge funds have moved to Greenwich in the past five years (mostly from Manhattan) that they now occupy about a third of the town’s relatively scarce office space. Another third is occupied by companies that work with hedge-fund companies, according to commercial-real-estate brokers….

“One day in January, shivering in the cold, I found myself staring at the skeleton of a mammoth, 19,000-square-foot house rising on [40] Zaccheus Meade Lane. Like so many big new houses in Greenwich, it was a spec house—financed in this case by two retired Goldman Sachs partners.

“Only a few months earlier, the lot had featured a gigantic granite boulder, 135 feet long and 35 feet high, and deeply embedded. It’s gone now, that massive rock; in its place we find an ordinary driveway and terrain that’s nearly flat. “We only blasted for three days,” boasted Frank Spoto, the spec builder who, backed by the men from Goldman Sachs, is putting up the house with his business partners, Steve LoParco and Frank Napolitano.

“In the old days, no one would have bothered to destroy that rock; financially it wouldn’t have made sense, for one thing. But these days, even the least desirable piece of land in Greenwich can attract a speculator who, if he knows what he’s doing, can make a quick fortune. For example: Mark Mariani, one spec builder I interviewed for this story, has done so well for himself he owns a Gulfstream IV and a Falcon 900.

“For their two irregular acres of land on Zaccheus Meade Lane, Spoto and his partners, or their backers, paid $2.5 million. After spending about $5 million to build the 19,000-square-foot house (and dynamite the rock), they anticipate selling it for around $12 million. Who will buy this big-ticket house? I asked. “A lot of people think this is a home for the hedge-fund guys,” replied LoParco. “That’s probably a good guess.”

Both quotes, of course, are taken from the now infamous 2006 article on Greenwich in Vanity Fair and, for 2006, I think the author did a credible, if venomous job of depicting the current condition of our fair town. But that was then, this is now. If we really are going to lose 1/3 of the hedge funds, what will that do to the commercial space in town, 2/3 of which is filled by hedge funds or related companies? Nothing good, I shouldn’t think. 

And we’re already seeing the affects of Wall Street’s retrenchment on our residential real estate market (duh). That Zaccheus Mead house that Steve LoParco and his ex-Goldman partners spent $7.5 million building is a (huge) white elephant that remains unsold. Instead of the anticipated price of $12.0 million (they actually put it on for more than that) it has dropped to $7.9 million and still no one wants it. That’s not entirely the fault of the market; the author states that “even the least desirable piece of land …can attract a speculator who, if he knows what he’s doing, can make a quick fortune”. [emphasis added]

40 Zaccheus Mead was and remains an undesirable lot that no one would ever pay $12 million to live on – LoParco’s “good guess” was just dead wrong. But the house might have found a buyer by now, at some price, if the market were better. It isn’t, so it hasn’t, and I wonder if it ever will.

There are plenty of other unsold spec houses sitting on equally undesirable pieces of land, all erected by builders who were convinced that some hedge funder with more money than brains would come along and snap up. The builders’ estimation of their would-be customers’ brain power may have been accurate – or at least, the last 12 months haven’t proved it wrong – but selling gullible people over-priced items requires that those people have money. It’s beginning to look as though that essential ingredient may have gone missing. At least until the next bubble, which may not arise for some little time. Hang on.

 

 

3 Comments

Filed under Buying/Selling Greenwich Real Estate, current market conditions, spec houses

3 responses to “Don’t they know

  1. Hiram

    Zaccheus Mead, not Meade.

  2. christopherfountain

    I knew that, until the Vanity Fair lady got it wrong and led me astray. Another example of Gresham’s law at work.
    http://eh.net/encyclopedia/article/selgin.gresham.law

  3. anon

    Goldman guys don’t know the lay of the land. 40 ZM is swamp land. Not as bad as Fox Run/Vineyard Lane, but without fill dirt hauled in decades ago, that area would be one big patch of skunk cabbage today.