Their buildings echo with empty offices, their borrowing costs have soared, and now owners of buildings in cities across the U.S. are facing a new tax on their carbon emissions.
Cities are toughening their climate standards and are beginning to tax buildings that don’t meet the new requirements. Landlords are left with a difficult choice between paying for expensive upgrades to reduce emissions or paying the tax.
In New York City, which has one of the first and most expensive carbon taxes, landlords of large buildings (including owners of residential buildings) beginning next year will face a $268 fine for every ton of carbon dioxide emitted beyond certain limits.
“If you’re under cash flow pressure due to lack of tenancy, adding a tax on top of that isn’t a good sign,” said Bank of America CMBS Strategist Alan Todd. “It would be potentially pretty painful.”
The Wall Street Journal tallied the potential impact of the taxes on buildings that borrowed funds from Wall Street investors by issuing mortgage-backed bonds. The Journal also looked at properties owned by three of the country’s largest publicly traded landlords. The tax bill for 128 properties analysed could add up to more than $50 million during the first five-year enforcement period, which begins in 2024, according to the Journal’s analysis of Department of Building data and financial disclosures.
Fines for the same buildings could jump to $214 million if their landlords don’t meet the city’s emissions standards during the period between 2030 and 2034, the Journal’s analysis shows. The Real Estate Board of New York, an industry group, and engineering consulting firm Level Infrastructure said that more than 13,000 properties could face fines totalling about $900 million annually.
Buildings are by far New York City’s largest source of carbon emissions, which come from the fossil fuels used to heat and to provide air conditioning for them.
More than a dozen local laws regulating buildings’ carbon footprints from Chula Vista, Calif., to Boston have gone into effect since 2021 or will come online by 2030, according to carbon accounting firm nZero. Compliance also begins next year for buildings in Denver, while St. Louis properties face penalties beginning in 2025. Four other laws from Cambridge, Mass., to Reno, Nev., will go into effect in 2026.
The impact of the emissions laws initially will be small but will come on top of other, more costly problems faced by landlords. The law, based on New York’s current projections, would cost the 51-story skyscraper at 277 Park Ave. in Manhattan just $1.3 million in fines in 2024. The revenue of the building, owned by private landlord The Stahl Organization, was $129 million last year.
The building’s vacancy rate has jumped from about 2% in 2014 to 25% currently, according to commercial property data provider Trepp. JP Morgan Chase accounts for about half of the building’s space, but its lease expires in 2026. The bank is constructing a nearby tower that aims to produce net-zero carbon emissions and is scheduled to be completed in 2025. It wouldn’t comment on its leasing plans.
Stahl’s $750 million mortgage on the building is scheduled to mature next August. Stahl is now faced with potentially higher rates if it takes out a new loan, the loss of its biggest tenant and fines for carbon emissions.
Stahl declined to comment.
Shares of the three big landlords whose properties were analyzed by the Journal are trading at near historic lows. Shares of Vornado Realty Trust and SL Green, each of which has about 30 New York City office buildings, are down by roughly two-thirds since before the pandemic. Boston Properties Inc., one of the country’s largest office building owners, shares are down more than 50% from before the pandemic.
SL Green faces a potential carbon-tax liability of up to $6.6 million by 2030, according to the Journal’s analysis. The company declined to comment. More than 80 other properties financed using mortgage-backed bonds reviewed by the Journal could have a nearly $27 million carbon-tax bill by 2030.
The costly upgrades needed to comply with the law will hit some properties when they are on the block or when they are trying to attract tenants, who know they will effectively be paying for any improvements. “Tenants are looking to be in a building that is greener,” said Brendan Schmitt, partner in law firm Herrick’s Real Estate Department.
The library at the Manhattan office of Vornado Realty Trust, one of the landlords expected to be on the hook for a significant amount of New York City carbon taxes. PHOTO: VICTOR LLORENTE FOR THE WALL STREET JOURNAL
The new laws coincide with big government spending on climate. Landlords can get generous subsidies for projects that reduce emissions.
Ironically, landlords are also benefiting from emptier buildings, which burn less fossil fuel. New York City says about 11% of buildings covered under the law are projected to face penalties using the latest energy data, down from 20% using earlier data.
The city’s law was passed in 2019 and included a $268 fine for every ton of CO emitted by buildings over 25,000 square feet exceeding limits. Landlords will be required to report emissions to city officials starting in 2025 with penalties based on 2024 energy use.
Some big landlords are facing fines in multiple jurisdictions including Boston Properties, which will likely get hit on properties it owns in Boston, New York and Washington, D.C. The company’s eight New York City offices could face a $2.3 million dollar tax bill by 2030, according to city data.
Ben Myers, senior vice president of sustainability at Boston Properties, said complying with local building standards is important. “We have made energy efficiency a priority,” he said.
China’s economic troubles have so far been a boon to other Asian markets. But if the world’s second largest economy continues to turn sour, things could start to look uglier for them too.
Major Asian stock markets have been doing well in 2023. Japan’s Topix index has gained 24% this year while Taiwan’s Taiex index has risen 18% and Korea’s Kospi is up 15%. That is in contrast to Chinese stocks: the MSCI China index has dropped 6%, despite a strong start of the year.
There are some fundamental reasons why Asian stocks outside of China have gone up. Buybacks and dividends are rising in Japan, while Warren Buffett’s endorsement gave the market another push. The hope of an eventual rebound in the semiconductor industry has lifted stocks in Taiwan and South Korea. But these markets also benefited from foreign investors fleeing Chinese stocks: markets such as Japan and South Korea have seen foreign inflows in recent months. Some multinationals have also been migrating manufacturing out of China and into other Asian countries to diversify their supply chains.
However, Goldman Sachs has noted that correlations between China and other markets in the region have risen lately, indicating potential concerns of spillover.
China is the top trading partner of many countries in the region like Japan and South Korea, and weak demand from China could ripple through to its neighbours. South Korea’s exports to China, accounting for roughly 20% of its total, fell 25% year on year in the first eight months of this year.
And falling investment in China—especially in the real-estate sector—could weigh on commodity prices. So far prices of commodities such as iron ore have been resilient this year as demand from sectors like autos and infrastructure have softened the blows from property construction. But commodity-exporting nations such as Australia, Malaysia and Indonesia could suffer if Chinese investment remains weak.
The confidence crisis in China could also hurt companies selling to the country’s consumers. The number of Chinese tourists, in particular, is still way down from pre-Covid levels for many countries like Japan and Thailand.
As China is the economic juggernaut in the region, the country’s pain is unlikely to be its neighbors’ gain for long.
Look, when you drive an electric car, you have to toss out what you know about gas guzzlers. Beyond the bonkers acceleration and quiet-as-a-librarian ride, you have to tackle new complexities like how to tell if the car is…on. Get good and you might even master the art of driving one-pedal without puking.
Plenty of readers know what I’m talking about—and may have already aced the course. But if you’re thinking of buying an EV, or even renting one, you need to anticipate a learning curve.
Why is the Journal’s tech columnist talking about this? Don’t they have a car guy?
As you may have seen in my column and video last week, I tested five leading EV options under $60,000 in search of a second car for my family. Sitting in my garage is the winner, a leased Ford Mustang Mach-E. And yes, I am teaching my sons how to shine it up, Karate Kid style.
My EV exercise wasn’t merely about finding my next car. I wanted to clock just how much the shift to battery power is turning our cars into gadgets, not unlike smartphones and computers. Technology is upending a century-old industry.
For EV adopters, that means waving goodbye to a lot of things we’ve known about driving. I may be an expert at USB-C dongles and buried iPhone menu settings, but I am new to this hot gadget on wheels. Here are things I wish someone had told me before I went electric.
Welcome to Dri-EV-er’s Ed.
How to open the car
“Car door handles, they’re just too easy to use,” said no one ever. And yet EV makers thought they were begging for disruption.
On the Ford Mustang, you press a circular button on the door and it pops open. On the Kia EV6 and Hyundai Ioniq 5, the handle is flush with the car and pops out when the car is unlocked. With the Tesla Model Y, you need to push in the wide part of the handle then pull the longer skinnier part toward you. Thankfully, there’s a GIF for that.
The Volkswagen ID.4’s handle looks like a handle—but you don’t have to pull it out. Nestled under the handle is a sensor. Obviously, you learn how to open the door when it’s your own car, but you’ll always enjoy watching the uninitiated try to get in.
How to turn on the car
My least favourite car game? Power-button hide-and-seek.
“How to turn Tesla on” will be forever burned into my Google search history. I really couldn’t find a power button anywhere because…there isn’t one.
The Ford Mustang Mach-E has a traditional push-button. PHOTO: KENNY WASSUS/THE WALL STREET JOURNAL
Instead of a physical key fob, Tesla provides a hotel-style keycard. You can also use Tesla’s smartphone app as a key. As soon as you open the Model Y’s door, the touch screen powers on and you can operate all controls. To get it moving, you step on the brake and move the gear shifter to Drive.
Volkswagen’s ID.4 is similar: If you have the app or the key fob with you, the car powers up when you sit in the driver’s seat. Press the brake pedal and the drive system activates.
Ford, Hyundai and Kia stick to start/stop push buttons. There are key fobs, but you can also set up the apps as keys.
How to drive the car
OK, you know how traditional automatic-transmission cars creep forward when you take your foot off the brake? That generally isn’t the case with EVs. To move, you tap the accelerator. (Even in reverse, which can be a little unnerving.) As soon as you take your foot off the accelerator, the car slows and brakes on its own. You only hit the brake pedal itself if the car isn’t slowing quickly enough.
Most EVs let you do “one-pedal driving”—that is, driving with only the accelerator.
Why change how we’ve driven for so long? Regenerative braking. These brakes use motors that capture energy and return it to the battery. Hybrids often have a variation of this too, but EVs are all about it. (Here’s a deeper discussion of how it works.)
The rapid, automatic deceleration can be unsettling at first. And some people told me it can make passengers nauseous or queasy. Don’t worry! On many EVs, you can turn off the setting or minimize its intensity. The Volkswagen doesn’t even prioritise it—you have to select the mode. Its default drive mode feels much more like a regular car.
But I’m a total one-pedal convert now. In fact, when I get back in my gas-powered Volvo, I have to remember to hit the brake.
How to know if the car is running
Unlike internal combustion engines that go “vrrrrr vrrrrr VROOOM” when you start them up, EVs sound like futuristic golf carts. I’ve definitely ended up restarting the Mach-E because I wasn’t sure it was on.
The National Highway Traffic Safety Administration has set guidelines for “quiet cars” to protect pedestrians—especially people who are blind or have low vision. Under 19 mph, the cars must emit some sound. My Mach-E beeps when I reverse. The Model Y’s whirring sounds like the spaceship in “E.T.”
Some automakers use synthetic sounds to make these new cars sound old school. In the Mach-E, when I put the car in Unbridled mode and press on the accelerator, it hums like an internal combustion engine.
How to pull in for a charge
I think we can all agree on the greatest automotive invention of all time: the little arrow on the gas gauge telling you which side the fuel cap is on. There’s no standardisation for charging-port location on an EV. (This diagram is proof.) I didn’t see any handy arrows inside the cars I tested. Turns out Hyundai and Kia show a little arrow on the screen (I didn’t see it) and Volkswagen does have a cool map of the car showing the charging port, but it’s a few taps into the settings.
Tesla displays clear instructions on how to back into your Supercharger spot. PHOTO: KENNY WASSUS/THE WALL STREET JOURNAL
Again, you learn when it’s your own car. What’s not as easy to get used to? Reversing into a spot to plug in, a must at many charging stations with shorter cords.
Let me be clear, this is guidance, not a gripe fest. You’ll love driving an EV…as soon as you figure out how to get inside and turn it on.
As a Capricorn, John McIlwee considers himself a spiritual person. But when his psychic told him in late 2021 that he was going to buy another house, he didn’t believe it. McIlwee and his husband, entertainment executive Bill Damaschke, already owned a portfolio of three architecturally significant California homes, and they’d decided not to take on any more projects.
“I said, ‘Hell, no. You’re wrong on this one,’” recalled McIlwee, 56, a Hollywood business manager.
Two days later, they’d signed a contract to buy a circa-1960s house in Rancho Mirage, roughly 10 miles from Palm Springs.
Sometimes, McIlwee just can’t help himself. The idea that someone might tear down or alter a beautiful old house is more than he can bear. In the case of the low-slung Rancho Mirage home, he couldn’t stand the thought that a developer might destroy it.
“I know myself,” he said. “If I let that house fall into the wrong hands and get ruined, it would piss me off every time I drove by.”
Over the past few decades, McIlwee and Damaschke, 59, have purchased and restored multiple houses, including former President Gerald Ford’s onetime estate and John Lautner’s Garcia House, an almond-shape structure considered one of L.A.’s most significant midcentury houses. McIlwee and Damaschke typically hold their houses long term and live in them, hosting parties and sometimes allowing commercial photo shoots.
“We’re living in a world now that is unsustainable with what people are destroying,” McIlwee said. “I didn’t particularly sign up to be some weird preservationist, but I look at these things as kind of like a mark in history.”
The couple admire how billionaire grocery tycoon Ron Burkle has restored a number of important trophy homes across California, McIlwee said. In comparison, he said he and Damaschke might be considered “Ron Burkle Light.”
“Ron’s doing the $50 million things,” he said. “We’re doing the $10 million things.”
McIlwee, a California native, serves as business manager to celebrities such as “The Batman” director Matt Reeves and “Glee” star Jane Lynch. Damaschke grew up in Chicago, where he admired the local Frank Lloyd Wright houses and took high school drafting classes. He originally harbored notions of becoming an architect himself, but eventually wound up in the theater, working as a Broadway actor and later transitioning to the business side of the L.A. entertainment world. He is now president of Warner Bros. Pictures Animation, and is also a producer of Broadway shows such as “The Prom” and “Moulin Rouge,” for which he won a Tony Award in 2021.
John McIlwee creates social-media accounts for all the couple’s homes. PHOTO: JULIE GOLDSTONE FOR THE WALL STREET JOURNAL
When it comes to their homes, the two said they typically work with the same “rat pack” of professionals, including landscape architect John Sharp, interior designer Darren Brown and architecture firm Marmol Radziner. McIlwee also sets up Instagram accounts for all the homes, posting historic photos and images from their parties and photo shoots.
“They are consummate cheerleaders for their houses,” said Leo Marmol, a California architect who has helped the pair restore several homes. “Their goal is not to pour liquid amber over a historic object to kind of freeze it. It’s the opposite. It’s to invite the world in to celebrate the home.”
McIlwee said he handles most of the logistics and the execution of their projects, while Damaschke is more of a creative thinker and would spend more money if McIlwee didn’t rein him in. Though he doesn’t consider the homes as investments so much as passion projects, “I never want to lose money,” he said.
The pair mostly agree about design choices, with a few exceptions.
“Sometimes we have huge screaming fights and don’t agree on anything,” Damaschke said with a laugh. “But we end up in a good place.”
One of Damaschke’s pet peeves: McIlwee is “classic California” and leaves all the windows and doors of their homes open. “Sometimes I’ll walk through and close the shades or drapes. He’ll come right behind me and open every one of them up after I leave the room.”
Read on for a closer look at the couple’s collection.
The couple’s primary residence for roughly 20 years was the Lautner-designed Garcia House, which sits 60 feet off the ground on concrete caissons. Dating to the 1960s, the three-bedroom home is perhaps best known for its star turn in the 1989 movie “Lethal Weapon 2,” where it appeared as the headquarters for a South African drug-smuggling cartel. McIlwee and Damaschke bought the roughly 2,600-square-foot house for $1.2 million in 2002, property records show.
When it comes to architecture, Damaschke said he’s often fascinated by the narrative behind a home, which was the case here. The original owners, film composer and conductor Russell Garcia and his wife, Gina Garcia, “were real trailblazers,” he said, “because the house was unbuildable. The lot was unbuildable. So, I’m like, ‘What possessed these people to build this amazing structure against the tide of what was popular at the time?”
After living in the property for more than a year to get a feel for the space, McIlwee and Damaschke embarked on a roughly $5 million restoration project at the house, which had fallen into disrepair. They also added an ellipse-shaped pool based on Lautner’s original plans.
Living in the house forced them outside, Damaschke said, since getting from the bedrooms to the main living room requires taking an external staircase. “The flow of it actually invited you to be a part of nature,” he said.
However, “it can be overwhelming, like you’re living in an art piece,” he said. “So we worked hard to make it super cozy and comfortable, like a home.”
Damaschke also called it “the best party house in the world.” The pair hosted numerous parties there, including one for the whole cast of “Moulin Rouge.”
After years in the house, the couple was ready to move on to their next adventure, they said. Earlier this year, the couple sold it for $12.5 million to Nicholas C. Pritzker, a member of the famed Pritzker hotel family.
The Ford Estate in Rancho Mirage was designed in the 1970s for Gerald and Betty Ford after they left the White House. Located less than 2 miles from the Betty Ford Center, the rehabilitation center founded by the former first lady, the roughly 6,300-square-foot, five-bedroom house faces one of the fairways of the Thunderbird Country Club.
McIlwee and Damaschke caught their first glimpse of the property decades ago during Palm Springs Modernism Week, when they were doing research for their renovation of the Garcia house.
When the house came on the market in 2012 following Betty Ford’s death, they jumped at the chance to see it, and quickly fell in love. The house had its original décor in place, including the 7-foot-tall portrait of Betty Ford in the entryway, the red panic button in the president’s personal bathroom and the lime-green dining room, with its leafy mural and lattice chairs. They signed a contract within just 11 days of the listing going live, paying about $1.6 million.
McIlwee said he enjoys the irony that a Republican president’s home has fallen into the hands of “two gay Democrats.” He said he considers Betty Ford a trailblazer and forward-thinking for her day. “She was very sympathetic to a lot of people,” he said. “That’s the problem with American politics today. Nobody talks to each other.”
The house was designed by Welton Becket & Associates, the company behind the Galactic-style Capitol Records Building in Hollywood, in Desert style, with swaths of glass and a flat roof with overhangs. The vividly colored interiors were designed for the Fords by Laura Mako, who also designed homes for the likes of Gregory Peck and Jimmy Stewart.
The couple did significant work to the property with help from Marmol, but with the goal of maintaining the original structure. “We weren’t looking to make dramatic changes,” said Marmol. “We were actually trying to preserve the original drama of the home, while making subtle interventions to make the house more functional by today’s standards.”
Because of security concerns, the Fords had left the house relatively unexposed to the outside, so McIlwee and Damaschke added several windows and skylights. They opened up the entertainment areas to the outdoor pool and replaced the kitchen, which had been designed more as a service area than as the heart of the house, McIlwee said.
They preserved much of the interior design and furniture, including the Betty Ford portrait, which the Ford family had originally intended to sell at a Gerald R. Ford Presidential Foundation event to raise money. The couple donated to the foundation instead, they said.
“We were like, ‘No, this has to stay with the house,’” Damaschke said. “It’s a showstopper.”
The couple uses the property as a weekend and vacation getaway and frequently host friends and clients there, McIlwee said. They have no plans to sell it.
In 2021, McIlwee made a snap decision to buy a second house in Rancho Mirage, just down the street from the Ford Estate on Sand Dune Road. The move flew in the face of a conversation the couple had recently had about taking a step back from their renovation projects, which take up a lot of time and money.
The rationale? He was concerned that a developer would buy and ruin the house, a modest 1960s home that he believes was designed by the architect William Francis Cody.
“He was very anxious about it,” Damaschke said.
McIlwee chalked his anxiety up to the flipping frenzy that took over the Palm Springs and Rancho Mirage markets during the pandemic. Developers, he said, were buying houses, putting “maybe $100,000” into them, painting them white, adding a cactus and reselling. He found the bright white paint jobs especially abhorrent, preferring the traditional sand tones of desert houses.
“I wasn’t going to let that happen on my street,” he said.
At the time of the purchase, Damaschke said, he was in London and sick with Covid. “I didn’t really have a say in that one,” he said with a laugh. “He snuck it in under the radar.”
“I just said, ‘Sign this,’” McIlwee said.
They paid about $1.4 million for the three-bedroom house, which also sits on the golf course at Thunderbird. Spanning about 3,400 square feet, it has travertine floors and 16-foot sliding doors leading to the pool deck.
The house had undergone several “bad” renovations that have “glommed on to each other,” McIlwee said, and needs a lot of work. They plan on peeling back much of the block siding and basework and removing an addition that a previous owner put on the house. He estimated the cost at around $1 million.
McIlwee said they are unsure of their long-term plans for the property, but they might rent it out.
This year, the couple bought a four-bedroom Modernist house in Beverly Hills designed by the little-known Mexican architect Raul F. Garduno.
Located in the tony Trousdale enclave, the roughly 5,400-square-foot home was built in the early 1970s and has long, curving hallways, a step-down living room and a rounded swimming pool. Its design is unusual, Marmol said, because the various wings of the house seem to splay out from a single point like an off-centre windmill. The house also steps up as the site slopes down, so the house seems to respond directly to the shape of the earth.
McIlwee and Damaschke said they first saw the property when a friend who runs a design company rented it as a show house. “When Bill and I walked in, we were immediately like, ‘We’re going to get this house,’” McIlwee said.
At the time, the property was still owned by the same family it had been built for five decades prior. The original owner’s daughter, Lynne Corazza Anderson, had been fielding offers, McIlwee said, but most of the competitive ones had come from developers, who planned to tear down the house and replace it. Though he was aware of the proliferation of spec developments in the Trousdale neighbourhood, which has drawn celebrities like Jennifer Aniston and David Spade, McIlwee said he found the notion of tearing down the house “dumbfounding.” The couple decided to sell the Lautner house and use the capital to restore the Garduno house.
McIlwee convinced Anderson to hold off on accepting any of the offers for several months so that he and Damaschke had time to sell the Lautner house. Eventually they bought the Garduno house for $9.6 million in April. He estimated that they will spend at least another $3 million renovating it. They already have plans to redo the kitchen and bathrooms. They also intend to wall up some doors in the hallway to create an art corridor.
McIlwee said he also intends to amplify Garduno’s name.
“In every magazine right now, people are talking about Mexico City. Well, this is the perfect example of Mexican Modernism,” he said. “I’m taking it upon myself to give this guy some air.”
The house will be the couple’s new primary home; it is their first time living in the coveted 90210 ZIP Code. Two friends who came to lunch earlier this summer brought the couple a “Welcome to 90210” cake. “I’m still laughing about that,” McIlwee said.
A single-family home is the exception to the rule in high-rise Singapore, where most of the city-state’s 5.5 million residents live in apartments. So when it came time for Mark Tan and Stella Gwee to trade in their starter bungalow for something larger and grander, they decided to stay put, tear down and begin again on their rare 1/10th-acre lot.
In 2009, Tan, now 48, and Gwee, 46, paid 2.2 million Singapore dollars, or about US$1.6 million, for their original 1,500-square-foot house, located in a single-family enclave in Singapore’s North-East region. The couple then spent $2.6 million to replace the three-bedroom, semidetached structure, built in a Balinese-fusion style, with a four-story, seven-bedroom brick house that combines Asian and Western elements across 7,400 square feet.
In all, Tan and Gwee have invested just over $4.2 million in their new home. Multibedroom Singapore homes of a similar size could sell now for twice that.
The couple—Gwee works with her husband, a local entrepreneur—began demolition in 2020, relocating with their two children, Xavier, now 17, and Andrea, 13, to a nearby rental for the two years of construction. The family, along with dogs Furry and Brownie, moved into the finished house in early 2022.
The new home’s standout feature is a landscaped vertical courtyard, rising nearly 40 feet. “A lot of Singaporeans won’t sacrifice the space to build a courtyard like this,” says Tan, a Singapore native, who grew up nearby.
Enclosed by a skylight, the space is outfitted at the top with a large industrial fan 8 feet in diameter that is powerful enough to ventilate a factory floor. Made by Southern California’s MacroAir, the fan helps the family keep cool in Singapore’s year-round tropical weather. It is part of a $74,000 climate-control system that allows every room individual air-conditioning units.
The flora-rich courtyard, featuring an indoor koi pond and fronted by an open-air outdoor swimming pool, opens to the street at its base between the pool and the pond. The house can be closed off and revert entirely to air conditioning on especially hot days.
The open-plan first floor includes living and dining areas, and has space enough for a Steinway piano for music student Andrea. The second floor is given over to a mahjong room that doubles as a guest bedroom and a study. The bedrooms are on the third floor. The fourth floor serves as a penthouse recreation room for the kids and their friends.
The elevator makes for easy transitions, but Tan says his health-conscious wife takes the stairs.
Windows and terraces orient the house around the courtyard. Designing an expansive vertical courtyard was a challenge, says the couple’s architect Han Loke Kwang, principal in Singapore’s HYLA Architects, which specialises in upscale single-family projects (or landed properties, as locals call them). Immense vertical spaces like this are seen in commercial structures but are unusual in a residential setting, says Han.
The goal in the Tan-Gwee home, he says, was “to make sure the scale of the courtyard wasn’t overwhelming.”
Foliage—chosen to flourish in the courtyard’s shaded conditions and kept fresh with an elaborate irrigation system—and the koi pond help ornament the space. The pond gives the first floor a waterfront feel.
The couple spent $148,000 on the pool and pond areas. Tan filled the pond with $59,000 worth of top-dwelling adult koi, mostly imported from Japan, and several bottom-dwelling freshwater stingrays, costing $22,000.
Singapore, which is smaller than Los Angeles County, is a blending of cultures, bringing together East Asian, South Asian and European influences. The Tan-Gwee home has a decidedly cosmopolitan flair, combining Italian designer furniture, British and Canadian lighting, kitchen appliances from Germany’s Miele, and bathroom details inspired by vacations in Dubai and the Maldives.
The fortresslike facade, which preserves the privacy of the home, is in keeping with Asian residential models, says Han.
Many of Han’s clients have two kitchens—an open area for Western-style cooking and a closed-off Asian-style cooking space with wok stations, requiring extra ventilation. While finishing the house, Tan and Gwee decided to forgo the planned Asian kitchen, converting it into a kitchen terrace equipped with an $11,000 barbecue.
Back inside, the kitchen was outfitted with a steam oven, two conventional ovens of different sizes and a built-in Miele coffee machine.
These are booming times in Singapore. The city-state now has a per capita GDP of more than $91,000, higher than anywhere else in Asia and one of the world’s strongest residential markets.
Overall residential real-estate prices rose 7.5% between the second quarters of 2022 and 2023, with those of landed residences increasing by 9.4% in the same period, says Nicholas Keong, senior director of Knight Frank’s Singapore affiliate. Also, Singapore came in first in Knight Frank’s Prime Global Rental Index—far exceeding London, New York, Monaco and Tokyo—with rent prices rising 28% in 2022.
The couple seem to have exhausted their wish list. When you have everything from three ovens to a stingray budget, there isn’t much left. What about a home spa? “No sauna here,” counters Tan, who relies on the primary bedroom’s three air conditioners to maintain comfort. “It’s already too hot in Singapore.”
OTHER COSTS
Foundation and framing: $589,400
Electrical work: $148,000
Designer Lighting: $74,000
Elevator: $88,400
Kitchen (including appliances): $222,000
Bathrooms (7): 148,000
Brickwork/masonry: $222,000
Glazing, including windows and sliding glass doors: $222,000
Landscaping, including indoor plants and irrigation: $73,700
Is the pain over yet for U.S. commercial real estate? The answer might be yes for stocks but no for the assets they own.
A record $205.5 billion of cash is earmarked for investment in U.S. commercial real estate, according to dry-powder data from Preqin. But good deals may not be available for another six to 12 months. Here are some trends investors can watch for signs of when it is the right time to buy.
How Much Are Values Down Already?
U.S. commercial property prices have fallen 16% on average since their peaks in March 2022, according to real-estate research firm Green Street. Unlike the 2008 crisis, when a lack of credit hurt the value of all real estate, today’s downturn has hit some types of properties much harder than others.
Unsurprisingly given remote working, offices are the worst performers, having lost 31% of their value since the Fed first began raising interest rates. The discount isn’t as enticing as it sounds, as troubled buildings need heavy investment to bring them up to a standard that will attract tenants, or to be redeveloped for new uses.
Meanwhile, prospects for snapping up America’s e-commerce warehouses at knockdown prices look slim. Warehouse values are down just 8% from peaks to reflect higher financing costs, and top industrial stocks like Prologis don’t look cheap either, trading close to net asset value.
Apartments might be a better bet for those hunting for distressed assets. Prices for multifamily apartment buildings have fallen by a fifth since March 2022. Some owners who paid top dollar for properties during the pandemic using short-term, floating-rate debt may be forced to sell if mortgage repayments become unmanageable when their interest rate hedges expire.
Property Sellers Are Still Demanding Yesterday’s Prices
Sellers are holding out for prices that are no longer realistic. MSCI’s bid-ask spread reflects the difference between what U.S. property owners are asking for and what buyers are willing to pay.
As of July, the gap for multifamily apartments was 11%, the widest it has been since early 2012, when the property market was still recovering from the 2008 crash. The gap for office and retail is a bit narrower at around 8%. Price expectations are closest for industrial warehouses, where sellers want just 2% more than buyers are willing to pay.
The market will be sluggish until one side caves. In the second quarter of 2023, investment in U.S. commercial real estate was down 64% compared with a year earlier, according to data from CBRE.
As the bid-ask gap narrows, it will signal that valuations are approaching more sustainable levels. But this will take some time. It was five years after the 2008 crash before buyers and sellers saw eye to eye on prices on the hardest-hit assets like apartments—although the adjustment should be much faster this time.
What Could Force Sellers to Slash Prices?
The number of properties that slip into distress will be key for bargain-hunters.
So far, there haven’t been many forced sales. Only 2.8% of all office deals in the U.S. in the second quarter were distressed, according to MSCI.
This may be because loans haven’t matured yet. “Owners don’t want to take a loss but once there are refinancing issues, they will have that come-to-Jesus moment with lenders,” says Jim Costello, chief economist at MSCI Real Assets.
Even if forced sales are still rare, the value of U.S. property in distress—in default or special servicing—is rising. In the second quarter, an additional $8 billion of assets got into distress, bringing the total to $71.8 billion, according to MSCI. Including properties that look at risk, the pool of potentially troubled assets is more than double this amount.
Investment-grade corporate bond yields suggest that property prices have further to fall
Owning commercial property is a bit like owning a corporate bond, only slightly riskier: You bet on the solvency of a tenant, with more uncertainty about the value of the capital you’ll get back. For at least the past 20 years, investors in U.S. real estate have required a return premium of 1.9 percentage points over the yield on investment-grade corporate debt, according to Green Street’s director of research, Cedrik Lachance.
Right now, real estate only offers a 1.3 percentage point premium. For the relationship to return to normal and make property attractive again, U.S. real-estate prices need to fall a further 10% to 15%.
The share prices of listed property companies also point to further falls
Publicly traded real-estate stocks provide a live read of sentiment toward property markets. In the U.S., listed property companies currently trade at a 10% discount to gross asset values, based on Green Street data. This is a good proxy for the size of the price falls that investors still expect in private real-estate values.
Investors can also keep an eye on property stocks for signs of improvement. “Listed real estate is a leading indicator for private in downturns and also recoveries,” says Rich Hill, head of real estate strategy and research at Cohen & Steers, who points out that there are already green shoots. At the end of June, REITs had risen in value for three consecutive quarters and were 13% above their lowest point in the third quarter of last year. Based on how long it usually takes for a recovery to feed through to the private market, property values could hit the bottom within six to 12 months.
All this suggests the best strategy is to buy property stocks but to wait to purchase physical real estate. “If you want to bottom fish in real estate now, do it in the public markets,” says Green Street’s Lachance.
Christie’s will feature classical Indian art created from the third century through the beginning of the 20th century in a standalone sale for the first time this September.
The online auction is a break with the traditional approach of including Indian, Himalayan, and Southeast Asian art in one sale and responds to collectors of modern and contemporary Indian art who are “interested in following art history backwards,” finding links in the art of recent time to the faraway past, says Tristan Bruck, head of sale.
The previous model better suited “an old-fashioned collector who was buying works in all three sub-niches,” Bruck says. “A collector who bought Indian paintings, for instance, was likely to also go out and buy a Tibetan thangka (or tapestry).”
The Arts of India sale, open from 10 a.m. Sept. 13 to 9 a.m. Sept. 27, is paying particular attention to works that transition Indian art from the classical to the modern era, a period that until now hadn’t received close attention, he says.
In the midst of the online offering, on the morning of Sept. 20, Christie’s also will hold a live sale in New York of mostly modern but also contemporary South Asian art, which is predominately from India in addition to Pakistan, Bangladesh, and Sri Lanka.
Christie’s expectation is that collectors who attend, or dial into the modern and contemporary sale via phone or online, might be intrigued to also take a look at the online sale, where earlier Indian works provide inspiration for colours, style, and themes by 20th-and 21st-century artists. The auction house will also display the works together in its Rockefeller Center galleries in New York.
Collectors “realize that this art wasn’t created in a vacuum,” says Nishad Avari, Christie’s head of South Asian modern and contemporary art. “There’s thousands of years of tradition that modern and contemporary artists in the region drew on and continue to draw from.”
Consider Maqbook Fida Husain’s Untitled (Naga), a massive work of five female figures and a serpent (or naga) painted around 1971. The painting portrays four of the women with breaks at the neck, hips, and knees, alluding to physical forms expressed in temple sculpture of the Gupta Empire from the fourth- to early sixth century, Avari says.
The painting, expected to achieve between US$700,000 and US$1 million, likely was created to commemorate the launch of a monograph of Husain’s work that was published by Harry N. Abrams, who acquired the painting, Christie’s said in a catalog note. Abrams, a vast collector who also published art and illustrated books about Old Masters through artists such as Robert Rauschenberg, had displayed the work in his offices and later in his family’s home for more than 50 years.
A very large and important Pichvai of Vishvarupa Amidst A Lotus Pond, India, Rajasthan, 18th-19th Centuries
Courtesy of Christie’s Images Ltd. 2023
Going further back in time within the Arts of India sale is a Pichvai painting of Vishvarupa—a form of the god Krishna—painted in the 18th to 19th century. The work, originally a temple banner, is a traditional Indian form and concept, “but by the 19th century you can see artists are working with different types of perspective,” Bruck says. They are also using a more modern color palette, with vibrant pinks and blues, and the canvas is large—about six by eight feet.
“This could go in a gallery with the modern works, which are on these large canvases,” Bruck says. The painting “tells a great story alongside 20th-century work, being able to see the origin of a lot of these concepts.”
The Pichvai—a term that refers to devotional folk art paintings—is estimated to achieve at least US$120,000.
Another popular category are so-called company-school paintings that came out of India’s princely courts beginning with the imperial Mughal around 1600 through to the 19th century, when they were commissioned by British administrators, Bruck says.
Each court had its own style that may have been influenced by other courts and changed over time, he says. The works, often called miniature paintings because of the small, precise figures and scenes they depicted, were typically created in albums, or series, making them highly collectible.
Until recently, a group of collectors had focused solely on this sector somewhat in isolation, but Bruck says, Christie’s is seeing an “explosion of interest” in court painting albums, such as an illustration from the “Bharany” Ramayan series that is being offered in the upcoming sale.
A collector “can see what the other pages from that album have sold for and sort of put them together as an album in [their] mind and ideally collect more than one or try to get a few from the set,” Bruck says. The fact they exist within series also gives collectors confidence in what to pay, he adds.
The Bharany Ramayan work in the sale, titled The Monkey Army Intruding Upon a Demon’s Cave, from “Punjab Hills, Kangra or Guler, first generation after Nainsukh or Manaku,” from 1775-1780, is being offered for a minimum of US$80,000. A Patna court painting of a marriage procession at night, from around 1810 and painted in a more European style, is being offered for a minimum of US$10,000.
For many collectors, those price points are more accessible than, for example, the estimated US$250,000 they would pay for a work by Sayed Haider Raza, whose Rajasthan, 1983, is included in the modern and contemporary sale. The structure and primary-colour palette of Rajasthan, in fact, is intentionally drawn from court paintings, Avari says.
“The way in which their discrete sections, cells, in which he paints and the way in which he surrounds it with the red border is a direct reference to Pahari or Rajasthani (court) painting,” he says.
When collectors can see the court paintings that inspired a modern work they own, and they can acquire them for far less, “why not hang them side-by-side?” Avari says.
A Hong Kong megamansion with views of Repulse Bay has hit the market for a whopping HK$2.2 billion (about US$281.1 million), making it the city’s priciest listing.
The residence is also among the most expensive homes on the market in the world, pricier than the $250 million penthouse at Central Park Tower in New York City, currently the U.S.’s most expensive publicly listed property. In addition, earlier this year, a new mansion in an exclusive Hong Kong neighbourhood known as The Peak reportedly sold for HK$1.2 billion from a mainland Chinese buyer, Mansion Global reported.
The more than 18,000-square-foot residence was completed in 2019, but protests in the city and the Covid-19 pandemic kept the developer from listing the home. Now that they are ready to sell, however, property prices are cooling, according to Victoria Allan, managing director at Habitat Property, which listed the property last week.
“2022 was a rough year in Hong Kong,” Allan said, noting the city shutdowns. “Now that the city is open again, Hong Kong Chinese and mainland Chinese are actively buying for self use. As prices soften, we expect activity to increase as buyers [secure] property for self use at reduced prices.”
For the seller, that may mean being negotiable to a lower price, she noted. Still, the sheer size of the house, its proximity to the water and its location in the tony Repulse Bay neighborhood is likely to attract buyers who are finally able to return to Hong Kong, Allan said. In addition, high-end real estate is very limited in supply because of the island city’s limited building space, she added.
The residence features oversized black casement windows and marble floors and bathrooms, listing photos show. An imperial staircase leads to the main level that has an open layout, and there’s also an elevator.
With 11 bedrooms and eight bathrooms, the house is “ideal for families,” the listing said. There are several outdoor areas, including a roof deck with water views and a lap pool surrounded by a lounging area.
HABITAT PROPERTY
The underlying property was previously occupied by an apartment building, and was purchased by local property firm First Group Holdings in 2014 for HK$350 million, The Business Times reported, citing government data. Representatives from the developer were not available for comment.
Despite falling home prices, Hong Kong’s strict lending requirements have protected the market from the effects of rising interest rates and property owners from being over leveraged, Allan said. “This has helped keep the market more stable, and rising rates have not had as much of an impact on values as other global markets.”
There are many advantages to unveiling high-end cars this week at Pebble Beach this week, where the average attendee will find the vehicles well within their means. And so it is with the venerable Italian coachbuilder-turned-automaker Pininfarina, founded by Battista “Pinin” Farina in 1930.
The PURA Vision design concept to be shown at Pebble was developed in-house at Pininfarina. Most onlookers would call it an SUV, or at least SUV-adjacent, but Pininfarina calls it a Luxury Utility Vehicle (e-LUV). The first design element to capture the eye is the glass dome that sees the door glass and windshield flowing uninterrupted into the roof. The side glass opens up in gullwing fashion but the doors stay put and open in “suicide” fashion, with the rear doors rear hinged to allow easy access to the back seat.
The PURA Vision looks like no other car, or at least no recent one. It sits high on huge 23-inch wheels, with slab sides and a low and aerodynamic “pillbox” upper body that recalls some chopped 1950s customs. And a 1950s design was an inspiration, the Lancia Florida I and II concepts of 1955 and 1957 respectively. The Florida I sedan also had suicide doors and no vertical roof support structure between the doors, known as a “B” pillar. Another inspiration, the gorgeous Pininfarina-designed 1953 Alfa Romeo 6C 3000 Superflow concept, had a similar glass dome roof and a futuristic look. There are very slim horizontal LED lights at the back that extend into the curved rear hatch. The interior is relatively simple, with controls on a console-mounted tablet.
Pininfarina’s Battista Edizione Nino Farina is a tribute to the founder’s race-winning nephew. Pininfarina photo
Dan Connell, the chief brand officer for Pininfarina, describes the car as “beautiful, but in an unexpected form.”
Currently, Pininfarina offers the Batista, a US$2.2 million electric supercar based on the ultra-fast Rimac Nevera, and in the process of developing the PURA Vision, the company “kept the Battista owners and other admirers of the brand close,” Connell says. “We had a private showing for them, and some were skeptical—but their minds were blown by what they saw.”
The company’s second production vehicle, code-named B95, is the first Pininfarina to reflect the PURA Vision design philosophy, Connell says. Details will be revealed during B95’s formal debut at the Quail: A Motorsports on Saturday. It’s sure to be a very exclusive car with a big price tag.
Pininfarina will also have the Battista Edizione Nino Farina on its stand at Pebble. First shown at the Goodwood Festival of Speed in England last July, it’s a special edition of the Battista presented as a tribute to the first Formula One World Champion, Nino Farina, who was Battista Farina’s nephew. Setting it apart are unique paint colors, special gold wheels, and body side graphics. An aluminium door plate celebrates the younger Farina’s racing wins. Only five of the high-end electric cars will be built. It’s the second limited-edition Battista, after the Anniversario model.
Simplicity is the watchword in the PURA Vision’s interior. Pininfarina photo
Pebble Beach is always a parade of new model reveals. The “House of Maserati” is celebrating the 75th anniversary of the GranTurismo (GT) model. Both the electric Folgore GT and the Trofeo versions, powered by a three-litre twin-turbo Nettuno V6, are to be sold in the U.S. Two one-of-a-kind GTs, the Luce and Prisma, will be on display at the Quail. Also seen will be the MC20-based Maserati MCXtrema, with 730 horsepower and a build of just 62 cars. Lotus will be giving rides in the 2024 Emira sports car, the final gas-powered Lotus with both four-cylinder and V6 power. Prices start at US$77,100. Rolls-Royce will show a one-of-a-kind car created for a customer.
Other cars to be shown at Pebble include: the Acura ZDX electric crossover, a “world-first new model” from Aston Martin, the Bugatti Chiron Super Sport Golden Era, the Hennessey Venom Revolution Roadster (with a 17-pound removable carbon fiber hardtop), the world premiere of the new Mercedes-AMG GT, the second Lamborghini electric concept, and the Infiniti QX Monograph Concept.
Novice collectors should focus their investing efforts on what brings them happiness amid wider economic uncertainty and unpredictable returns, according to Knight Frank’s Luxury Investment Index, released Tuesday.
The index—which tracks 10 luxury collectibles: art, watches, jewellery, coins, wine, classic cars, coloured diamonds, handbags, furniture, and rare whisky—found that as a whole, the value of these collectibles rose 7% in the 12 months to the end of June.
While that outpaces the returns on some other assets, including prime property in central London (down 1% over the same time), the FTSE 100 Index (up by 5%), and gold (up 1%), it was the weakest annual performance for collectibles since the second quarter of 2021, Knight Frank said.
“Economic uncertainty and higher interest rates will cast a long shadow on luxury collectibles,” said Knight Frank’s Andrew Shirley, editor of the index. “Novice collectors should focus on what brings them joy, perhaps that’s more important now that value appreciation is far from guaranteed in these asset classes.”
Art topped the index by a long shot, growing in value by 30% in the year through the end of June, according to Art Market Research’s (AMR) All Art index, which uses data from auction sales worldwide.
However, those gains may have already peaked.
“The auction season’s spring sales are the first measure of market confidence and recent results suggest growth is already starting to slow,” AMR’s Sebastien Duthy said.
Following art, watches (10%), and jewellery (10%) rounded out the top-three best-performing collectibles of the past year.
Rare bottles of whisky were the only asset in the index to see values drop in the short term—down 4%—but collectible tipples ranked as the strongest 10-year performer, with prices rising 322% over the last decade.
“Bottles of rare whisky have had a far more sedate time from a performance perspective over the past three years,” industry consultant Andy Simpson, of Rare Whisky 101, said in the report. “Higher value (more than £5,000 (US$6,370)) bottles have re-traced recently due to a myriad of geo-political, social, and economic reasons.”
