The Generational Retreat

The Generational Retreat

During the spring of 2010 I was working with a buyer who was, in fact, not just any buyer. Which isn’t to say that any buyer is a boring buyer, but it is to admit that buyers with a nagging legacy itch who in turn seek out large lakefront estates are my sort of fun. This buyer originally looked for lakefront land of the vacant variety, the sort that might accommodate a massive home of 10,000 square feet or so, to be built of the finest materials and in the most fantastical fashion. The idea was to build a retreat that might not just house his immediate family, but one that would play host to generations of his family, both looking into the past and far into the future. The plan wasn’t to just have a lake house, the plan was to find, or build, the lake house.

And so we set about in search of vacant land, and in our efforts, we looked at large parcels and larger parcels, each beautiful but not quite right. The general consensus at the time, and still today, is that in order to find a large estate sized parcel of land one would need to spend perhaps as little as $2.5MM or as much as $6MM, but likely somewhere between $3MM and $4MM. With this budget in mind, we measured and weighed the various possibilities. And then, one day, we decided to look at a great big house that had been only recently built. The buyer liked the house and after negotiations and tribulations, we closed for $5.885MM last August. The sale was robust, but not nearly as robust had the total outlay been first for vacant land, and next for the actual house. By buying a built home and tweaking it, many, many millions of dollars were saved.

This buyer may have understood the big picture, but the trend over recent years for those seeking monstrous estates has been to buy vacant or buy and tear down and then build up and out to the extent of local zoning ordinances. This trend has created an influx of lakefront manses, those where the owners have total invested dollars totaling anywhere from $6MM to $10MM. This is a subjective estimate, but considering many vacant land purchases have been in the $3MM to $3.5MM range over recent years, this estimate might be subjective but it is likely reasonable. The question with these properties is what happens when these newly minted estates, with an intended use to span generations, end up instead hitting the open market at numbers that reflect the good intentioned owner’s exaggerated cost basis. Are there lakefront buyers on Geneva in the $8MM-$10MM range?

The answer, fortunately, is yes. But unfortunately, if you’re a seller trying to sell one of these upper bracket mansions, is that the bar set to obtain such a price is insanely high. The Pritzker family purchased a lakefront estate (Casa Del Sueno) in recent years for a purported price of $10MM. Mr. Driehaus has an estate that is easily worth more than any other on the lakefront, and that value probably makes the Pritzker purchase look downright anemic. Mr. Patrick Ryan has one of the finest estates on the lake (House in the Woods), with dozens of acres of land. Same goes for Mr. Wrigley Jr. But these are estates with tens of acres of land and mostly spectacular, historical homes (Wrigley excluded). While there are buyers for these sorts of homes, are there buyers for new homes in this lofty range?

We shall soon find out. A lakefront hit the market this week for $11MM, a price not tested for quite some time, and hardly ever proven even in the best of times. The home is being built currently, and promises to be ultra impressive, as well it should for a ten figure asking price. The property is estate worthy, the setting divine, and the structure fitting. But all of that is unimportant if there are no buyers for this home. While some may assume this lakefront palace is being built on spec, it doesn’t appear that way to me. Then again, I don’t know the owner so that much is pure speculation on my part, as it may well be on theirs.

Today, there are six lakefront estates on Geneva listed in excess of $5MM. These are amazing homes, with prime addresses and large swaths of land (some exclusions apply). But are they realistic? Considering each year or two a buyer looking to buy an existing home in that strata may surface, but typically only one of them. The trend to buy and build rather than to buy existing is quite strong and established, so we’ll just have to wait to see if there are any buyers out there seeking a turn key generational estate. I have a feeling that there may be one such alpha buyer out there, but I’m not so sure he or she will be buying any time soon.

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