The inside scoop on East End real estate
The summer looks to be sizzling this year while East End sales have continued the robust trend with 631 transactions worth $910 million in the first quarter of 2013.
Now that she is no longer Secretary of State, Hillary Clinton is reportedly looking to buy a home in East Hampton, where she and her husband have rented a mansion on Lily Pond Lane for the past few summers. In 2011, the former president celebrated his 65th birthday at Babette’s, and the couple has been spotted going to the beach and listening to live music at Stephen’s Talkhouse. Sources say that the Clintons are looking at homes in the $10 to $15 million range.
With 2013’s capital gains tax changes looming, a flurry of Hamptons real estate sales closed at the end of last year—despite the still-uncertain economy. Brokers postponed Aspen and Palm Beach getaways to January and February in order to seal more than $1 billion in deals. Sales prices rose during that period, too: According to the Long Island Real Estate Report, an independent data collection agency, the median price for a home in the fourth quarter of 2012 in Southampton Town jumped to $901,500 from $800,000 for the same period in 2011, and a home in East Hampton sold at a median price of $1.065 million, up from $735,000. “People buying at the high end bought late last year because of the fiscal cliff and tax code changes,” says Dottie Herman, president and CEO of Douglas Elliman. “It was a mad rush, and in the fourth quarter there were 49 sales over $5 million, which is a record for the Hamptons.”
So far this year, East End sales have continued the robust trend, with 631 transactions worth $910 million in the first quarter of 2013, versus 483 worth $533 million during the same period last year. However, according to real estate appraisal firm Miller Samuel Inc., the average sale price of a Hamptons home has dropped from $1.72 million to $1.22 million—perhaps because so many of the larger properties rushed to close at the end of 2012. Now, says Herman, “Pricing is key. Houses are selling on average at a 9.4 percent discount from the listing price.”
The exception is Bridgehampton, where prices have increased by nearly 30 percent. “The Hamptons are historically about half a year to a year behind New York City in sales,” says Harald Grant, senior vice-president of Sotheby’s. “With the city being strong in sales as well as the financial world being very positive, there’s going to be momentum across the board.”
The sweet spot stands at the $20 million mark: Grant reports that a number of homes both on and off the water are selling at that price and even higher. Take hedge fund titan Steven Cohen’s recent controversial purchase of a $62 million oceanfront property on Further Lane in East Hampton. “Once a significant sale like that happens,” says Grant, “the rest of the market starts catching up.” Right now, Grant has a $29.5 million listing on Captains Neck in Southampton with a ten-bedroom main house, pool, and pond on almost five acres. Even super-storm Sandy didn’t dampen demand for luxury properties like this one, which boasts 300 feet of waterfront overlooking Shinnecock Bay and borders the DuPont reserve.
Don’t have $30 million or so on hand? There’s strength in the entry-level market too. “We’re seeing more first-time home buyers in the $500,000 to $1 million range,” says Ernie Cervi, executive managing director of Corcoran. “People with good credit can get mortgage money now, which has made houses affordable again. Lots of people are buying inexpensive houses and fixing them up.” Cervi recently listed a property for $1.295 million, and by the next morning he had received four offers on it. “There’s a whole active market under a million dollars that’s entry level,” says Dottie Herman. “Anything under a million, especially in the villages, will be gone fast.”
As for rentals, the pickings are getting slimmer, particularly on the higher end. (An oceanfront property recently went for just under $600,000 for the month of August.) While there isn’t much inventory to choose from, brokers say there’s still plenty of demand from prospective renters with money to burn.
A builder with integrity—in the Hamptons? Jeffrey Collé and his company, JC Construction, are determined to dispel the most pessimistic claims about the local housing industry with a portfolio of preservation-minded projects. The Massapequa-born Collé learned the carpentry trade from his father and grandfather and has worked in the Hamptons for the past 35 years, building custom homes for clients such as Billy Joel, Christie Brinkley, Donna Karan, and Alec Baldwin. He and his partners recently bought 40 acres in Wainscott from land lover Ronald Lauder. “It’s the largest undeveloped parcel left in East Hampton, which will be 70 percent reserve,” says Collé, who plans on turning an extant house on the property—the oldest in Wainscott—into a guesthouse for a new main house. He also purchased 34 acres on Sagg Pond from Lauder, with plans to build only two houses on the land, leaving 26 acres as reserve. On David’s Lane in Water Mill, he has built an 8,000-square-foot, seven-bedroom, ten-bath home while restoring the hamlet’s oldest existing house, which dates from the 1700s and was once the home of David Halsey, a grandson of one of Southampton’s original settlers. It is being converted into a studio space, but its large fireplace and wide-plank floors will remain intact. “It’s very rare for a historic home like this to still be standing on its original site,” Collé says.
This Old House
Dating from the 1700s, the former home of David Halsey, grandson of one of Southampton’s earliest settlers, is being converted into an artist’s studio.
On Georgica Pond, Collé rebuilt a late-1800s Stanford White house and reoriented it toward the water. Adjacent to a 17-acre meadow preserve, the 12,000-square-foot house is now on the market for $29.995 million with Susan Breitenbach and Matthew Breitenbach of Corcoran and Beate Moore of Sotheby’s. “It was falling down, with a crumbling foundation on locust posts, and sat on the market for over two years,” says Collé, who maintained as much as he could of White’s original design. “Everything is done by hand. I had the floors made in Paris with wood from old wine barns and installed Louis XV fireplaces and an old floor from a church.” He also found a violinmaker from Ecuador to hand-carve the banister from a single piece of mahogany. Given his attention to detail, does Collé ever feel compelled to snag one of his projects for himself? “The hardest day is always the day I have to start knocking on the front door,” he says. “That’s when I know it’s not my house anymore.”
Developer Jeffrey Collé rebuilt and rotated this 19th-century Stanford White mansion, sited next to a 17-acre meadow preserve, so that it directly faces Georgica Pond.
Although the ocean naturally takes away sand and returns it to the shore again, some locals believe the jetties in East Hampton, first put in by legendary Pan Am president Juan Trippe to protect his oceanfront property, started our coastline’s serious decline. With the threat of global warming and storms such as Sandy occurring more regularly, erosion is a bigger problem than ever. After Sandy, one home belonging to the Lauder family in Wainscott was left devastated, with many others in dire shape, and people have been trying to create ersatz dunes out of everything from discarded Christmas trees to cesspool rings.
In February, a group of homeowners from Town Line Road to Flying Point Road voted to fund a $25 million restoration project that will dredge sand from the ocean to shore up the beach. The group voted 72 to 49 to agree to a tax, typically ranging from $1,000 to $100,000 per home per year, to cover 90 percent of the project’s costs. (The Town of Southampton, which has five public beaches, will pay the rest.) The largest bill will surely be footed by Sagaponack’s Ira Rennert, who would pay an estimated $200,000 per year of the special tax, or about $2 million over the life of the bond, due to the size of his estate and the property’s assessed value. The project is not expected to start until after the 2013 summer season.
BACK TO THE LAND
Fresh produce from Hamptons farm stands is one of Long Island’s signature attractions, but preserving open land on the increasingly commercial East End can be a challenge. On the occasion of the Peconic Land Trust’s 30th anniversary, its president, John v.H. Halsey, discusses the issues behind 21st-century land preservation.
HC&G: Why do some people sell their land, and how does the Peconic Land Trust work with them?
John v.H. Halsey: Sometimes landowners have to sell their land in order to pay federal or state inheritance taxes, or because they cannot afford the local property taxes. No two situations are alike. We base our approach on a family’s needs and an understanding of their land. Ideally, we identify a strategy that protects their land while providing for their financial future. It’s never all or nothing, and anything is possible, including sales at less than fair market value, which can then be considered a charitable gift.
Why are developers, and not farmers, getting rich on land sales?
When developers subdivide raw land and construct homes in a good economy, they are adding value to that raw land, but the process takes time and money. For many landowners, all they have is their land, and typically they’d rather sell to a developer who will then subdivide the land. We want to provide landowners with as many tools as possible to show them how to retain equity and protect their land without selling it outright. For example, land ownership is a bundle of rights with uses defined by zoning. The most valuable right is to build a house, and that could represent, say, 80 percent of the value in the land. One option for a family might be to sell or donate development rights on most of their land while retaining a few building lots where the soil is poor. This could enable them to realize a substantial amount of the equity in the land while still owning it. The future house sites would enable them to retain additional equity for the future. So a farmer could realize 80 percent of the land’s value, but still own the land to farm it.
John v.H. Halsey (left) is the president of the Peconic Land Trust, which is celebrating its 30th anniversary this year. Pike Farms in Sagaponack (above) is still thriving.
What are the current rules in terms of land preservation in new developments?
The current subdivision rules in Sagaponack and Southampton Town, for example, require that 65 percent of farmland within a parcel be protected through clustering when the land is in a three-acre zone. Unfortunately, even though the land is protected, it doesn’t necessarily mean that it is accessible to farmers. This most recent challenge stems from the realization that towns and villages currently cannot force the owners of protected farmland to lease to a farmer. No one ever anticipated that new owners of protected farmland might not want to hear a tractor or an irrigation pump on a Saturday. In the meantime, the trust is looking at ways to ensure that farmers will have access to protected farmland at a price they can afford.
Can you give an example of a success story?
There are still a number of multigenerational farm families in the Hamptons, such as the Babinski family, who wanted to keep their land and sold the development rights on most of their farm through a bargain sale for half of what they were worth. The trust raised $2 million in contributions from more than 200 local residents toward the $7 million purchase price, with the Town of East Hampton putting in $5 million through its Community Preservation Fund, which collects monies from Suffolk County’s 2 percent real estate transfer tax. Neighbors had a vested interest in seeing the farm continue and contributed generously to the effort. On the 7.6-acre Pike’s farm stand property in Sagaponack, the trust was able to negotiate a price of $6 million from the Hopping family and raise about $1 million privately toward the purchase from residents. At closing, we simultaneously sold the development rights to Suffolk County and the Town of Southampton. Ultimately, we sold the protected farmland to Jim and Jennifer Pike, who have been farming it for the past 20 years, at a price they could afford—$167,200, at $22,000 an acre. And there are additional restrictions ensuring that the land can be sold in the future only to farmers, at an affordable price.
The Peconic Land Trust negotiated a deal on behalf of Pike Farms, allowing Jim and Jennifer Pike, who have farmed for two decades, to maintain control of their land.
The South Fork Land Foundation [SFLF], a supporting organization of the Peconic Land Trust, is potentially selling the development rights on 14 acres in Bridgehampton to Southampton Town. What’s your take on this controversial move?
Fundamentally, the big issue is, What will we have to do to ensure that we have food production continuing here? That’s the whole motive behind the sale of development rights of the property—to provide the SFLF and the Peconic Land Trust with additional assets to accomplish this goal. There are properties on the market at this moment, and we don’t have the luxury of waiting. We can sell the development rights [on the Bridgehampton land] and then use those assets to buy other pieces of farmland. We’re using the value embedded in that land to fulfill our overall mission as a public charity. Both the SFLF and PLT share that mission.