It seemed like an insane gamble: Spend millions upon millions of your personal fortune to build a house that’s so off-the-charts indulgent – $200,000 “candy wall,” $1 million-plus security system, quarter-million-dollar sculptures (plural) – that the Los Angeles Times won’t feel too hyperbolic declaring it “L.A.’s most extreme home.”
Then charge $85 million (£57m) for it and let the market have its way.
That the market certainly did. The 23,000-square-foot Beverly Hills gargantumansion notoriously sold a year ago for $70 million (£47m) — cash — to Minecraft founder Markus “Notch” Persson, a Swede who sold his Mojang game company to Microsoft and crossed into the billionaire club. Notch reportedly outbid Beyonce and Jay-Z.
Yahoo Real Estate spoke at length with Bruce Makowsky, the ultra-rich man who put a sizable chunk of his personal money and reputation on the line to build the spec house.
And we have to say, the way Makowsky explained his venture, we started to see his logic (though we wouldn’t have gambled our millions … lesson one, perhaps, in why we still don’t have any).
But first you had to think like a billionaire.
The property occupies just shy of an acre in Beverly Hills’ Trousdale Estates.
More Money Than Time
Makowsky had no problem thinking like a billionaire. He wasn’t one, but he wasn’t far off, members of his team told Yahoo Real Estate. He made his fortune in handbags and other women’s accessories, which you might have seen everywhere from QVC to Bloomingdale’s.
“I have a big mega-yacht and toys and planes,” Makowsky told us. “I kind of understand what very wealthy people want.”
Take yachts. (Bear with us, because this circles back to his real estate thinking.) He sat in the Beverly Hills gargantumansion with a prospective buyer who had a mutual interest in boats – who had, in fact, ordered up a 300-footer, at a cost of about $200 million (£136m). Makowsky asked how often the visitor sailed. About eight weeks a year, the visitor replied. The operating costs on that yacht were about $8 million (£5m) a year, or a million for each week of use.
Admittedly, we’re not sailors, but that seems mind-boggling: a boat that’s about twice as expensive as the most expensive mansion ever sold in America (and a mansion comes with land!).
What is so special about a $200 million yacht? we asked Makowsky.
He said that, in a nutshell, “every detail inside that boat is spectacular.” Every single detail. You don’t spend a couple hundred million on a yacht, hire a world-class chef and then tell a guest who wants pizza that you’re out of pepperoni, he said. On a billionaire’s yacht, you can’t ever be out of pepperoni; your fridge had better be big, and it’d better be stocked with every staple imaginable, plus some ingredients you’d barely dream of.
We’ll be honest. We weren’t entirely convinced that 24-hour personal pizzas equal $200 million of special. So he cited too the punishing saltwater, the unremitting barrage of ocean waves, the systems and craftsmanship required to keep the boat afloat.
As he spoke, though, it dawned on us that maybe the truth is something he can’t say out loud, at least not to a non-billionaire: Maybe yachts aren’t exactly $200 million worth of special, but to a billionaire, does that really matter?
“A lot of the wealthy people have more money than time,” he said, and “wealthy people are getting wealthier.”
There’s a backlog for mega-yachts that’s “incredible right now,” Makowsky told us. “I have a big boat – and I take it down to St. Bart’s and I’m the smallest boat in the marina.”
The Lure of the New
So you’re a billionaire, and you’ve spent $200 million on a yacht and $100 million on a jet and maybe a few million on your car collection. By now you may be making money almost faster than you can spend it: At a measly 1 percent interest, a billion dollars would generate $10 million a year.
Your real estate agent, meanwhile, keeps showing you houses that are $20 million, $30 million, maybe $50 million. They don’t knock your Cervelt socks off. Compared to the kind of money you’ve been spending, they might even seem a little, well, piddling.
And while 10,000 square feet may have been considered a big house a decade ago, that attitude has changed among the super-rich, who now demand “super-large,” Makowsky said. The mansion he built is more than twice that size.
There are “a lot of nice homes” out there, “but they’re tired,” he said. “Nothing brand-new.”
Is newness that important to the ultra-wealthy? we asked.
“They want to feel like they’re the first person in that house. … They want to feel like it’s theirs,” he said. That’s why, he said, he didn’t hold any open houses, or even one of the parties that’s become more common for high-end L.A. real estate. He wanted to preserve its untouchability.
Makowsky was emphatic. “People. Want. New.”
The natural conclusion might seem that they should build their own dream house, tailored to their tastes and desires. But remember to think like a billionaire who has more money than time. (And remember, too, that billionaires might easily own a dozen ultra-luxury properties at once; that’s how many homes most Americans have in a lifetime. As ultra-high-end developer Nile Niami says: “Nobody buys a 100,000-square-foot house as their principal residence to use every day.”)
They’d have to scout out the perfect lot – and in Los Angeles, promontories with downtown-to-ocean views are so coveted that a nearby family reportedly refused an offer of $75 million for their house, which developers intended to bulldoze. Then they’d have to get all the necessary local permissions and build the place. It takes “four to six years to do what we did here,” Makowsky said.
Not only that, they’d have to devote time and attention to all the hundreds of details that accumulate as luxury. On a yacht, luxury is made up of sea-hardiness, of masterful design in deceptively limited space, of laid-in pizza supplies. At the mansion Makowsky built, it’s mirrors placed so that wherever you are in the master bath, you can see downtown Los Angeles behind you, right down to the mirror backing within the medicine cabinet; it’s the drawers you open to discover they’re lined with crocodile; it’s “the most beautiful hangers” dangling in the closet.
Makowsky’s idea, in other words, was to “bring mega-yachts to land,” packaged up and ready to go, right down to the administrative staffing.
Which was an interesting proposition, because if billionaires were willing to spend $200 million plus $8 million a year on a boat they rarely used, what would their limit be for the right house?
‘The Air Is Absolutely Thin Up There’
The particular audacity of Makowsky’s venture is that the spec house Notch bought represented only Phase 1. Two more estates were in the works, and he said they’d be even more expensive. “I want to be like the Four Seasons of residential building,” he told us.
We think it’d take nerves of steel to build one spec house priced so high. How many billionaire prospects could there be?
“The air is absolutely thin up there,” he acknowledges, but he says 4,000 people worldwide are worth at least $500 million. Forbes counts a record 1,645 billionaires on the planet.
Meanwhile, brand-new, ultra-high-end houses like his are scarce. “Other than Donald Trump building something down in Palm Beach, this is the second-highest[-cost] spec house ever built in the United States.” We checked with Zillow, and only about 30 homes nationwide are publicly listed at more than $50 million. Just seven of them are asking $75 million or more. (Important caveat: This doesn’t include so-called “pocket” or “whisper” listings, or any other kind of off-market listing.)
So maybe Makowsky is onto something. His fellow L.A. developers sure seem to think so: Locally, there’s a bit of a stampede toward gargantumansions asking $100 million or more.
And one of them, Nile Niami, is expected to list a 100,000-square-foot spec house at half a billion dollars in the next year or so.