The growing $100+ million in debt for the most expensive home in Los Angeles

Subprime lending helped bring about the housing crisis of the late 2000s but it is also utilized by very wealthy actors, such as in the case of a home valued in the hundreds of millions:

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The first loan, which a source close to the project said also refinanced existing bank debt, was $82.5 million with a minimum interest rate of 11%. It included an agreement that should the house sell for more than $200 million, Hankey would get $3.5 million of the sale.

Niami came back a little over a year later and borrowed an additional $8.5 million at the same rate, paying a loan fee of $82,500. He also agreed to more onerous terms: giving Hankey a percentage of the profits if the house sold for $100 million to $200 million.

Two months before the loans were due, Niami came back for a third helping, and got an additional $15 million at the same interest rate. There were no changes to the profit-sharing arrangement, but this time the developer had to cough up a $1-million application fee.

The total: a whopping $106 million that Crestlloyd defaulted on when it all came due on Oct. 31, 2020 — and it’s growing with interest and penalties. But Hankey is not the only lender owed by Crestlloyd, according to a title report provided by the receiver.

There is a lot of money wrapped up in this house and it is unclear whether those involved will get what they hoped for. Almost regardless of what happens in the short-term, this house will live on in future memories because of its price-tag and location. Will it end up being a cautionary tale/disaster or an eventual success in a land of mega-mansions and wealthy residents?

Because this is one of the most expensive properties around, would the fallout from the subprime lending receive more attention or less attention compared to the consequences of subprime loans in the late 2000s? How long would it take to sort out debt and payments in court? While there are wealthy actors involved, a lot of money could be lost and even the wealthiest would feel a loss of $50-100 million on a single house.

Get a house that is zero-carbon over its lifetime…for $32 million in Malibu

It will take a little money to acquire the first zero-carbon home in California:

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The roughly 14,400-square-foot modern ranch-style house has all electric appliances and mechanical systems, and comes with an organic vegetable garden, orchard and apiary, according to marketing materials. In addition, the develop said it reduced carbon emissions during construction by using alternative building materials.

“This home will have zero [carbon] emissions throughout its lifetime,” said Scott Morris of Crown Pointe Estates, developer of the home. The average U.S. home emits 8.3 metric tons of carbon dioxide a year, according to U.S. Environmental Protection Agency data…

Until recently, developers have focused on reducing energy use in homes, but attention is expanding to include cutting embodied carbon, the greenhouse gases that are emitted during the manufacturing, transportation and disposal of building materials, said Cliff Majersik, a senior adviser at the Institute for Market Transformation, a Washington, D.C., think tank with public and private funding that promotes investment in low-energy building. If the developers rigorously reduced and measured embodied carbon, and offset the remaining carbon, it would be a “very impressive achievement,” he said.

According to Mr. Morris, Crown Pointe reduced the embodied carbon in this home’s construction by replacing 80,000 pounds of steel in the original home design for sustainable timber. It says it slashed its concrete usage by 14% by replacing a concrete-slab foundation with a crawl-space foundation. And rather than place a concrete subfloor beneath the wood and stone floors, it used a rubber underlay made from recycled tires. Around 25% of the concrete used is recycled, the developer said.

This is a cool feat and yet it is not exactly anything close to an average home. The irony here is that this zero-carbon home both costs so much – it is a luxury in a premium location to be zero-carbon – and it is such a big house – a reduced environmental footprint yet still taking up a lot of land and having a quintessentially American square footage. Does this make being zero-carbon a status symbol?

How long until this kind of home is within reach of more homeowners? Some of this technology would be possible in much smaller homes but it could still be costly to eliminate carbon from all the other materials.

Touring the most expensive American homes on YouTube

There is an appetite for seeing the homes of the rich and famous. See the popularity of showing these homes on YouTube:

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Mr. Yilmazer, 31, isn’t a wealthy buyer, nor is he currently a real-estate agent. Rather, he is one of a handful of real-estate YouTubers, amateur video hosts and producers, who are bringing regular people, via their laptops or cellphones, inside the mansions of the megarich. With more than 820,000 subscribers on his YouTube channel, Mr. Yilmazer’s videos rack up millions of views and inspire tens of thousands of comments…

In some ways, real-estate YouTubers like Mr. Yilmazer are providing today’s answer to the MTV Cribs phenomenon of the early 2000s, offering the masses a rare glimpse at how the 0.1% really live. But rather than getting a peak through the eyes of a movie star or a suave celebrity real-estate agent, like on shows such as Bravo’s “Million Dollar Listing,” they’re seeing these houses through the eyes of a regular guy just like them…

Mr. Yilmazer said he is bringing in between $50,000 and $100,000 a month in revenue from his YouTube channel in ad revenue alone, putting him on track to bring in more than $1 million this year if the growth of his channel continues at its current pace. Those are just the revenues provided by YouTube for allowing their automated ads to stream on the channel without any effort from Mr. Yilmazer’s own small team. On top of that, he and his team can make money from dedicated sponsorships—Mr. Yilmazer will personally feature a particular company’s brand in his videos for a fee that runs in the tens of thousands of dollars—and the money real-estate agents offer him to feature their listings on his channel. He said he often won’t charge if a property is particularly spectacular and will drive viewership to his channel. If a property is less impressive, he charges a fee, which typically runs into the five figures…

Still, not everyone is sold on letting YouTubers have free rein in their properties, since some agents believe that prospective buyers would prefer that their future homes not be splashed all over the internet.

It is the Internet, expensive real estate, and making money all in one. What could more American than that in 2021?

The money angle is very interesting to consider. The owner of the big expensive home could benefit from more exposure (though the article notes that not all big home owners think the YouTube views benefits them). YouTube gets original content that plenty of viewers want and they can monetize the content through advertising. The presenter can develop a brand and bring in a good income. Does anyone lose here?

One potential downside: how Americans view homes. If people consistently see large luxurious homes on television, as sociologist Juliet Schor argues in The Overspent American, or on social media, does this ratchet up their expectations about what they should be able to acquire? The biggest homes are out of the reach of almost everyone yet some of the individual pieces or features might find their way to a more attainable range.

Seeing into the megamansions of celebrities

The wealthy often live in large and lavish houses. Today, we have more access to some of these houses and the lives lived inside because the homes are part of what it means to be a celebrity:

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Sprawling celebrity homes exist across North America – like Drake’s 50,000 square foot Toronto mansion that’s large enough to house a regulation NBA basketball court (and does); John Travolta’s Ocala, Florida, property that makes up for its modest 6,500 square footage with two private airplane runways that lead straight to his front door; or Taylor Swift’s 11,000 square foot beachfront Rhode Island estate, which she immortalized in song-but the epicenter of celebrity real estate has always been Los Angeles. And homes there are only getting larger and more extravagant…

“American culture, to begin with, is unusually spacious, in the sense that people think of space as part of American culture,” Sonia A. Hirt, a professor of landscape architecture and planning, told The Atlantic in 2019. “This is partially part of the American promise-that you can have more room.”

But in the age of COVID-19, witnessing celebrities cloister inside their obscenely large houses and pander with “Imagine” sing-alongs can provide new reasons to scoff at their out-of-touch lifestyles. “Seeing celebrity homes [in 2020] took on new meaning in a potentially negative way,” said Andreas McDonnell, co-author of Celebrity: A History of Fame. “The pleasure of voyeurism was overshadowed by those feelings of resentment by regular people who are going through a really difficult time and are also confined to the home a lot more”…

As Instagram Lives and Zoom interviews allowed a more unfiltered look inside celebrities’ daily activities at home, the New York Times speculated that 2020 would bring about “the swift dismantling of celebrity culture.” But it’s unlikely they’ll stop buying insanely large homes any time soon. Luxury home sales surged nationwide in 2020, and Oppenheim noted that L.A. buyers have been eager to shed properties in cluttered, central neighborhoods like West Hollywood and seek more space and privacy further afield.

Homes are part of a package of conspicuous consumption: people with means can buy and do things in ways that others cannot and they can also display that to the world. A celebrity living a modest life may not get as much attention as someone flouting their purchases and lifestyle.A big house in a particular location denotes money, status, an interest in living near other elites. With social media and reality TV, part of being a celebrity today is inviting people into your life in more intimate ways. Through different mediums, observers can see the home and household. Yet, this leads to different expectations from viewers who have the opportunity to comment and critique.

Along similar lines, inviting people to see your home is a different kind of celebrity or status than an ability to stay out of the public view and not be observed. Some powerful or famous actors prefer to stay out of the limelight and physical residences are part of this. Perhaps it involves never allowing cameras inside their large home. Perhaps it means finding a home that is secluded and away from public attention, whether the house has gates and security or the residence is a unit in a high-rise that very few people can enter. Celebrity can bring the option of keeping the world out to a certain degree or inviting the world in, including into their home, in a way that very few people could.

Is there a connection then between seeing a celebrity megamansion and wanting something similar? It is one thing to observe the homes of celebrities. It is another then to act on acquiring a larger home and the life that goes with it. If Americans do see celebrities and others in media as reference groups, people with whom they compare their lives, then the megamansions might not just be fun; it may be part of a larger system that Hirt references where people expect that a higher status equals a bigger house.

Perhaps large houses are not bad if they are designed well or used correctly?

The top concern about McMansions is their size. Yet, a house that is big is not necessarily a problem. See this recent example of resilient housing from New Urbanist architect Andres Duany:

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He then scrolled through building prototypes, developed in partnership with architect Korkut Onaran. For affluent families, Duany proposed a multigenerational alternative to McMansions, resembling the walled courtyard houses found in Latin America, Europe and Asia. These compounds’ walls protect against wind, rain and storm surge. Clusters of eight or so walled compounds would surround a central green that could be used for vegetable farms, exercise facilities or a small schoolhouse. Resilient adaptations such as backup generators, solar panels and water purification facilities would come standard. The goal, Duany said, was to design communities that could be “partially self-sufficient” in the weeks after a disaster.

Here, the large home has several advantages compared to McMansions. First, it is designed by architects. McMansions are often said to be mass-produced by builders who want to maximize profits, not aesthetics (outside of an impressive – though often jumbled – facade). Second, the home can hold a multigenerational household. If a larger family inhabits the larger home, it is not just an empty McMansion that impresses people passing by; the space might actually be used. Third, the large home is part of a community intended to stand strong in the face of the effects of climate change. McMansions are criticized for their poor building construction – possibly limiting their ability to stand up to storms and other issues – and are often in sprawling areas.

An argument could be made that large houses in general should not be promoted. Even if you have the resources, who needs a home larger than 4,000 square feet, let alone the mega mansions of the truly wealthy? For example, the Not So Big House suggests smaller but customized homes would work better for residents. Tiny houses explicitly reject the bigger is better logic.

But, if bigger houses are still going to be built – perhaps some will say they need them for entertaining or large families or for particular uses that take up a lot of room – they could be done in a way that makes them less like McMansions and more like large versions of well-designed, built to last homes. Indeed, McMansions receive a lot of negative attention even as there are plenty of supersized homes – true mansions – that might also be worth rethinking.

Houses and locations from TV shows can draw visitors

To follow up on yesterday’s post regarding the importance of the English manor to Downton Abbey, some more on the popularity of the home:

When the Downton Abbey producers first approached Highclere in 2009, the family faced a near £12m repair bill, with urgent work priced at £1.8m. But by 2012 the Downton effect had begun to take the pressure off. Lord Carnarvon said then: “It was just after the banking crisis and it was gloom in all directions. We had been doing corporate functions, but it all became pretty sparse after that. Then Downton came along and it became a major tourist attraction.”

Visitor numbers doubled, to 1,200 a day, as Downton Abbey, scripted by Julian Fellowes, came to be screened around the world after becoming a hit in the UK in 2010 and then in the US. It is now broadcast in 250 countries…

VisitBritain’s director, Patricia Yates, said: “The links between tourism, films and TV are potent ones.” She added that period dramas have also raised the popularity of regions outside of London.

Keeping an older house maintained and running is an expensive task. Tourism spurred by television or film can help some locations stay afloat even as dozens of other homes languish. More broadly, when I studied the primary home on The Sopranos, I ran into stories of Sopranos tours and merchandise that utilized the show’s New Jersey locations. A Simpsons home outside Las Vegas has attracted visitors even as the home has remained as a private residence. Fixer Upper helped bring people to Waco, Texas. Some shows do indeed seem to spur tourism.

On the other hand, visiting the locations and homes of other shows would prove disappointing. Many television homes, such as the residence of the Brady family on The Brady Bunch, do not match the actual home even if the exterior is recognizable. Numerous shows use establishing shots of real locations and then the filming takes place on soundstages and backlots. For example, a tour of New York City based on Friends makes little sense since most of the action took place inside fictional locations (though the 25th anniversary pop-up location in New York City is sure to attract visitors). On a tour of the Warner Brothers backlot, I saw Wisteria Lane and part of Stars Hollow; in both cases, knowing that this was not a real place changed how I later perceived the shows.

In a world where cities and places chase tourists, television shows that use that location and become popular can be a boon because there is little a community has to do with it. What exactly those tourists expect to get – perhaps a little closer to the on-screen characters? to drink in the mystique of the entertainment industry? – is another matter entirely.

Argument: the star of Downton Abbey is the house

All television shows have settings and locations but few are as important as the large home on Downton Abbey:

The main character in Downton Abbey is not a person at all. It’s a building. Downton Abbey.

There it is in the opening credits of the new film and, despite a whole raft of new changes that I am trying not to give away, there it stands at the end, towering over all of the humans who enter and exit its doors, more custodians than owners, really.
The domestic edifice is this hugely successful franchise’s reason for being, the explanation for the movie, the lodestar for the show’s fans. Individual characters can die — and, God knows, they have. But if “Downtown Abbey” itself were ever to fall, then the story would be over.

This is unusual. Most long-running TV shows are centered on either an individual or a family. “Mad Men” could not survive past the death of Don Draper. “Dexter” needed Dexter. “Breaking Bad” tells the story of Walter White. “Game of Thrones” (73 episodes!) had numerous story arcs, heaven knows, but it still remained the story of communities, not unlike “The Wire” or “The Deuce.” “Star Wars” is a generational saga at its core. And, of course, superhero franchises need their superheroes. (Or their close relations.)

In many television shows, the setting functions more as a backdrop than anything else. The opening credits may show a city and/or home. The show itself may feature a few main sets, typically a place of residence and a workplace. But, swap one city or suburb for another or home for another home and the show could go on.

Would the same be true for Downton Abbey? If the show took place in a different English manor – which are occasionally seen on the show and in the movie – would it be a different show or a weaker show? Is the show popular because of the house or is the house popular because of the show?

It seems like a step too far to suggest that a bad or mediocre television show could be rescued by or solely built on a unique and interesting setting. Good characters encountering interesting situations is a necessary ingredient, even in a show that depends on an unusual and/or popular location. Yet, we could study the degree to which a setting or location or building figures in the plot and popularity of a show. For example, would The Sopranos be the same show without the suburban McMansion the family lives in?

Considering the Wall Street Journal’s “mansion porn”

The Wall Street Journal sends a special supplement each week to readers looking at the houses of the wealthy:

Mansion, The Wall Street Journal’s real-estate supplement, arrives each Friday slipped into the middle of my newsprint edition, the way pornography (so I’m told!) used to come in unmarked envelopes back before the internet placed it at everyone’s fingertips. I’m satisfied with my weekly print version, but you may prefer reading Mansion on the web, where the photographs are more numerous, detailed, lurid, and explicit…

The comparison to porn is apt. It’s also unoriginal and incomplete. A little more than a decade ago, when the century was young and right before their real-estate holdings drove millions of people into bankruptcy, New York magazine ran a regular feature about how fabulous it was to own real estate. And not just to own it, but to fantasize about it, drool over it, caress the photos and the sales price as though they were objects of sensual desire. The feature was called “Real Estate Porn,” in keeping with the salacious content.

Mansion invokes the same feelings of naughtiness: You’re watching people do something that, in a fairer and more just world, you’d be doing yourself. I think of Vivian Dixon and John Chapple, a married couple that Mansion introduced us to not long ago, as the exemplars of the Mansion character. They are voluptuaries of real estate. They grab houses the way the rest of us scoop mints from the little bowl as we leave a restaurant. At the time of the article’s publication, in May, they owned six residences, though by the time the piece ends you suspect their trigger finger is getting itchy again…

This willingness to take the wealthy on their own terms is a rarity in American business journalism. Reporters are usually more leery in their treatment of such subjects, when not nakedly hostile. Few people in the world despise the winners of the capitalist lotto more than the sorry drudges who are called to write about them. You’ll find a higher percentage of committed socialists in the newsroom of the Financial Times than at a lakefront party at Bernie Sanders’s dacha.

I have not seen this section but I wonder if tackles several darker essentials of American culture from the beginning:

  1. The presence of really wealthy people in the midst of an egalitarian/middle-class public discourse.
  2. The importance of real estate in American life. Sure, citizens can vote and a few people can move from the bottom to the top in unique ways but the real answer to getting ahead is real estate (from moving the frontier for 150+ years to gobbling up expensive properties in  global cities).
  3. The work that goes into homeownership in both maintaining and improving properties.
  4. The interest in seeing what the rich are up to and uncertainty about whether to critique their excess or celebrate their success.

It would be interesting to know how many Americans exist at this elite level of real estate. This is not the typical homeowner hoping to make money on their single-family home or the small market house flipper or the “dream hoarders” in the top quintile of earners; these are people buying and selling with large amounts of capital (perhaps some even thinking like the current president).

New Bel Air homes of over 17,500 square feet cannot be called McMansions

In recent years, a number of extra large houses have been constructed in Bel Air. But, these are not just regular McMansions:

Rosen rallied his neighbors in a mini-revolt against City Hall. The result was 2017’s Bel Air mansion ordinance, a more rigid version of the ordinance imposed on the rest of Los Angeles. While many of the hauling trucks are now gone, the wealthy enclave is still grappling with the legacy of its McMansion years. Between 2014 and early 2017, the city issued 28 permits for mansions in Bel Air of 17,500 square feet or larger, most of which are still under construction, according to an analysis by The Real Deal. The projects are exacerbating a spec-home building spree that rattled longtime Bel Air residents and is dramatically altering the landscape of the area, not to mention its real-estate market.

As of Wednesday there were 12 homes in Bel Air of 15,000 square feet or larger currently sitting empty and unsold in, according to MLS data cited by Steve Lewis, President of CORE Real Estate Group in Beverly Hills.

These are not regular McMansions in suburban neighborhoods: these are megahomes going for megaprices and constructed by and for the ultra-wealthy.

Meanwhile, on Chalon Road, Thomas Barrack Jr., the Colony Capital CEO and pal of President Donald Trump, is nearly done building out an eight-acre compound with a 77,000-square-foot mansion being designed by Peter Marino. Barrack is building it on behalf of the royal family of Qatar. Other competing giant offerings, including the Mountain, a 157-acre plot in Beverly Hills Post Office now listed for $650 million, and a 120-acre site owned by an entity linked to the late Paul Allen asking $150 million, don’t have plans or permits in place for mega-mansions, Blankenship said.

Massive spec mansions on the market right now include Bruce Makowsky’s 38,000-square-foot estate at 924 Bel Air Road, asking a much-reduced $150 million, and the Mohamed Hadid-developed mansion at 901 Strada Vecchia, which is the subject of an FBI probe and a lawsuit from neighbors who want to see it torn down.

Granted, it sounds like some of the activity in Bel Air may be consistent with several features of McMansions: big homes, teardowns, and status symbols for the wealthy. For those who live in Bel Air, it could be disconcerting to see the scale of new construction. But, this article focuses primarily on the really big homes, the ones that are not just someone upgrading from a 2,000 square foot ranch to a 5,000 square foot home with a mishmash of architectural features. The last example in the piece illustrates this difference between a McMansion and mansion: a billionaire/actress couple want to tear down a home under 8,000 and more than double the square footage in a new home. Again, that is a scale far beyond the average upper middle-class American (and that does not even include the price it takes to buy into this particular neighborhood). Perhaps the real goal of using the term McMansion here is to denigrate the new homes and not grant them the status of mansion.

I would argue McMansions are roughly 3,000 square feet to 10,000 square feet. The bottom end may seem rather small but this size home could be quite large if constructed in a home of small homes. The upper end is a rough cutoff when a home goes from regular big home to extra large/wealthy big home. Size is a critical factor in defining a McMansion and these Bel Air homes are way beyond McMansion limits.

Building celebrity mansions that can stave off wildfires

The Woolsey Fire in southern California has claimed the large homes of numerous celebrities:

Early Monday morning, Cyrus tweeted that her Malibu home — a $2.5 million mansion she purchased with her fiance, Liam Hemsworth, in 2016 — had been destroyed. The Woolsey Fire, which has been burning swaths of Los Angeles and Ventura counties in Southern California since Thursday, has forced evacuations and threatened thousands of homes from Thousand Oaks to Malibu…

Butler focused the camera on the charred frame of his former house, surrounded by ash and the blackened shell of a truck…

In a post on his website, Young stated that he had just lost “another” house to a California fire, referring to the Malibu home he shared with Daryl Hannah…

As The Post’s Sonia Rao reported, the historic Paramount Ranch production set in Agoura Hills burned on Friday, while wildfire threatened the nearby homes of a slew of celebrities, including Guillermo del Toro, Alyssa Milano, Lady Gaga, Will Smith, Kim Kardashian-West and Kanye West, James Woods, Orlando Bloom, Melissa Etheridge, Rainn Wilson, Cher and Pink.

Given the amount of money wealthy people put into their homes, what features could help a home avoid wildfires? A few options:

  1. An exterior sprinkler/hose system to help keep the home wet and not burst into flames.
  2. A protective shell that could arise around the exterior of the home.
  3. Construction out of certain materials that would be more fire-resistant.
  4. Building homes within communities that have permanent fire breaks around them or other devices to help slow fires before they arrive at individual homes.

None of these options would be cheap but there could be an opportunity here. And if these options could be had at a reasonable price, perhaps they could make their way to the general market.

(Side note: see an earlier related post about creating a McMansion that could withstand other natural disasters.)