Luxury real estate vultures

A Fortress Investment veteran is now at an auction house that hopes to feed off of distressed estates.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Katie Benner, writer-reporter

house.03.jpg
A Concierge Auctions property in Florida
How has Wall Street responded to last year's collapse of Lehman Brothers?
  • Made significant changes
  • Some reform, but more needed
  • Business as usual
  • It's gotten worse

(Fortune Magazine) -- When an ex-managing director of hedge fund Fortress teams up with Sotheby's in a real estate venture, you know something funny is going on in the luxury residential market.

But that's basically what happened last month when George Graham, formerly of Fortress's Drawbridge Special Opportunities Fund, joined a real estate auction house that works closely with Sotheby's (BID) International Realty and other firms to sell off luxury homes.

Graham is CEO of Concierge Auctions, founded in 2006 by a well-connected broker in South Florida. The company is looking to make hay from an uptick in luxury real estate auctions.

"There is a pipeline of multimillion-dollar properties that are underwater," says Graham. "In most of these areas the homes aren't selling. There's a multiyear supply."

Concierge's pitch to a seller is simple: Your house won't sell on the open market for years. You may not get the price you want with an auction, but it's better to have an exit than to be stuck with the carrying costs on, say, a $20 million home -- or worse, enter foreclosure. (As Concierge's website puts it, "The times have changed. Change with them.")

But the real focus for Concierge is on the other half of the equation: the lenders, who in this segment of the market are increasingly looking for an exit too.

Since the costs to the bank when a luxury home goes into foreclosure are so much higher than on a regular home, lenders are open to negotiating short sales, in which the bank accepts less than the amount of the mortgage.

With home sales stalled, an auction is the fastest way to a price. "You get market value without dragging out the process," says Graham, who sees a "wave" of high-end mortgages headed for default.

Concierge is hoping Graham's relationships with lenders from his years at Fortress (FIG) and, before that, investment bank Salomon Bros., will generate business from banks looking for an out. (Concierge takes a cut of the final sale.)

In July the company auctioned off a Boca Raton, Fla., mansion owned by the head of private equity firm Royal Palm Capital Partners. The property was on the market for three years, cut from $24.9 million to $21.9 million. The final price won't be revealed until the deal closes, but it probably won't cover the mortgage, said to be $12.5 million.

Either way it's money for the bank -- and Concierge Auctions.  To top of page

Company Price Change % Change
Ford Motor Co 8.29 0.05 0.61%
Advanced Micro Devic... 54.59 0.70 1.30%
Cisco Systems Inc 47.49 -2.44 -4.89%
General Electric Co 13.00 -0.16 -1.22%
Kraft Heinz Co 27.84 -2.20 -7.32%
Data as of 2:44pm ET
Index Last Change % Change
Dow 32,627.97 -234.33 -0.71%
Nasdaq 13,215.24 99.07 0.76%
S&P 500 3,913.10 -2.36 -0.06%
Treasuries 1.73 0.00 0.12%
Data as of 6:29am ET
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Sponsors
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.