泡网俱乐部

Just curious.

 

Found something for you to read, thought you would like it.  Notice the "Third Rolls Royce" part.

 

Can not believe it's 2005 article, auld lang syne!

 

 

New York's Real Estate Stars Reap Millions Amid Record Prices
2005-07-07 00:17 (New York)


    (Published in Bloomberg Markets magazine)

By Kathleen M. Howley
    July 7 (Bloomberg) -- One morning last April, a New York real estate broker named Sharon Baum eased into the leather back seat of her Rolls-Royce Silver Spur, which bears the license plate SOLD 1, and told her chauffeur to take her to Midtown Manhattan.
     As her car turned onto East 57th Street, Baum -- who, by her own count, has clinched $1 billion of sales in her 18-year career -- was aiming for another closing. On the 12th floor of one of the buildings there, a half-dozen paint-splattered workmen were gutting a four-bedroom, five-bathroom apartment. It was up to Baum, 65, to add the finishing touch: the asking price.
    ``Whatever Sharon says, that's what it will be,'' said the owner, Bettye Martin Musham, who greeted Baum inside as power drills droned, sanders skirled and white dust rained from freshly spackled drywall. One of a handful of brokers who've dominated high-end New York real estate during a record-breaking, 10-year boom, Baum glided from room to room across the bare plywood floors and, in the master bedroom, delivered her verdict.
    ``In the fours,'' Baum said, her voice just above a whisper.
     Translation: $4 million to $5 million, a price that might net a broker such as Baum a 5 percent, $250,000 commission.
     Ten years ago, five years ago, even one year ago, such bounty would have been unheard of for this GUT-REHAB (renovated unit) with LVLY VUS (lovely views) in a GB (good building), as the apartment is described in classified ads.

                          Soaring Prices

    Fueled by low mortgage rates, the average price of apartments in Manhattan, the nexus of global finance, media and the arts, has soared 141 percent since 1995. In 2004, the average topped $1 million, according to Miller Samuel Inc., a New York-based property appraiser. Defying predictions that the housing market might become a bubble destined to burst, that average jumped again to $1.21 million during first quarter of 2005, and again to $1.32 million during the second quarter.
     Riding New York's real estate wave is an elite corps of brokers such as Baum who land outsized commissions by snaring listings of $10 million or more.
    A vice president at Corcoran Group Inc., the city's top-selling residential real estate firm, and a Harvard MBA, Baum has sold an Upper East Side residence to the emir of Qatar and has shown apartments to actors Harrison Ford and Nathan Lane. Her latest trophy listing is a Fifth Avenue mansion owned by the
heirs to the Duke family tobacco fortune. The asking price: $50 million.

                       Celebrity Clients

     Another top broker is Patricia Burnham, 53, who courts celebrity clients such as Calvin Klein at her corner table in the Grill Room of the Four Seasons, the power-dining temple off Park Avenue. Earlier this year, Burnham was shopping for an apartment for Sharon Bush, the former sister-in-law of U.S. President
George W. Bush.
    Meanwhile, upstart broker Michael Shvo, a Prada-wearing Israeli who began his New York career in the taxi business, targets a young, new-money crowd. Shvo, 32, juggles three cell phones as his black chauffeur-driven Mercedes-Benz S500 bounces over potholes on the way to Daniel, where chef Daniel Boulud's eight-course tasting menu runs $168. Shvo says -- only half-jokingly -- that he dreams of installing hot tubs on every rooftop in Manhattan.
    As prices jump from record to record, Baum, Burnham and Shvo all agree the market is headed in one direction: up.

                      `Always Be Closing'

    The Four Seasons, the Rolls, the Prada -- no one would mistake these brokers for the sad-sack property hustlers in the Broadway revival of David Mamet's Pulitzer Prize-winning play ``Glengarry Glen Ross,'' which won a Tony Award this year. Yet rule No. 1 of Mamet's fictional boiler room also applies in real-world real estate: ``ABC -- Always Be Closing.''
     Brokers such as Baum, Burnham and Shvo often work seven days a week, says Steven Gaines, 53, author of ``The Sky's the Limit: Passion and Property in Manhattan'' (Little, Brown, 2005).
Baum says she fields calls while lifting weights in the gym at 6 a.m. Shvo employs not one but two assistants -- one for his day shift, which finishes at 7 p.m., and one for his night shift, which ends at 2 a.m.
    As a national center of commerce and culture, New York is one of the most visible examples of the housing boom that has swept communities from coast to coast. The price of a typical American home, however, wouldn't cover the cost of most one-room studios in Manhattan, where home prices have sailed beyond the reach of ordinary people.

                    Slice of the Big Apple

    The mortgage payments alone on an ``average'' Manhattan apartment run $5,836 per month, or $70,032 per year, assuming the buyer puts down 20 percent and secures a $1 million, 30-year mortgage at 5.75 percent. The median household in Manhattan, home to about 1.54 million people, earns just $48,030 annually, according to the 2000 census -- nowhere near what it would need just to make the mortgage payments.

     As an investment, a slice of the Big Apple has trounced U.S. stocks and bonds. So far this year, homes in Manhattan, by far the wealthiest of the city's five boroughs, have appreciated like dot-com stocks during the go-go 1990s. While the average apartment price jumped 21 percent in the first quarter, the Standard & Poor's 500 Index fell 2.58 percent.
    Undaunted by the steep rise in home prices, people bought 2,028 Manhattan apartments with a combined value of at least $2.45 billion during the first three months of this year, a figure that dwarfs the combined economies of Belize and Equatorial Guinea.

                          Hot Streak

     The first-quarter streak was the market's hottest since 2001, when Wall Streeters and stock market investors were still flush from a record bull stock market that had sent the Nasdaq Composite Index soaring 500 percent from 1995 to 2000. Since then, the Sept. 11 terrorist attacks have stunned New Yorkers, Wall Street firms have suffered through the longest bear market since 1939-41 and slashed 100,000 jobs before starting to hire again, and the U.S. Federal Reserve has raised interest rates
nine times.
     And yet New York home prices have kept spiraling higher. Today, New Yorkers like Musham spend millions of dollars for apartments in hopes of flipping them for even more. The roughly 8,000 active real estate brokers in Manhattan are now vying for a  shrinking number of listings, helping to drive prices higher still.
    ``It makes me nervous when I see such a staggering increase,'' says Paul Purcell, a partner at Braddock & Purcell LLC, a New York real estate consulting firm. ``I worry that the market may be a little too hot.''

                     `It Takes Fanaticism'

     Even in good times, few brokers have what it takes to become real stars. ``It takes fanaticism and guts and tremendous courage,'' Gaines says.
    One of the most important tasks for any high-end broker is shepherding clients past co-op boards. In luxury buildings, boards often require buyers to have at least three times the price of the apartment in liquid assets such as cash, stocks and bonds. That means a buyer needs $15 million in assets to buy a $5
million apartment.
    Disputes can get ugly: Fashion designer Gloria Vanderbilt famously sued the board of River House, a ritzy building on Manhattan's Upper East Side, for rejecting her as a buyer.
    Serial closers must be able play several roles at once: contract negotiator, financial adviser, design consultant, general contractor, market analyst, sociologist, psychologist, gofer. Baum, for instance, has helped oversee the renovation of Musham's flat free of charge.

                        Trophy Kitchen

     Among other things, she has prescribed a ``trophy kitchen'' replete with custom white cabinets, a black marble floor, a Traulsen refrigerator and a six-burner Thermador range.
     One time, Burnham ordered her driver to stop her Mercedes sedan so a client could buy milk. ``If they wanted to go grocery shopping, that's what we'd do,'' Burnham says. Shvo says he recently advised a developer on the design of new, $1 million-plus apartments near the New York Stock Exchange, hoping to make the units more appealing to his target audience: young Wall Streeters.
     For brokers who can hack it, the payoff is money -- lots of it. A handful of stars pull down at least $2 million apiece annually, says Purcell, 53, who previously ran Insignia Douglas Elliman. Just five of the 1,000 Manhattan brokers Purcell oversaw at that firm -- 0.5 percent -- made more than $1 million. Most were lucky to earn $100,000 to $150,000, he says.

                      Cutthroat Business

     It's a cutthroat business, Purcell says. About 10,000 apartments are sold annually in Manhattan. Fewer than 1 percent of them are priced in excess of $10 million. Assuming there's one broker on each side of every transaction -- one representing the buyer and one the seller -- that means there are just 20,000
opportunities each year to land a commission, big or small.
    ``You have brokers fighting over the same piece of pie,'' Purcell says. ``That's not a lot to go around.''
     Even the most successful brokers rarely get to keep their entire commission. Their firm usually takes a cut. Rookies typically pocket half of the total commission, which ranges from 5 percent to 7 percent of the selling price. Veterans specializing in luxury property might get 70 percent of the commission.
    For these brokers, commissions operate on a sliding, tiered scale. For example, a broker might make 5 percent up to a certain price level, 4 percent up to the next level and so on. Baum, Burnham and Shvo, who win business almost entirely by word of mouth, decline to discuss their clients or the commissions they charge them.

                       Living on Lattes

     Back on East 57th Street, Musham, a furniture designer, says she chose Baum to sell her apartment on the advice of friends. Musham bought the place in June 2004 -- she won't say what she paid -- and hopes to sell at a quick profit. Whatever the apartment goes for, Baum's pro bono consulting has started to
pay off: Musham says she's already referred two other friends to Baum.
    ``It's all about the relationships,'' Baum says.
     Before long, Baum slides back into her tan Rolls and heads for her next appointment. Baum, who lives on Park Avenue, typically rises at 6 a.m., runs in Central Park and then works out with her trainer. ``I live on Starbucks lattes -- vente, skim milk, extra foamy,'' she says as her chauffeur guides the car through midday traffic. ``I usually spend lunch right here, in the car, either with clients or talking on the phone.''
     As she heads uptown, Baum explains one of the rules of high-end New York real estate: To get rich, you must act rich.
Successful brokers have to live -- or at least appear to live --much like their wealthy customers. ``To be successful selling high-end real estate in New York, a broker has to understand what a billionaire senior partner at Goldman Sachs needs to impress his friends,'' Gaines says.

                       Third Rolls Royce

    Hence, Baum's Rolls. She says she used to hire Lincoln Town Cars, the standard New York car-service ride, until a shabby one showed up one morning.
    ``Sharon, is this really the best you can do?'' Baum remembers her client saying. Baum promptly bought her first Rolls Royce. Seven years later, she's on her third.
    Baum has come a long way from her girlhood days on a farm in Centertown, Missouri. After graduating in 1962 from Randolph-Macon Woman's College in Lynchburg, Virginia, Baum received her Harvard MBA in 1965, the first class to include women.
    After 18 years in marketing at Chemical Banking Corp., Baum quit to try her hand at real estate in 1987, a few months before the Black Monday stock market crash that October. That market meltdown eventually helped trigger a six-year slump in New York property prices. The average Manhattan home price fell 18 percent to $350,078 in 1995 from $429,242 in 1989.

                    `Enjoy the Good Times'

    ``I decided if I could make it in a market that was going down, down, down, down, then certainly I would be able to enjoy the good times,'' Baum says.
    Times have been very good lately. Baum goes to Fifth Avenue to show off the priciest townhouse on the market: the $50 million Duke Semans mansion. Tobacco king Benjamin Duke built the beaux-arts residence on the corner of 82nd Street in 1901.
     Baum has co-listed the mansion with brokers from another firm, Brown Harris Stevens. To get the job, Baum flew to Durham, North Carolina, to meet with Benjamin Duke's granddaughter, Mary Duke Biddle Trent Semans, now in her 80s, who lived in the mansion as a child.
    For the interview, Baum says, she ditched her usual ensemble of Manhattan-chic black for a ``real suit'' -- a pink one, with a skirt. ``I went to college in the south,'' she says, by way of explanation.

                    $8.5 Million Town House

    Baum's other recent listings include a five-story town house on East 61st Street, at $8.5 million. The home has an unusual feature: a swinging bed that descends from a hidden recess in the ceiling at the flick of a switch. ``I thought that after 18 years in the business, I'd seen everything,'' Baum says.
     Over at the Four Seasons, Burnham, president of and sole broker at P.S. Burnham Inc., explains her strategy for winning clients over a lunch of grilled swordfish. She opts for a corner table and selects a chair facing the entrance, the better to scope the crowd. Over there is Mortimer Zuckerman, the billionaire owner of the New York Daily News. There's Vernon Jordan, a senior managing director at Lazard Capital Markets LLC and golfing pal of former U.S. President Bill Clinton. There's John Loeb, the former U.S. ambassador to Denmark.
    ``It's completely a referral business,'' says Burnham, who grew up in Farmington, Connecticut, and attended Trinity College in nearby Hartford. ``I have no interest in selling to someone from an ad.'' Today, Burnham counts among her clients Vince Carter, who plays basketball for the New Jersey Nets, and actor
Warren Beatty.

                         Taking Calls

    As Burnham picks at her swordfish, her cell phone chimes every few minutes. She puts down her fork to take another call, this one from a client eager to look at an apartment in a GB that allows showings only from 9 a.m. to 5 p.m.
    ``Let me see if I can get you in at 5 p.m.,'' Burnham says, hoping to finagle a late visit.
     Her lunch finished, Burnham steps out of the Four Seasons and into her waiting Mercedes. The car has scarcely pulled away when she starts working the phone to learn whether another client's offer on another apartment is likely to be accepted.
Burnham's dilemma: The listing broker wants the offer in writing before presenting it to the owners. Burnham wants to know if her client's price has a chance before disclosing her financial information.
     Burnham muffles the phone handset against the shoulder of her black Yves St. Laurent suit.

                        `On a Warpath'

    ``I'm on a warpath,'' she whispers and turns back to the phone.
    ``Do we have a deal or don't we?'' Burnham says. ``I've got to know by 5 tonight.'' And with that, she snaps the phone shut.
     Burnham says that's how it's done. ``I'm not going to waste everyone's time if it's not an offer that's going to be considered,'' she says.
     Then she calls the buyer to strategize. ``Here's what I think we should do,'' Burnham tells her client. ``Let's wait until tomorrow, and then submit a written offer, just like she wants, but we're going to make it $100,000 less. Then, if they push us, we're going to move up $50,000, but we're going to stand firm there.''
     A few miles downtown, near the New York Stock Exchange, Shvo is donning his version of  construction boots: $400 black Prada loafers. He keeps the pair in the back of his Mercedes so
his $700 Louis Vuittons don't get scuffed when he walks through building sites.

                          Wall Street

     Shvo is running late for an appointment with Scott Milson of developer Leviev Boymelgreen, at the former headquarters of Chase Bank on Pine Street. Milson's firm is converting the offices into apartments, and Shvo hopes to sell them to young bankers and brokers. Shvo and Milson unfurl architectural
drawings, checking the design, and then move from floor to floor through the dusty office cubicles and empty mini kitchens.
    ``This is going to be a great apartment,'' Shvo says, using his arms to create imaginary walls. Visible from the window are the columned facade of the NYSE and the low roof of Federal Hall.
A few blocks away is Ground Zero, where the World Trade Center towers fell.
     Even without a potential buyer in sight, Shvo never stops selling. ``Wall Street is the most happening area in the city right now,'' he says, dressed in a navy blue Brioni suit and a red Hermes tie. ``All the young people want to live here.''
Standing on the rooftop veranda, he surveys the Manhattan skyline and the Statue of Liberty in New York Harbor. Instead of a rooftop pool, Shvo suggests several hot hubs. ``I want to put hot tubs on every roof in Manhattan,'' he says, his eyes wide.

                        Taxi Medallions

     Later, as Shvo heads uptown in his Mercedes, he points to building after building where he says he has sold apartments. ``I don't think there is a block in Manhattan where I haven't done a deal,'' he says.
     As Shvo conducts his guided tour, his three phones keep ringing. Shvo stops in mid sentence to flip them open one by one.
He doesn't say hello -- he just listens, mumbles his responses in English, Hebrew or a mixture of the two and snaps the phones shut without saying goodbye.
    Raised in Israel, north of Tel Aviv, and educated at TelAviv University, Shvo came to New York in 1996, at the age of 23, and started leasing taxi medallions. Within three months, he says, he had 30 people driving for him.
    In 1998, with the real estate market already heating up, he joined Douglas Elliman. He says he started out handling rentals, showing 30 to 40 apartments daily and scoring maybe one rental, or 350 per year. By 2003, he'd become the firm's top Manhattan broker. Last year, he struck out on his own, establishing Shvo
Group. A sign in his Fifth Avenue office sums up the firm's ethos: ``Let's Shvo.''

                       `Leave the Room'

    Buying and selling New York real estate isn't for the faint of heart, Shvo says. He used to teach training classes at Douglas Elliman and says he'd start each course by asking the same question: ``Who's doing this as a part-time job?'' Then he'd ask for a show of hands. ``Everyone who just lifted their hand please
leave the room right now,'' Shvo says he'd tell the crowd.
``You're wasting your time and my time.''
    As prices have marched relentlessly higher, real estate has become the talk of the town. The cover of a recent issue of The New Yorker magazine showed an apartment building filled with people speaking -- and thinking -- in floor plans.
    Writing in New York magazine, Henry Blodget, the ex-Merrill Lynch & Co. analyst who was barred from the securities industry for publishing biased research on Internet stocks, asks ``Is Your Apartment Like a Dot-Com Stock?'' A recent front-page headline in the New York Times declared ``Steep Rise in Prices for Homes Adds to Worry About a Bubble.''

                         Soft Landing

     A sharp rise in interest rates, a jolt to the economy, a slump on Wall Street -- any number of things could turn this boom into a bust, Purcell says. Jonathan Miller, president of Miller Samuel, says a soft landing for New York's high-flying real estate would mean quarterly price gains slowing to about 2.6
percent, the average during the past decade.
     For now, the challenge for brokers such as Baum, Burnham and Shvo is to persuade would-be buyers to keep ponying up. ``The successful high-end brokers have a lack of fear,'' Purcell says.
``They're not afraid to give someone bad news, like telling someone they're going to have to pay more than they wanted.''
    Or, when the real estate market finally cools, telling New Yorkers that the apartments they've bought for millions are worth a whole lot less.

--Editors: Gillen, Jahncke

To contact the reporter on this story:
Kathleen M. Howley in Boston at (1) (617) 338-5821 or
kmhowley@bloomberg.net

To contact the editor responsible for this story:
David Gillen in New York at (1) (212) 318-2447 or
dgillen@bloomberg.net