Does it ever feel like every time there’s a sale of a $25 million mansion in Los Angeles or a $10 million condo in New York, the buyer is reported as “an anonymous individual” or a limited liability company?
In the fall of 2020, news broke that a “mystery buyer” dropped $49 million on a Montecito estate belonging to Saturday Night Live alum Dennis Miller — only months later was that buyer revealed to be daytime talk show host Ellen DeGeneres. Last week, SNL’s Pete Davidson revealed on TikTok that he had bought a $1.2 million condo in Staten Island but, in reality, he had been living in it since December.
So how do they manage to keep such big sales under wraps? Edward Mermelstein, a real estate attorney and founder of luxury consulting company One & Only Holdings, said that celebrities and high-earning businesspeople often go to great lengths to keep any real estate transaction they make under wraps. Non-disclosure agreements (NDAs) are a given, but in some cases, they use representatives so that even a broker does not know whom they’re really working with.
“In most cases, you don’t even have to provide the identity of the potential buyer,” Mermelstein told Inman. “If there’s a pre-existing relationship between the broker and the attorney representing the buyer, they typically will trust that the individuals on both sides have a qualifying purchase.”
We chatted with Mermelstein to pull the curtain back on what it takes to maintain the secrecy of some of the country’s most expensive and prominent real estate deals.
Inman: How does a major real estate purchase with a celeb typically go down?
EM: A representative, personal assistant or financial manager of a movie star, athlete or other high-net-worth person will typically connect through a broker or an attorney that has information about a certain property. The name of the potential buyer is typically not provided, and in many cases, the first thing that happens is NDAs that protect the identity of potential buyer get passed around.
In most cases, you don’t even have to provide the identity of the potential buyer. If there’s a pre-existing relationship between the broker and the attorney representing the buyer, they typically will trust that the individuals on both sides have a qualifying purchase.
Even at the end, the broker may not know because if they’re buying directly in a new development, the only people that would know are the building staff and the regulatory agency that would be collecting real estate taxes for the state.
If it’s a resale, it becomes a little bit more complicated because you have to provide your financial disclosures on the person that’s filing to purchase and it’s quite difficult to avoid the disclosure laws in a condo or co-op. It’s typical that most of these institutions will respect the application process and they’re quite strict on protecting the identities of anyone at all, not just celebrities, that are applying to purchase a property.
The idea is that you create a document that has enough teeth in it to scare the people on the other side [into knowing] that, if any information is leaked out, they would have financial responsibility and a loss that could take place. Those documents are typically well-respected in our industry.
There are brokers out there that are more interested in being in the press than they are in selling the property because they figure that, even if the sale does not go forward, they are not losing anything if they leak that Justin Bieber was considering working with them.
This is not a good idea because most of these high-profile folks have no problem shelling out $5,000 to $10,000 on a lawsuit against anyone who thought they could get away with that, while the cost of defending those lawsuits is quite high.
Why such great lengths to keep one’s identity secret?
Many are concerned about people standing outside of their door, whether paparazzi or stalkers. So those are the celebrities for who you’ll never know where they live, and then there are the ones whose attorneys and business managers are trying to protect them but at the end of the day, they like the notoriety more than the protection.
They’ll then do what it takes in order to get that information out there. It depends on the circumstances. Sometimes they’re having a bad year in their business and just want some sort of notoriety.
Normally, it’s leaked by the celebrities themselves who, after the purchase is done, want to gain additional press.
On the flip side, there are certain buildings (the Dakota in NYC for example) that everyone knows to be a hotspot for very famous people. Why do so many choose to live there anyway?
It’s usually because of the services that the building provides. For example, the people that we know live in the Dakota are the ones that are walking through the front door.
You can also live in the Dakota or 443 Greenwich and never walk through the front door. No one other than the staff member that is letting you into the building would ever know that you actually live in the building. These buildings that I’m talking about also have secondary interests that are meant to protect people from being visible.
Most celebrity purchases start at $1-2M and cap around $25M. L.A. especially has numerous listings for $50M and even $100M. Who’s buying those?
Most celebrities out there don’t make the kind of money that many think they’re making. If they’re doing well, they’re making $500,000 a year. Superstars might be making millions of dollars a year. Then you have the superstars that have invested in all kinds of businesses where they may be making only a few million dollars in the entertainment industry or in the sports industry, but they made $50 million or $100 million from their investments.
The Kardashians or the Jenners of the world are a good example. The youngest one [Kylie Jenner] became the richest one when she started a cosmetics company. It takes that type of wealth in order to be purchasing something for $25 million and up.
You’re typically not going to see a major celebrity purchasing a home for more than $10 million because once you go above a certain number, typically $10 to $15 million, it becomes very hard to finance that type of purchase. It has to be all-cash, and it’s rare to have that kind of cash sitting around.
The people that are spending over $20 to $25 million to buy a home, you can’t really call them celebrities. They’re typically ultra-high-net-worth businesspeople who have amassed more investments and wealth than they can ever use. Artists, athletes, movie stars just don’t make that type of money.
It sounds like an agent who wants to work with high-net-worth client needs to become an expert in staying silent and not attracting attention.
Right. These are professionals that are experts in protecting their clients at all costs. That’s really all it comes down to. You have people that have interest not to be in the press and protect yourself against intrusion, whether it’s press or individuals that are trying to get close to you.
There are a lot of instances of stalkers and paparazzi trying to get into somebody’s homes and trying to get close to people, which can be a very dangerous situation if they’re trying to get at them or threaten them financially or otherwise.
You also have people who are very prominent overseas that wouldn’t want anybody to know that they have assets outside the country because of the political and economic risk from where they live. So there are all kinds of sensitive issues that come up when working with people that have very high net worth.
Original posted at www.inman.com