Prices for Luxury Real Estate Keep Rising. It Must Be Art.

The following is an excerpt from an article in 

The New York Times
Saturday, September 01, 2012

Prices for Luxury Real Estate Keep Rising. It Must Be Art.

By JAMES B. STEWART

If it’s $100 million, is it art?

Since Citigroup’s former chairman, Sandy Weill, sold his penthouse at 15 Central Park West late last year for $88 million, or $13,000 a square foot, to a Russian billionaire, sales prices in Manhattan have been flirting with $100 million, and brokers say it’s only a matter of time until the barrier is broken.

Sales at such stratospheric levels in Manhattan, as well as records in certain neighborhoods in Miami, Los Angeles and a few other pockets isolated from the nationwide collapse in real estate prices, have left real estate professionals struggling to explain the surge. Art may be the answer.

“Art is what people are willing to pay for, and an apartment like this is like a piece of art,” the Long Island real estate developer Steven Klar told a colleague of mine at The Times, Alexei Barrionuevo, in late July as he listed his penthouse on West 56th Street for $100 million.

Kathleen Coumou, senior vice president at Christie’s International Real Estate, said that some residential properties could legitimately be marketed and sold as art.

“When we call a property art, it tends to have architectural or historic significance,” she said. She cited the recent sale of a Manhattan town house designed by the famed 19th-century architect Stanford White, which was listed by Christie’s at what now seems a bargain, $49 million. “But even new construction could be considered art. It’s the equivalent of postwar and contemporary art, which is setting record prices.”

Something is certainly leading to record prices for what brokers describe interchangeably as trophy or art properties. An apartment at One57, a tower under construction across from Carnegie Hall, sold for $90 million and another is in contract for a sum said to be over $90 million (though less than the list price of $115 million.) The casino executive Steve Wynn, who is also a prominent art collector, bought a penthouse at the Ritz-Carlton on Central Park South for $70 million in June. A duplex co-op on Park Avenue sold for $52 million in May.

For high-end real estate sellers and buyers, the art analogy holds obvious appeal, since prices for paintings cracked the $100 million barrier at auction years ago and quickly rebounded from the financial crisis. The record for the most expensive painting is said to be held by Cezanne’s “The Card Players,” sold last year to the royal family of Qatar for a price estimated by Vanity Fair at $250 million. (A few weeks ago, a member of the same family walked away from a deal at One57, opting instead for a $47 million Upper East Side town house.)

To reduce the Cezanne’s 97-by-130-centimeter dimensions to real estate terms, that’s $19,826 per square centimeter. Mr. Klar is asking only $12,500 per square foot, and his apartment comes with swag drapes and a crystal chandelier.

It may be time for a reality check.

David Kusin, a former Metropolitan Museum of Art curator who also worked on Wall Street and now runs Kusin & Company, a consulting firm in Dallas that specializes in the economics of the art market, told me the comparison of real estate to fine art infuriated him.

“There’s absolutely no statistical validity to it,” he said. “It’s like comparing Earth to Saturn. And I’ve been studying these markets for 18 years. I live in a home designed by the dean of Taliesin,” Frank Lloyd Wright’s school of architecture. “The interior designer and landscape architect are at the apex of their fields. There is no comparability at all between the structure I live in and the art that hangs on the walls.”

For more, visit www.nytimes.com.

Realtors Reach the "YouTube Generation"

FEATURE

Realtors Reach the "YouTube Generation"

For L.A. agents on the cutting edge, remote-controlled helicopter videos and narrative videos are emerging as powerful marketing tools.

By Laurence Cruz

View All Contributing Writers

March 26 , 2012

Selling real estate to a generation of buyers who are increasingly disengaged from traditional marketing has some Los Angeles realtors getting creative with video.

One hot new trend: aerial video tours of properties shot using a small, high-definition camera mounted on a miniature remote-controlled helicopter. Companies, such as A Bird's Eye, that offer the service are increasingly in demand by realtors looking to connect with the "YouTube Generation," says Rob Aigner, who manages 300 real estate agents as CEO of Keller Williams in Beverly Hills, Calif.

Keller recently hired A Bird's Eye to create a mini-helicopter video tour as part of Aigner's strategy to sell 25 units in a plush Beverly Hills building. The experience was featured on the popular HGTV series "Selling L.A."

"We wanted to give people a perspective they don't normally get on a video tour of the inside of the property," says Aigner, adding that the video has already helped sell half of the units. "We felt like it was a great way to expose the values of the property and we knew that an aerial video could go more viral."

The trend is catching on fast in the real estate marketing community. Aigner says the videos are generating buzz among buyers and new clients alike. Chad King, president of A Bird's Eye, says in less than two years he has gone from producing a couple of the videos each month to 10 to 15 a month with the help of his trusty helicopter pilot, Justin Chapman.

After editing, the completed videos are typically distributed via Facebook, Twitter and a dedicated website set up to showcase the property, in addition to more traditional advertising. A Bird's Eye's aerial tours feature crystal clear video shot with a Nikon D7000 attached to the base of a mini-helicopter gliding low over manicured lawns, courtyards and swimming pools, or soaring high past facades, over rooftops and even the surrounding neighborhood to give a sense of location.

While it may look effortless, capturing the video is no easy feat. Chapman is a world champion remote-controlled helicopter operator with a commercial pilot license and years of experience as chief pilot on Hollywood feature films. He even designs mini-helicopters using custom-made electric motors, light materials such as Kevlar and fiberglass, and the latest in aerospace technology.

"It takes a tremendous amount of skill flying one of these helicopters, especially in a little bit of wind," says King, who charges realtors about $1,500 for a package of still photos, panoramas and an aerial video. "The reason we stand apart from the competition is Justin's skills."

King has created aerial video tours of everything from triplexes to sprawling luxury estates. Aigner says realtors tend to use the tours to appeal to younger first-time buyers with plenty of cash. The goal is to make the listing stand out from the crowd, and video seems to do the trick.

"We as realtors need to think about what we can do to make it interesting and dynamic—not just beautifully photographed," Aigner says. "The helicopter component was just different enough that it became a little more viral."

Another trend realtors are just beginning to embrace is using videos to tell a story—a short movie, if you will—with the property serving as the location. In one such video created by an Australian real estate team, a scantily clad woman bound to a chair in a swanky house screams into a nearby smartphone for help. On the other end of the line, as a SWAT team races to the rescue, an emergency operator asks the damsel to describe the property's location and layout—a dramatic pretext for a rapid video tour of the place. Slickly produced, racy and tongue-in-cheek, the video certainly stands apart from more traditional marketing approaches.

Realtor Jeff Yarbrough, also of Keller Williams in Beverly Hills, says he has had great success with a similar approach. Hiring an actor and a two-person film crew with a digital camera and small lighting kit, he creates "lifestyle videos" that not only showcase the home, but also suggest the lifestyle of the buyer and what the neighborhood offers. A recent example, for a property in the Hollywood Hills near the Sunset Strip, garnered 17,000 "Likes" on YouTube and landed a buyer who precisely fit the target buyer profile and lifestyle, Yarbrough says.

"Five years ago, you would have needed five or 10 people on site to make a film like this," he says. "Today, you can do it on an iPhone. It's really technology that's pushed it to the point where we can accomplish this with a reasonable budget in a reasonable amount of time."

King, who is positioning himself to ride the narrative-video-as-marketing-tool wave, agrees. "Video is the future," he says. "A picture can tell a thousand words, so what can a video tell?"

The contents or opinions in this feature are independent and do not necessarily represent the views of Cisco. They are offered in an effort to encourage continuing conversations on a broad range of innovative technology subjects. We welcome your comments and engagement.

We welcome the re-use, republication, and distribution of "The Network" content. Please credit us with the following information: Used with the permission of http://thenetwork.cisco.com/.

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News Release from IBM - Smarter Buildings

New IBM Smarter Buildings Analytics to Help CFOs Prepare for Major Accounting Shift

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ARMONK, N.Y. - 02 Mar 2012: IBM (NYSE: IBM) today introduced new analytics software to help Chief Financial Officers and real estate executives accelerate preparedness for pending compliance rules for leased assets. More than 92 percent of senior executives surveyed in a new IBM study say they're not yet prepared to address these changes.

Proposed accounting rules from the U.S. Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB), expected to be finalized in 2012, will require a company's leased assets – such as real estate, vehicles and other equipment – to be added to their balance sheet as a capital asset.

This means S&P 500 companies, for example, would have to list the value of their leases on the balance sheet, weighing them down with an estimated average of more than $1 billion in new assets. The pending regulation has the potential to dampen their financial performance as expressed in debt/equity ratios and return on assets. The U.S. Securities and Exchange Commission (SEC) estimates the impact of these changes may approach $1.25 trillion dollars for U.S. publicly traded companies.(1) 

IBM today is issuing new software to help companies manage this major accounting change. IBM TRIRIGA software has new analytics that delivers visibility into balance sheet and income statement impact; financial assumptions and audit controls for both real estate and equipment leases; and automates management review and approval processes, specifically to help companies navigate the proposed regulation.

The new software also delivers strategic facility scenario modeling to increase return on leased real property assets. With a global view, the software can:

• Provide operational controls such as critical date alerts, payment processing and financial assumptions for leased real estate and equipment assets in a single technology platform.
• Provide balance sheet and income statement analysis of complex real estate lease decisions, such as 10 years with two renewal options versus 20 years, for instance.
• Help predict future demand for space and display gaps between demand and availability of real estate space.

These types of analytics are critical as an IBM study issued today shows 92 percent of those surveyed believe they are not prepared to implement the pending rules. The IBM survey, conducted by CFO Research Services, a research group sponsored by CFO Publishing, polled 179 senior executives from global companies with revenue in excess of US$1 billion.

Survey Highlights Lease Accounting ChallengesThe IBM survey indicates the proposed rules will require considerable changes to companies' operating and finance strategies. Seventy-nine percent anticipate moderate or substantial changes to accounting policies, processes and practices, while a majority also expects related operational strategies for real estate (53 percent). Sixty-three percent of companies expect changes in information management systems to comply with the pending rules.

Specifically, the new survey, "Beyond the Balance Sheet: Opening the Book on the New Lease Accounting Standards" also found that:

• About half exhibit the most concern over worsening in debt/equity ratios and return on assets.
• Sixty percent say that they will need to make some level of change in planning, budgeting and forecasting systems, while half (49 percent) expect new or upgraded business intelligence systems.
• Sixty percent anticipate the need for changes or new software to enterprise asset management systems, while 56 percent expect to address real estate and facilities management systems.
• Seventy-four percent agree that their companies will need to conduct additional training to adapt to the new lease accounting standard.
• More than half feel they will need significant time to prepare for the proposed standards with 58 percent predicting six months to two years.

"As companies are hit with the new financial regulations, we see that most firms are concerned about their readiness to abide by the lease accounting changes," said George Ahn, vice president of Enterprise Asset Management, IBM. "We predict that the pending IASB/FASB regulations will spark companies to manage their leased buildings, vehicles and equipment as meticulously as they have traditionally managed their overall financial investment portfolio, with an increased focus on asset efficiency. At IBM, we have worked closely with progressive companies to understand the impacts, and are prepared and excited to help companies meet this new need."

Beyond compliance with the proposed regulation, IBM is broadening its reach by making its software available in global languages to increase productivity and ease of use for companies with worldwide operations. This globalization is the next step in accelerating IBM's growth in the smarter buildings market since the company's acquisition of TRIRIGA.

For more information on the lease accounting survey and IBM TRIRIGA software go to:

• http://www.ibm.com/software/products/us/en/subcategory/SW22A
• ibm.com/software/tivoli/lease-accounting

About the Proposed Lease Accounting StandardThe proposed rules are being released by the International Accounting Standards Board and Financial Accounting Standards Board, who are regulators for the U.S., Europe and many other countries.

Companies realize that compliance will take significant effort as it increases the complexity of lease accounting with new requirements for the management and tracking of financial assumptions of leased assets and real estate.

About IBM Smarter BuildingsSince launching its Smarter Buildings initiative in February 2010, IBM has created a portfolio of smarter buildings solutions that integrate with building automation software from across the industry.  IBM's real-time monitoring and analysis, facilities and space management capabilities, and advanced dynamic dashboards helps property owners and managers reduce facilities operations and energy expense, and improve asset management and reliability. Through IBM's acquisition of TRIRIGA, IBM accelerated efforts to bring intelligence in the smarter buildings market. IBM's smarter building solutions help clients listen to data generated by facilities. By collecting, managing, and analyzing data IBM helps clients gain intelligence and insight to energy, space and facilities management. TRIRIGA strengthens IBM's smarter buildings solutions by adding key functions such as real estate, facility and energy management software solutions. 

(1) U.S. Securities and Exchange Commission, "Report and Recommendations Pursuant to Section 401(c) of the Sarbanes-Oxley Act of 2002 On Arrangements with Off-Balance Sheet Implications, Special Purpose Entities, and Transparency of Filings by Issuers", page 64,http://www.sec.gov/news/studies/soxoffbalancerpt.pdf, 2005

Developer Convicted of Operating a Ponzi Scheme

From the FBI, New York:

Jury Finds Staten Island, New York Real Estate Developer Guilty of Operating Multi-Million-Dollar Ponzi Scheme

U.S. Attorney’s Office February 09, 2012

Eastern District of New York (718) 254-7000

— filed under: Breaking News, Press Release, White-Collar Crime

BROOKLYN, NY—Following two weeks of trial, a federal jury in Brooklyn, N.Y., today returned guilty verdicts against Joseph Mazella, the founder and president of the Great Atlantic Group Inc., a Staten-Island based real estate and financial consulting company, on charges of securities fraud, wire fraud, and money laundering. These charges arose out of the defendant’s operation of a Ponzi scheme that led to more than $14 million in losses. When sentenced by U.S. District Judge Carol B. Amon, the defendant faces a maximum sentence of 25 years in prison on the most serious charge.

The verdicts were announced by Loretta E. Lynch, U.S. Attorney for the Eastern District of New York.
The evidence at trial proved that Mazella solicited money from prospective investors by telling them that he would invest their money in real estate projects, including projects in Trenton, N.J., a warehouse in Utica, N.Y., and a golf course in Greene County, N.Y. Mazella told his victims that their money would be safe and that he would pay them a fixed rate of return. Mazella encouraged several investors, typically senior citizens, to apply for reverse mortgages on their residences and to invest the proceeds with him. From approximately January 2007 until approximately December 2010, investors gave Mazella more than $14 million. By January 2007, though, the evidence showed that Mazella was operating Great Atlantic as a Ponzi scheme in which he paid returns to investors from existing investors’ deposits or money paid by new investors. Mazella also used investors’ money to pay his personal expenses, including payments for a Porsche, a mortgage on his personal residence and family expenses.

“The evidence at trial showed that the defendant callously and systematically defrauded his victims of their lives’ savings. Mazella’s victims, many of whom are senior citizens on a fixed income, turned to him to ensure their security in their golden years. Instead, their security was raided to fund his fraud, and they will feel the impact of Mazella’s crimes for the rest of their lives,” said U.S. Attorney Lynch.

Ms. Lynch extended her grateful appreciation to the FBI, which led the government’s criminal investigation.
The government’s case is being prosecuted by Assistant U.S. Attorneys John Nowak, Winston Paes and Mary M. Dickman.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The Task Force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

Energy Spurs Recovery in Houston

Excerpt from an article in The New York Times
Wednesday, February 08, 2012

Energy Spurs a Recovery in Houston Real Estate 

By KRISTINA SHEVORY

HOUSTON — In most cities, companies are holding tight, mothballing office expansions and delaying new hires. But not in Houston.

Powered by a rise in oil prices and a shale exploration boom, Houston is the first major metropolitan region to regain all the jobs it lost in the recession. The region added about 76,000 jobs last year, according to the Texas Workforce Commission, and is on pace to pick up tens of thousands more this year.

Oil and gas companies, from the biggest names like Exxon Mobil to the smallest independents, are dusting off plans to expand, relocate or put up new buildings. Last year, 1.8 million square feet of commercial space was vacuumed up, and real estate brokers expect the same or greater this year. “No question, it’s energy,” said Jim Arket, a senior vice president at Grubb & Ellis in Houston. “That’s been the plus multiplier of Houston.”

The resurgence can be partly tied to the lifting in fall 2010 of the government moratorium on deepwater drilling in the Gulf of Mexico after the BP oil spill. The bulk of the gulf’s drilling and profits comes from those offshore waters. Shale drilling has also bolstered balance sheets.

Nexen, a Canadian company, is moving its American headquarters from Plano, Tex., to Houston after it received permits to restart deepwater drilling in the gulf. “Houston is quite clearly the place to be for a deepwater operator,” said Grant Dreger, the vice president for finance and administration at Nexen Petroleum U.S.A. “You have loads of deepwater talent, and it’s home to the majority of our joint venture partners.”

Bid Rigging at Foreclosure Auctions

News release from the FBI, Sacramento Division:

California Investor Pleads Guilty to Bid Rigging and Fraud at Public Real Estate Foreclosure Auctions
Ninth Guilty Plea in the Investigation to Date

U.S. Attorney’s Office January 27, 2012

Eastern District of California (916) 554-2700

— filed under: Fraud, Press Release, Sacramento Top Stories

SACRAMENTO, CA—A real estate investor pleaded guilty today in U.S. District Court in Sacramento to conspiring to rig bids and commit mail fraud at public real estate foreclosure auctions held in San Joaquin County, Calif., Sharis A. Pozen, Acting Assistant Attorney General of the Department of Justice’s Antitrust Division, and Benjamin B. Wagner, U.S. Attorney for the Eastern District of California, announced.

Kenneth A. Swanger pleaded guilty to conspiring with a group of real estate speculators who agreed not to bid against each other at certain public real estate foreclosure auctions in San Joaquin County. The primary purpose of the conspiracy was to suppress and restrain competition and to obtain selected real estate offered at San Joaquin County public foreclosure auctions at noncompetitive prices, the department said in court papers.

According to the court documents, after the conspirators’ designated bidder bought a property at a public auction, they would hold a second, private auction, at which each participating conspirator would bid the amount above the public auction price he or she was willing to pay. The conspirator who bid the highest amount at the end of the private auction won the property. The difference between the price at the public auction and that at the second auction was the group’s illicit profit. The illicit profit was divided among the conspirators in payoffs. According to his plea agreement, Swanger participated in the scheme beginning in or about June 2009 until in or about October 2009.

To date, nine individuals, including Swanger, have pleaded guilty in U.S. District Court for the Eastern District of California in connection with the investigation. They are: Anthony B. Ghio; John R. Vanzetti; Theodore B. Hutz; Richard W. Northcutt; Yama Marifat; Gregory L. Jackson; Walter Daniel Olmstead; and Robert Rose. In addition, four other investors, Wiley C. Chandler, Andrew B. Katakis, Donald M. Parker and Anthony B. Joachim, and one auctioneer, W. Theodore Longley, were indicted by a federal grand jury in Sacramento on Dec. 7, 2011.

“This type of illegal scheme undermines the transparency and integrity of the competitive market for residential real estate. Today’s guilty plea sends a clear message that the Department of Justice does not tolerate anticompetitive conduct that harms consumers,” said Acting Assistant Attorney General Pozen. “The Antitrust Division will continue to work with its law enforcement partners to prosecute the perpetrators of anticompetitive schemes in public real estate foreclosure auctions in the Sacramento area and into northern California.”

“The Department of Justice is bringing greater scrutiny to auctions of foreclosed properties as part of our effort to root out fraud in the real estate industry in all its forms,” said U.S. Attorney Wagner. “The days when a few players could rig these auctions for their own benefit are ending.”

Swanger pleaded guilty to bid rigging, a violation of the Sherman Act, which carries a maximum penalty of 10 years in prison and a $1 million fine. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime if either of those amounts is greater than the statutory maximum fine. Swanger also pleaded guilty to conspiracy to commit mail fraud, which carries a maximum sentence of 30 years in prison and a $1 million fine.

These charges arose from an ongoing federal antitrust investigation of fraud and bidding irregularities in certain real estate auctions in San Joaquin County. The investigation is being conducted by the Antitrust Division’s San Francisco Office, the U.S. Attorney’s Office for the Eastern District of California, the FBI’s Sacramento Division and the San Joaquin County District Attorney’s Office. Trial attorneys Anna Pletcher and Tai Milder from the Antitrust Division’s San Francisco Office and Assistant U.S. Attorney Russell L. Carlberg are prosecuting the case.

Today’s charges are part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. One component of the task force is the national Mortgage Fraud Working Group, co-chaired by U.S. Attorney Wagner. For more information on the task force, visit www.StopFraud.gov.

Anyone with information concerning bid rigging or fraud related to real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at 415-436-6660, visit www.justice.gov/atr/contact/newcase.htm, contact the U.S. Attorney’s Office for the Eastern District of California at 916-554-2700 or contact the FBI’s Sacramento Division at 916-481-9110.

Man Indicted for Hurricane Katrina Fraud

News release from the FBI, Honolulu Division:

Kailua Man Indicted for Hurricane Katrina Fraud

U.S. Attorney’s Office January 25, 2012

District of Hawaii (808) 541-2850

— filed under: Fraud, Honolulu Top Stories, Press Release

HONOLULU—A federal grand jury returned a 28-count indictment today against Kailua (Oahu) resident Dan Doyle, age 54, for an investment fraud scheme marketed primarily on AM radio financial shows airing in California. Florence T. Nakakuni, United States Attorney for the District of Hawaii, and Frank Montoya, Jr., Honolulu FBI Special Agent in Charge, announced the indictment of Doyle on 27 counts of wire fraud and one count of mail fraud relating to real estate projects designed to rebuild affected areas of Mississippi following the destruction of Hurricane Katrina.

The indictment describes a program known as the “Gulf Opportunity Zone” (“GO Zone”) implemented by the federal government to provide tax incentives to real estate investors and developers seeking to build affordable housing in the Gulf region following the August 2005 devastation of Hurricane Katrina.The indictment also alleges:

• Doyle owned and operated a business in Kailua using names including Investment Real Estate Network and Investment Radio Network. From late 2007 through December 2009, DOYLE allegedly purchased air-time on California talk radio stations to broadcast “radio infomercials” that he hosted and produced touting the benefits of Mississippi “GO Zone” real estate investments. Listeners to the programs were encouraged to call DOYLE’s office in Kailua for investment information.
• When potential investors called Doyle’s Kailua office, they were allegedly encouraged to wire transfer a refundable deposit to Doyle’s business bank account in Hawaii.
• Seventeen individuals wire transferred or mailed over $890,000 to DOYLE in Hawaii as deposits for “GO Zone” investments that were never built.
• Instead of preserving the money for potential refunding, DOYLE spent investor money on unrelated personal and business obligations including mortgage payments on his Kailua home and yachting expenses, according to the indictment.

For each of the wire and mail fraud counts, DOYLE faces a maximum period of imprisonment of 20 years, plus possible fines of up to $250,000 and terms of supervised release of up to three years. The court issued a penal summons for DOYLE to appear in federal court for arraignment An indictment is only an accusation and the defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.