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  1. Wealth
March 1, 2008

Big Ben Strikes, Big Apple Crumbles

By Spear's

New York ain’t what it used to be, even for billionaires. Elizabeth Wolff discovers why London is the preferred hostess for those with the mostest.

New York ain’t what it used to be, even for billionaires. Elizabeth Wolff discovers why London is the preferred hostess for those with the mostest.

t hough born, raised and billionaire-made outside of the United States, the world’s largest diamond dealer has as a life goal to provide every American Jewish child a private Orthodox education on his dime. Additionally, since 9/11, the Uzbek-born Lev Leviev, who is reportedly worth twice Forbes’s $4.1 billion estimate, has invested well over $1 billion dollars in the city.

He opened a school in Queens ($14.5 million), bought up land around Brooklyn’s ready-to-gentrify Gawanus Canal; bought the ground zero neighbour 23 Wall Street ($100 million), Madison Avenue’s Clock Tower Building ($200 million), half the Upper West Side’s famed Apthorp ($520 million); and his latest acquisition has been the former New York Times headquarters ($525 million). Despite all this – and a storefront and Fifth Avenue offices to boot — he hasn’t any interest in making New York City his home.

Instead, when the 51-year-old family man thought it high time to move west from his Tel Aviv suburb, he decided to relocate to London. In January, the Israeli-national bought a seven-bedroom Hampstead mansion, dripping in excess, for $70 million, a record sale for newly constructed homes in London. The property already has a $100,000 bulletproof front door, a $1.5 million stone staircase, and gold-plated tiles for his indoor pool but Israel’s richest businessman will also see that the property is fitted with a helipad on its roof. And since his company, Africa Israel, has made clear its plans to extend its empire to the US (he claims already to be the largest 7-Eleven franchise owner and also has an amusement park project underway in South Carolina), he has no plans to give up his pied-à-terre in New York.

For businessmen around the world, Leviev’s choice of London over New York can be seen as nothing personal against the Big Apple; it’s just that London is more practical. While providing the most politically stable environment to raise his children and access to the most privileged of educations, it is simply the closest global city to his geographical business interests. He is five hours from Israel; eight hours from Angola, and when he wants to check up on his pet projects, five hours from NYC.

Leviev’s Russian colleagues (yes, he’s a major Russian real estate investor too) have been taking advantage of London’s geographical benefits for years. In 2006, Russians – one of the world’s fastest growing demographics of ultra-high-net-worth individuals – purchased 316 London homes costing more than $2 million, according to a survey by the Knight Frank agency, up from 65 homes in 2000, the year Putin took office. The manageable four-hour commute to Moscow is not insignificant.

Many people also presume that Leviev recognises the clear benefits of England’s ‘non-domicile’ tax haven. It is still too early to say what the affect will be of the controversial recent tax amendment to levy £30,000 for resident foreigners who have been in the UK for seven of the last ten years. One thing is certain. That HM Customs did not tax offshore income was highly significant in convincing the foreign super-rich to move to London.

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And in the growing global community, London’s ability to lure international billionaires is, perhaps, even more valuable than its ability to generate them. Over half of London’s resident billionaires are foreign-born, including: a Lebanese racing car franchise owner, a Ukrainian steel mill owner, an American hedge-fund manager, an Icelandic brewery billionaire, plus assorted Russian oil tycoons and Indian real-estate and steel honchos. So for New Yorkers, Leviev represents just the latest international billionaire the city has failed to attract.

And New York City’s 65-year-old billionaire mayor – because he’s a billionaire, he thinks like one – saw it coming. Recognising his city’s weakening grip on the world’s super-rich, Mayor Michael Bloomberg last year commissioned a report that studied the future of New York as a world financial centre. The in-depth study found that ‘caps on the number of visas available under US immigration rules’; the country’s ‘greater perceived litigation risk’; and its ‘complex and sometimes unresponsive regulatory framework’ have all made New York and Wall Street less attractive to both US-based and international companies.

Bloomberg is also tackling another accelerant to New York’s decline: quality of life. Towards the end of last year, the New York mayor paid a visit to London to study how the city had dealt with security and traffic. He stayed in his $7 million leasehold apartment overlooking Cadogan Square and took a number of public tours of the city with its mayor Ken Livingstone when he wasn’t attending parties thrown in his honour. He told a press conference there that after his duties as mayor expire, he expects to ‘spend a lot more time in London because it’s exciting and they have great museums and nice people’.

Upon his return, he was full of optimism and good cheer – and never more positive that emulating London was the way to go. But what he overlooked was the sheer difference between these two global centres today and – what is sure to be damaging down the road – the fact that New York is no longer a place where the wealthy feel wealthy.

For the last century, the Upper East Side has been a neighbourhood of excess and self-regard. Getting accepted into a Park or Fifth Avenue co-op was a sign of social and financial arrival. A green light from the board in a prestigious building indicated that your charm did something right – and all the money in the world couldn’t buy that kind of ego boost. It represented an insider’s club of wealth and privilege, a stone’s throw from Central Park, the top private schools, the most social churches and synagogues and all the see-and-be-seen that restaurants like the old Mortimer’s had to offer. Who could want more?

In the latter half of the 20th century, passing muster with the Park Avenue board was only outdone by the privilege of living in its pre-war buildings. Ornate wall and ceiling moulding, original wooden floors, cedar closets, thick walls, and classic layouts designed for residential quarters and entertaining were the most basic perks of the buildings constructed prior to World War II. If you were lucky, the original toilets and pedestal sinks were still intact. That architectural integrity and craftsmanship just did not come with new buildings.

At best, the white brick high-rises mostly built east of Third Avenue during the 1960s and 1970s financial slump were thoughtless replicas of quality urban living. Low ceilings, thin walls, boxy windows… I cringe at the thought. It became a bit of a family joke when I refused to move out of my parents’ Upper East Side co-op until I found an apartment with decent moulding. ‘Personality,’ I said to the broker on our fifth stop at a newly constructed rental. ‘I’ll only look at apartments with personality!’

But, no matter how much money you have, it is has become almost impossible to get accepted into one of these gold coast buildings – and for many, it no longer seems to be worth it.

The Old Money homogeneity of the 1950s still exerts a strong hold within many of these buildings and it is these board members who submit every prospective tenant to a gruelling financial and social review. All of your finances on the table, your personal life laid bear, entertaining habits: the lot.

If you require a ten-man security team, they may pose too much of an interference in the lobby: rejected. If you’re in town a dozen times a year but expect family members to make use of the apartment in your absence: rejected. And, even if you make it past the humiliating approval process, every central air-conditioner and intercom and third phone line must be OK’d by the board beforehand. New York City’s co-op approval process may be the fastest way to make your $200 million feel like zilch.

For far less hassle, you can live in one of the wealthiest areas in London – Mayfair, Knightsbridge, Kensington. You just sign the cheque for one of the many gorgeous $12-million homes and join the party. We’re happy to have you. Even the poshest London apartment blocks, where liveried footmen carry in your luggage, don’t care if you have a 95% mortgage or a criminal record, social or otherwise.

For those who still prefer New York – and, for the time being, it is still the city for the media industry – the new set of billionaires and those not far off have been finding other properties in which to relish their wealth.

Leading the pack has been the unassuming financier Bruce Kovner, who in 1999 paid $17.5 million for the International Center of Photography’s Fifth Avenue flagship so that he could call it his home. He has spent the better part of the last decade restoring the neo-Georgian ‘Museum Mile’ mansion to its original single-family occupancy and, during the landmark’s $10 million fix-up, added a two-storey master bedroom and an underground book vault for his rare book collection. Another relocated institution -the Lycée Français – sold its two 5th Avenue mansions on the corner of 72nd Street to the Emir of Qatar in 2002.

While many of the city’s wealthy veer towards the minimalism of Richard Meier’s glass-sheathed downtown condos, joining their fellow new-moneyed, Upper East Side rejects, there is wavering desire for uptown. The young wealthy set retreated downtown; the older establishment, trying desperately to hold onto their youth, followed (Richard Grasso lives in TriBeCa and so does Harvey Weinstein); and the restaurant and nightlife innovators have all, in turn, followed them.

I am the only one of my peers who still maintains that the Upper East Side is the best neighbourhood in the city. When I say this, it is standard practice for young professionals to roll their eyes. A restaurant and nightlife developer, one of New York’s biggest, who says he never goes above 19th street, told me that the Upper East Side is considered the worst place to open up a new restaurant. ‘It’s a ghost town all summer and every weekend,’ Steven Kamali told me from the trendy Meatpacking District. ‘At night there, everyone’s in bed by nine.’

Still, the neighbourhood that’s tucked in by nine has also been ground zero for 2007’s largest real estate purchases – even though its social enclave has lost much of its flock. One of London’s foreign billionaires, Leonard Blavatnik, bought Edgar Bronfman Jr’s East 64th street townhouse for $50 million – $3 million shy of 2006’s priciest townhouse record in the neighbourhood – and months earlier he also spent $27 million on a fancy 5th Avenue co-op. Wedding dress designer Vera Wang sold her Park Avenue co-op for $35 million – the same price financier Keith Rubenstein paid for a 62nd street townhouse off 5th. It’s as if the super-rich real-estate world is playing a game of musical chairs.

But the United States’ two top residential purchases of the last year have come out of New York’s latest attempt to woo the wealthy: turning famous hotels into lavish apartments. For a whopping $60 million, mega-developer Harry Macklowe bought all but one unit of one of the top floors of the Plaza to turn it into one sprawling trophy apartment and an anonymous London-based oil businessman shelled out $56 million for the 100-year-old hotel’s 9,200sq ft penthouse triplex.

And it’s a no-brainer that the condominium renovations of New York’s – and the Upper East Side’s – most iconic hotels, which have already been built with the utmost integrity and personal comfort in mind, would attract those top spenders looking for the crème de la crème. Buildings like Madison Avenue’s the Mark or midtown’s St Regis appeal to those who want to live uptown and under the roof of that pre-war aesthetic grandeur.

Leave it to the diamond guy to understand the appeal of rarity. Leviev has bet on the staying power of New York’s older buildings. Even though he’ll be in a newly constructed garish mansion in London, the diamond dealer’s building investments – all cherished landmarks – are in various stages of becoming luxury condominiums. This has provided at least some respite from the world’s clamouring super-rich but, living in everyday Manhattan, you can’t help but feel that there’s just not enough quality real estate to satiate the need. What will happen if New York maxes out?

For two years, the London and New York media have been abuzz over which of the two cities is more attractive to the world’s estimated 94,970 ultra-high-net-worth individuals. It doesn’t seem, however, that the two cities’ competition (and envy) is the point at all. The real story is the staggering amounts of money being generated worldwide and the two hungriest cities’ desire to grab a piece of the pie.

There were fewer than 200 billionaires worldwide in the 1950s, 476 in 2003, and 946 last year. At that phenomenal rate of growth, both New York and London will have a lot of people who expect excellent accommodation and I’ve got to believe, just based on the buying patterns of New York’s approximate 45 billionaires, that finery is a priority. In addition to that, it’s estimated that, for every billionaire, there are 100 individuals with assets of more than $30 million (ultra-high-net-worth) and 10,000 with assets of over $1 million (high-net-worth).

I’m not concerned with London’s ability to withstand the billionaire demand, but I fear the worst for New York’s billionaire hosting prowess. In London, there are prime neighbourhoods, yes, but for a foreigner looking for a property to reflect their self-worth, architectural heritage is as good a status symbol as any for the nouveau riche. And London, at twice the square-mileage of New York, is not at a loss for lordly-like structures.

Then, for those with modern sensibilities, One Hyde Park offers the same modern trophy as the Time Warner Center but with special attention paid to the security demands of billionaires who come from less stable nations – bulletproof glass etc. London has also embarked on a plan to demolish its post-war architectural eyesores to make better use of the land.

But it seems that New York, despite some of its new high-end luxury housing, may ultimately pay for the rapidity with which its developers have erected mid-level condos.
In reaction to the burdens of the co-op board, the demand for the no-hassle, show-me-the-money condominium market has gone through the roof. So developers are buying up every empty lot and tearing down every row of three-storey tenements so that they can throw up full service, luxury condos for the hundreds of thousands of low-level members of the high-net-worth community. Growing up in Manhattan, you come to learn that having a couple of million in assets is basically middle class.

To provide the appearance of a sturdy, unique urban building, developers install large faux-brick detailed exteriors over the mess of steel beams and sheet rock. Then they pave the lobby in marble, hire teams of 24-hour doormen in caps, provide gyms and in-house laundry service, and call the building high class. These buildings, come with low ceilings and snap-in wood flooring.

As New York City works to make itself appealing to the growing roster of the world’s super-rich, west of 5th Avenue, three blocks south of Central Park, in the heart of midtown, would have made a magnificent block for future billionaires. On both sides of the street stand stately townhouses, built by Gilded Age financiers. This is the perfect spot: a stone’s throw from the office, a neighbourhood stroll to Per Se at the Time Warner Center or south to the 21 Club on 53rd.

Your turn-of-the-century mansion would be just around the corner from friends at the Plaza, FAO Schwartz, the local playroom, Bergdorf Goodman, your closet. Should you care, within easy distance lies the grand New York club scene and around the corner is Carnegie Hall. Those prim private schools are not a ten-minute morning drive away up Madison or Broadway.

Since mid-century, it is as if this ultra-high-net-worth road has been lying in wait for the moment when the well-heeled return. Pizza parlours and Indian restaurants have set up shop, taking advantage of the block’s proximity to the daytime delivery demand. All the locale needed was a little sprucing up; its interiors renovated and restored – not unlike Kovner’s renovations.

Last summer, four adjacent townhouses on the north side of 56th street, our once dreamed of future billionaires’ block, witnessed the wrecking ball ploughing through what could have easily been their dining rooms and powder rooms and settees. Opening in December 2008 in its place will be the Centurion, seventeen floors of 48 prefab condominium units. Its owners paid about $60 million for all four mansions and recruited IM Pei (of the Louvre pyramid and Javits Convention Center fame) to design a building with as many condos as he could to put in its place.

Pei’s international recognition should help to attract foreign buyers and the sales office is hoping to charge from $1.9 million for a 750sqft one-bedroom unit to $10 million for a four-bedrooms, 3,400sqft spread. The building is great for international businessmen looking for that convenient pied-à-terre, but hardly offers the status symbol a financier family man would require to lay roots down in the Big Apple.

Since the rich, it turns out, are drawn to rich buildings, Mukesh Ambani, who is among the world’s top five wealthiest men, won’t be making himself at home in any measly London or New York mansion. The Indian industrialist, who is worth $56 billion, is erecting a monument unto himself in Mumbai. Due to be completed this September, he will own the city’s first $1 billion home, a 60-storey vertical palace with six floors for his 168 imported cars, a private health centre, a floor for entertaining, three floors of Babylon-inspired hanging gardens and three rooftop helipads, all manned by 600 employees daily.

Looks like, even if we tried, the East will have us beat. Let’s face it: we’re small potatoes.

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