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What Really Makes a House Worth a Hundred Million Dollars?

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Welcome back to Property Lines, a column by veteran real estate reporter Alexei Barrionuevo. Each week on Tuesday, Barrionuevo will report on housing trends, real estate deals, and major business moves right here on Curbed.

The text message arrived on my phone innocently enough. "He is considering not selling," wrote Joyce Rey, the Beverly Hills real estate agent known for her celebrity and billionaire clients.

Rey, who works for Coldwell Banker Previews International, was responding to my request earlier this month to tour the sexily named Palazzo di Amore, the mega-mansion owned by Jeffrey Greene, the billionaire from Palm Beach, Florida. Until recently, the 12-bedroom compound in Beverly Hills, spread over 25 acres and replete with its own vineyard, was the most expensive listing in the United States, at $195 million.

Greene, who became rich shrewdly betting against real estate as subprime mortgages tanked, put the house up for sale in November of 2014. In September, he slashed the price by one-quarter, to $149 million, declaring in a press release that he was "very motivated" to sell the home, which took eight years to build. And now he was thinking of not selling?

Is this gate worth $149 million? Palazzo di Amore; photo by Alexei Barrionuevo.

Greene may be waking up to the reality that the market for homes hovering around the $100 million mark just isn't as big as the rhetoric spilling out of the real estate industry—especially in New York, Los Angeles and the Hamptons—would suggest.

The attention-grabbing headlines of the past few years have almost desensitized people to the truth about this non-trend. The sales in New York of the $88 million penthouse at 15 Central Park West, the $100 million penthouse at One57, and the $95 million penthouse reportedly under contract at 432 Park Avenue have fueled lofty expectations. But don't expect brokers to admit that.

"I think we have arrived at what we call the nine-digit market," Peter Turino, an agent at Brown Harris Stevens, told me earlier this month. "The finest properties are now selling at those levels."

That kind of broker-speak gets under the skin of other market observers. "I am so tired of hearing about these high-end listings," said Jonathan Miller, the president of Miller Samuel, a property appraiser in New York. [Editor's note: Miller is a frequent expert voice on Curbed NY.] "There are lots of these listings that are very disconnected from the market."

Miller recently shared a list he has been compiling of high-end sales around the country: Only 25 houses and apartments have sold for $70 million or more since the year 2000, according to the list. (Two are currently under contract.) Eight have sold for $100 million or more—not counting the penthouse reportedly under contract for $200 million at 220 Central Park South.

The $100 million sales were spread across New York City, Palm Beach, the Hamptons, Montana, Connecticut, and northern California. The national record-breaking $147 million sale in East Hampton at 60 Further Lane, which closed in July of 2014, inspired education entrepreneur Chris Whittle to list his 11-acre spread, also in East Hampton, for $140 million last November.

After nearly a year the home is still on the market. Turino, who has the listing, confirmed to me that Whittle was sticking with $140 million—for now. The neo-Georgian property, on Briar Patch Road, features two houses, one designed and another renovated by the architect Peter Marino, a sunken tennis court, and 1,150-feet of frontage on a private pond.

Owners of at least 11 U.S. properties are asking between $100 million and $500 million. One not on Miller's list: a $195 million listing for a 16-acre property dubbed Gemini, in Manalapan, Florida, being sold as "price upon request" by the Ziff family via Christie's, according to the Wall Street Journal.

"It is a challenge finding the right fit," Turino said. "You have to find someone that loves the house, wants a property of that size, and wants to take care of the property and preserve it and care for it. It is more than just buying the property. It is a stewardship for a work of art."

With so few comps to compare to, owners asking $100 million or more are looking for bragging rights and attention. While Turino said he is targeting international billionaires, recent high-end buyers in the Hamptons have come mostly from the Wall Street private equity set, he said.

With buyers and sellers that rich, price-setting becomes arbitrary. "When you are looking at the $100 million range you are going to look at a house whether they are asking $100 million or $150 million, because you can afford it," said Jeff Hyland, president of Hilton & Hyland Real Estate in Beverly Hills.

In a strange irony, none of the sales of $100 million or more have been in Los Angeles. That's surprising when you consider the deep concentration of in-demand real estate in the "Platinum Triangle" of Holmby Hills, Beverly Hills, and Bel Air, where Hugh Hefner and many Hollywood tycoons live.

"We have not yet had a sale over $100 million, but we will," Hyland promised, when I went to see him earlier this month. (He told me the same thing in 2012.) "It is just a matter of time. The problem is there hasn't been a house that has been worth more than $100 million."

Of course, Hilton & Hyland is eager to be the firm that hits the mark. The Manor, the Holmby Hills mansion formerly owned by Candy Spelling that then sold to British heiress Petra Stunt (maiden name Ecclestone) for $85 million in 2011, is rumored to be back on the market. "People say it is," Hyland said. "But it is not on the market."

Hilton & Hyland are also listing Neverland Valley Ranch (renamed Sycamore Valley Ranch), the former residence of Michael Jackson, for $100 million. The estate rests on 2,698 acres and boasts a 50-seat movie theater. That's up in Santa Barbara County, so it wouldn't break the LA-$100 million-drought. As I left his Beverly Hills office, Hyland handed me a six-page brochure, which doesn't mention Michael Jackson anywhere, saying he had already gotten "several offers" on the property after four months on the market.

Properties that can sell for more than $100 million have spectacular views, iconic architecture, and privacy and exclusivity, Turino said. For now, the hopes of Los Angeles for joining the ranks of the $100 million club rest with two spec-home listings: Greene's Palazzo di Amore, and a 100,000-square-foot compound being built by film producer and speculative residential developer Nile Niami.

The Bel Air project, which isn't expected to be done until 2017, will feature a 5,000-square-foot master bedroom, a casino and a 30-car garage, Bloomberg reports. Niami wants $500 million for the spread. "I have been up there," Hyland said, speculating: "It is going to be the last big house that is ever going to be able to be built" in Los Angeles.

Still, one more mega-listing does not make a trend. Which brings us back to Joyce Rey's text. Miller, the appraiser, thinks Greene, given his background sniffing out something too good to be true, is too smart to keep pushing an unrealistic sale. Or maybe he just likes the 53,000-square-foot spread too much.

"He may realize he's made a big mistake," Miller said. "He's done the math in his head and realizes that this is a ghost market – a bunch of over-the-top properties inspired by a handful of sales, under the incorrect assumption that this was a broad and deep untapped market. That's not how it's played out."

· Introducing Alexei Barrionuevo as Curbed Editor-at-Large [Curbed]
· Subprime King Asking $195MM For Vomitous Bev Crest Palace [Curbed LA]
· $140M Georgica Estate is Now the Hamptons' Priciest Listing [Curbed Hamptons]
· Ziff Family Florida Compound Is Seeking Almost $200 Million [Wall Street Journal]
· The Long Battle Between Two of LA's Craziest Megamansions [Curbed LA]
· California Dreaming: Record $500 Million Tag on L.A. Home [Bloomberg]