Jim Weix, a South Florida Realtor, recalled a period at the peak of the housing bubble more than a decade ago when even the man mowing his lawn was scouting six-figure real estate deals.
“The guy that cuts my grass, he came by one day and he said, ‘Hey Jim, I’ve got this really hot deal,’” recalled Weix, broker-owner of The Real Estate Company in Stuart, Florida. “‘We can buy a hundred lots in Port St. Lucie for $15 grand a piece,’ he said, and then he added, ‘So what I’m looking for is two partners to chip in $50 grand apiece and I think we can make a killing.’”
Weix turned him down, as did others who were approached. But one year later, those same lots, situated in the middle of nowhere and overrun by roaming gopher tortoises, would skyrocket 233 percent to command a whopping $50,000 each. A year after that, they climbed to $100,000.
It was in such a climate of frenzied buying, loose lending practices and questionable appraisals that in May of 2008, mere months before the true effects of the subprime mortgage crisis had begun to sink in, Donald Trump closed what, for a brief moment in time, was heralded as the priciest single-family home sale in American history.
The headline-grabbing deal for a 61,744-square-foot oceanfront property in Palm Beach fancifully known as the Maison de l’Amitié, or House of Friendship (pictured above), was valued at $95 million in a 2008 sales deed, but ballyhooed as the nation’s first $100 million transaction by Trump, then the star of the hit reality show The Apprentice, but every bit the braggart he is today.
“I love breaking records,” Trump said shortly after the blockbuster sale of the French-regency style estate at 515 North County Road to the Russian fertilizer billionaire Dmitry Rybolovlev. “And this is a record.”
Senator calls for investigation into deals
Although the transaction is now a decade in the past and has long since been surpsassed by a slew of bigger, brasher deals — including 10 for $100 million or more in 2016 alone — the sale is raising red flags in Washington, D.C., where at least one senator has called for an investigation.
On Friday, Feb. 9, Oregon Sen. Ron Wyden called on the Treasury Department to turn over financial records tied to the deal, citing the ongoing investigation into possible Russian collusion during the 2016 presidential campaign. At the center of his inquiry, the Democrat raised questions as to how Trump was able to more than double his initial investment of $41.35 million in 2004 despite an appraisal value in 2008 that Wyden claims fell well below the sales price.
“In the context of the President’s then-precarious financial position, I believe that the Palm Beach property sale warrants further scrutiny,” Wyden wrote in a brief. “It is imperative that Congress follow the money and conduct a thorough investigation into any potential money laundering or other illicit financial dealing between the President, his associates and Russia.”
But in interviews with Florida real estate professionals, including at least one involved in the 2008 sale, agents characterized Trump’s blockbuster deal as simply par for the course in the years leading up to the financial collapse, when appreciation rates climbed at a historic clip and the housing market in Palm Beach and elsewhere in South Florida was like the Wild West.
“In my opinion, Trump was in the right place — Florida — at the right time, 2004 to 2008,” said Weix, who cast doubt on insinuations made by Wyden that Rybolovlev was a conduit of sorts for money laundering. “Although his numbers were larger, he was simply doing what everyone else was doing, [which was] taking advantage of crazy appreciation rates.”
Stephanie Anton, the executive vice president of Luxury Portfolio International, said because Trump bought the property at a steep discount at a foreclosure auction, doubling his return wasn’t far fetched — especially when considering that, among lofty luxury properties, identifying comparable real estate values is frequently a challenge for listing agents. In other words, the sale, which fell below an initial $125 million asking price, may have been low.
“We don’t even like to use the word ‘comp’ at significant prices like that,” Anton told Inman News. “We like to use ‘relevant sales’ because there aren’t comps a lot of times. Rarely are things sold at that price point or with those unique factors, so pricing can be a challenge.”
“When you’re talking about ultra-luxury real estate, it’s like a piece of artwork,” added Samantha DeBianchi, a broker with DeBianchi Real Estate in Ft. Lauderdale. “I could look at a piece of artwork and say ‘this is something that I could do myself,’ and then you find out someone else paid $20 or $30 million for it. At that level, it all comes down to how much somebody is willing to pay.”
Who is Dmitry Rybolovlev?
And if history is any indication, Rybolovlev was always willing to pay a lot. Largely unknown in the United States, the former Russian bank owner, who last year was ranked 190th on Forbes list of billionaires, rose to power through the potash industry, but has drawn attention through an array of stateside real estate purchases, each one loftier than the last.
In 2011, for example, he shattered New York real estate records with the $88 million purchase of a 10-room apartment at 15 Central Park West from the former chairman of Citigroup, Sanford Weill. Two years later, he garnered headlines for his $20 million purchase of actor Will Smith’s home in Hawaii, a three-bedroom pad on seven acres in beautiful Kauai, the oldest of the Hawaiian islands. In each case, Rybolovlev paid well above the seller’s initial investment.
“As a seller, you know sometimes when someone is making an emotional decision,” said Anton. “I think we saw more of that back then, particularly with Russians but also Chinese, too. There was a time when people were buying willy-nilly, but that has changed, and particularly the Chinese. These are shrewd investors and they come in knowing the market and they’re not looking to spend and be silly. But early on, there was a little more of that, for sure.”
Discrepancy over renovation history
One mystery remains, however. Following Trump’s purchase in 2004, he reportedly hired season three Apprentice winner Kendra Todd to spearhead a $25 million renovation of the property in 2005. But according to an application for demolition filed in 2016 that was obtained by The New York Times, the architect stated that the renovation project focused solely on a new kitchen, bedrooms, bathrooms and “minor interior alterations of doors, frames and windows.”
“I don’t care about the house,” Trump reportedly told Miami gossip blogger Jose Lambiet in 2013, according to a report in Gossip Extra. “I bought it for $41 million, put in $3 worth of paint and gave it a good cleaning — and I sold it for the highest price ever for a single-family home.”
But Todd, who co-founded the Kendra Todd Group in 2009, where she focuses on the Seattle and South Florida housing markets, told Inman News on Wednesday that claims Trump invested little or no capital into renovations are patently false.
“It was basically a three-bedroom museum, and we went in and completely altered the floor plan and added bedrooms, but there was a significant alteration to the layout,” said Todd. “The bathrooms were redone, the entire pool area redone. I mean, there were a lot of renovations.”
Regardless, in 2016, Rybolovlev demolished the nearly century-old home, tearing down with it a pool house, tennis courts and carriage house. Split into three parcels, he sold two last year for a total of $71.34 million, and he’s expected to sell the remaining lot soon, experts told Inman, due to a scarcity of developable oceanfront land in Palm Beach. In the end, he may see a return on his investment, but because of property taxes, he could still post a sizable loss.
For Trump, however, the deal is emblematic of his acumen, Todd believes.
“During that time, Trump was able to accomplish things in the real estate market that nobody else could, and he’s just been very, very successful over the years in his real estate dealings,” Todd said. “I do think it was a combination of right time, right place, right person, right name.”
“The fact that a Russian billionaire purchased it is in all likelihood a pure coincidence,” she added.