Cambridge Analytica-Facebook, Mossack Fonseca’s Panama Papers, Saudi Arabia’s corruption crackdown, and the lesser known, but equally telling Paradise Papers, all have one thing in common – the exposure of a global system rigged against the 99.999 percent of us little people. In case you missed these exposures, all occurring in the past 12 months, private palaces like the 100,000-square-foot The One, currently under construction in Los Angeles, unashamedly remind us.
Here in Dallas, you may be remembering the award-winning columns I wrote in 2016 about how real estate non-disclosure enables the wealthy to unequally obscure the true value of their homes. I noted that the top 10 most expensive homes for sale at the time were valued by DCAD at $82 million less than their asking prices. This discrepancy cheated Dallas out of some $1,904,080 in taxes a year … based on just 10 homes.
Tip of the iceberg stuff was that.
Certainly we’ve known about the decades-long corporate drive to shift the burden of taxes onto consumers by diminishing their tax rates and exploiting loopholes in order to pay little or nothing (e.g. Apple, Starbucks, Google, Amazon, and others). What the table above doesn’t show is how tax avoidance manifests itself as unbridled opulence. Artwork and real estate suddenly worth hundreds of millions provide a vehicle to show off and obscure wealth. Offshoring, shell companies, bribery, and money laundering are the name of the game.
You might be thinking I included Cambridge Analytica for its du jour splashiness. You’d be wrong. Cambridge Analytica exposes the gutter of the surveillance economy and just how easily our thoughts and opinions are mined and manipulated into believing the unbelievable by a new crop of data scientists. Aside from their work in politics, data scientists routinely fabricate non-problems, based on fear, to change behavior that enriches the few. From mouthwash to hand sanitizers and vaccinations we’ve been manipulated by fear and we don’t question it.
Cambridge Analytica is particularly interesting because Equifax’s 2017 hack of 145 million credit reports didn’t take center stage in the way Cambridge Analytica and its 50 million Facebook records have. I think Cambridge Analytica has more steam because (so far) Equifax is theft by unknowns for unknown purposes. Cambridge Analytica has the stink of “you’ve been used” that’s so far lacking in the Equifax case. We’ll see if the pressure to protect and regulate continues to build, or peters out as usual.
Note: as of this writing the financial press trumpets Facebook’s stock drop. But know that in the week since the scandal broke, Facebook shares haven’t even lost a year’s worth of gains. They’d have to drop another $17 to reach that level ($130s). It seems most investors believe the storm will pass.
“Jon, you seem to have really veered off-topic here.”
No, I haven’t.
The One spec home, located in the Tony Bel Air enclave of Los Angeles, will be listed for sale in the coming months at $500 million. Its four-acre lot, sliced off the top of a hill, contains over 100,000 square feet, 20 bedrooms (seven for staff), including a 5,500-square-foot master suite. Thirty bathrooms. Thirty-car garage. Five pools. Five elevators. Four separate homes on the property (three guest/servant homes and the 74,000-square-foot main residence). There will also be a disco, casino, VIP room, walls of jellyfish aquariums, a refrigerated flower storage room, and its own hair salon. In case this hilltop home doesn’t make its owner feel above us “little people,” it’ll literally be surrounded by a moat.
The price likely has more to do with publicity than reality. The two most expensive homes to sell in Los Angeles were the Playboy Mansion (listed at $200 million) and another spec home, each selling for $100 million. In Dallas, the Crespi-Hicks Estate, also known as Walnut Place, was originally listed for $135 million in 2013, sold to Andy Beal in 2016 (rumored at $58 million-ish) before most recently being purchased by Mehrdad Moayedi for $36.2 million at auction last December. No one believes The One will generate anywhere near the $500 million price tag. Developer Nile Niami reportedly paid $28 million for the four-acre site and its 10,000-square-foot home. Even at $1,500 per square foot in construction and finishes, you’re at $178 million.
Gauche and vulgar don’t begin to cover it. But who do you think is going to buy it?
Former B-movie producer turned mega-mansion developer Niami told Details Magazine “We have a very specific client in mind. Someone who already has a $100 million yacht and has seven houses all over the world, in London and Dubai and wherever.” Indeed, a promotional video shows a fictional owner driving up in a multi-million dollar Ferrari (red, ‘natch) and moving through the imagined spaces all populated by what appear to be the best women technology can conjure.
The pool of buyers really only includes one gender (men) and four groups: Russian oligarchs, Middle East and Asian billionaires, or perhaps a technology titan. Sure, Dallas billionaires Jerry Jones and Mark Cuban could technically afford a home like this. However, with a significant portion of their wealth locked up in sports teams, they’d likely need to sell something to be mortgage-free. Mansion monstrosities like this require a buyer who can just write a check.
It reminds me of a 1980s sitcom which featured lines like, “If you want to know what God thinks of money, look at who he gives it to.” And this exchange, “… he went to the city and made his millions.” “Honestly?” “No one makes a million honestly.”
Nearby sits the $77.5 million Niami-built Opus mansion complete with a Cristal champagne room. It, too, sits near another of his mega-mansions which had sold for $40 million. It has since been seized by the US Justice Department as part of their ongoing investigation into the “biggest kleptocracy case in history” involving Malaysian government officials defrauding their own citizens out of billions. Niami is quoted as saying of the now dilapidated mansion, “I want to buy it back,” Ahh, but to resell to whom?
This is not a story about Niami. In 2015, the newly built Chateau Louis XIV, a stone’s throw from the real Versailles, sold for over $300 million. It sits in the middle of 57 manicured acres and includes a moat with an underground transparent viewing chamber. It was built on spec by the nephew of a billionaire arms dealer. Two years after its sale, the New York Times revealed the owner behind the shell companies was Saudi Arabian Crown Prince Mohammed bin Salman. In addition to the home, the prince also purchased a $500 million yacht and $450 million da Vinci painting the same year. Today, the crown prince leads the anti-corruption wave sweeping Saudi Arabia. In November 2017, bin Salman ordered the internment of prominent Saudis at the Ritz-Carlton in Riyadh seeking a return of at least $100 billion believed to be earned from corruption and embezzlement. The Times story published the following month on his own wild expenditures was well timed.
History: Rinse and Repeat
Just as the new Vanderbilt, Carnegie, and Rockefeller money of the prior Gilded Age built mansions to impress old money, so too this latest crop tries to buy legitimacy. The only difference is that the current gilded agers, trapped in a selfie culture they may have built their wealth upon, only want to impress themselves as they shelter money from governments and ultimately their fellow citizens.
Niami must be a little less confident in The One than he was in 2013 when construction began. The Saudi Arabian anti-corruption drama likely removes one pool of potential buyers wanting to shun conspicuous publicity. Ditto tech billionaires on the heels of Cambridge Analytica, and those garden-variety wealthy exposed via the Panama and Paradise Papers scandals. Marry that with the overall growing unrest over economic inequality and it may not be the best time to be hawking the most expensive home in the country. It will sell, but I suspect the quicker the sale, the more tone deaf the buyer. Many would argue that in this stratosphere the buyer will always be tone deaf as ego overshadows any moral compass.
As you read about unbridled opulent spending, question where the money came from.
One unintentionally ironic quote from Niami involves The One’s library. “Nobody really reads books. So I’m just going to fill the shelves with white books, for looks.” May I suggest volumes on the fall of ancient Rome, the French and Russian Revolutions, and the end of the Gilded Age?
Remember: High-rises, HOAs and renovation are my beat. But I also appreciate modern and historical architecture balanced against the YIMBY movement. In 2016 and 2017, the National Association of Real Estate Editors recognized my writing with two Bronze (2016, 2017) and two Silver (2016, 2017) awards. Have a story to tell or a marriage proposal to make? Shoot me an email firstname.lastname@example.org. Be sure to look for me on Facebook and Twitter. You won’t find me, but you’re welcome to look.