Are you prepared to bet tens of millions of dollars on building outrageously lavish spec homes that you hope to sell for nine-figure sums? If the answer is yes, you’re part of a small and extremely quirky club.
Despite murmurs of a slowdown at the top of the luxury market, a handful of Los Angeles developers are creating playgrounds for the ultra-wealthy with price tags of high as $500 million. It’s an extremely risky proposition – these builders risk being stuck with gilded, one-off properties that they’ve sunk substantial money into. The personalities and stories of these spec builders tend to be as colorful as the homes themselves.
“It’s a crazy business,” Bruce Makowsky, who is asking $188 million for his Bel-Air spec mansion dubbed “Billionaire,” told the Wall Street Journal. “You don’t do it unless you’re a little nuts.” Makowsky made his fortune selling handbags on shopping channel QVC before getting into real estate.
Makowsky’s property, initially asking $250 million, features a 40-seat movie theater, a bowling alley, and artwork such as a photo of a blonde standing on a Rolls-Royce holding a chainsaw.
But his project isn’t even the most expensive one out there. Nile Niami, a former B-movie special effects man and producer, is building a Bel-Air mansion dubbed “The One” that he hopes to sell for $500 million. The home has 20 bedrooms, a nightclub and jellyfish aquariums. The magnitude of the bets he makes and the sheer expense of building and financing such projects can be taxing, he admitted.
“It’s like, my God, look what the mortgage payments are, look how long it’s taking,” he told the Journal. “I cannot keep doing this at this level with this many houses so often. It’s too much stress. My girlfriend’s a yoga instructor. She’s got me doing yoga and drinking yerba mate shit.”
Scott Gillen, who came from a background in directing commercials and is now building a Malibu spec home asking $85 million, told the newspaper that spec developers tend to shoot for a return on investment of about 50 percent — though he’s likely to get closer to 30 percent.
“If I’m going to invest $20 million, I need 10 million bucks,” he said. “If I’m listing a house at $100 million, I’ve got to have enough meat on it that, if something goes wrong, I can slice $25 million off the top.” [WSJ] — Meenal Vamburkar