Deeds & Don'ts

Buying the Farm?
Why keep a 3.8-acre farm stand (included in a 7.6-acre parcel) when the land could be sold for $11 million? That's the issue facing owner Jim Hopping. He has leased the land to local farmers Jim and Jennifer Pike for 20 years. In total, they farm about 65 acres locally and sell the produce at the above-mentioned farm stand on Sagg Main Street, one of the most popular in the area. The 7.6 acres was listed with Brown Harris Stevens for $11 million with 50 percent held as an agricultural reserve. With a four-lot subdivision of the 3.8-acre farm stand land, each parcel would be slightly under an acre. That means a prospective developer would be paying $2.25 million for each lot. Over 1,000 locals have signed a petition to keep the property as is. The Peconic Land Trust is considering a possible acquisition, and many clients have offered to contribute to a fund to keep things as they are.

Mortgage Mania
Ever wonder how some people afford those $10-20-plus million East End "cottages"? Readers of this column may or may not be surprised to learn that even hedgies and heiresses sometimes take out mortgages-of the more than $10 million variety. (No, it's not for tax purposes. The cut-off for tax-free mortgages is a modest $1 million.)

Big-ticket homeowners take out such hefty mortgages because, with interest rates at around six percent, they believe their money is better off in hedge funds and other investments that-for now-can still bring in double and triple that amount. (At press time, the Dow Jones industrial average broke a record and rose above the 14,000 level for the first time.)

The good news for the economy is that these buyers are a good bet for the banks. They are usually buying their homes to live in, instead of for investment purposes.

They are basically sophisticated enough to sell their homes instead of losing them if they can't make the mortgage payments-unlike their financially and credit-challenged sub-prime mortgage compatriots in other parts of the country who are already losing their homes after falling prey to ethically challenged (if not yet legally criminal) lenders. (Just as an aside, some investors are active locally in buying up defaulted properties.)

"Historically, paying cash for $10 million and $25 million homes was a statement to your peers and your neighbors. Now it's all about the cost of funds instead of needing leverage to buy," says local mortgage executive Jamie Whitall.

One of Whitall's biggest mortgage deals was for a total of $12 million: a $9 million mortgage to help someone buy a $20 million property combined with a $3 million mortgage to help fix it up.

Many brokers attest that those who take out hefty mortgages can help pay for them by renting out their East End homes in the summer months. (Sometimes, homeowners even use some of the money they get from summer renters to traipse around Europe's French Riveria and Amalfi Coast.)

It's not just the high-end rentals, but any home that can bring in big bucks if rented during the summer months. A high-enough take in July and August can pay for a whole year's expenses, as renters are responsible for paying all house-related bills, from the gardener to garbage disposal, heat and air-conditioning.

"The Hamptons and Aspen are the only places in the country where you can pay a year's worth of expenses by renting your home for two months," says power broker Dolly Lenz of Prudential Douglas Elliman.

Why Own When You Can Rent?
JThe prices homeowners are getting for summer rentals are nothing short of astonishing-especially considering they're not even oceanfront or a quick walk down to a beach.

New York fashion designer/socialite Tory Burch and boyfriend Lance Armstrong are said to have rented on the street for $360,000-spurring some of their resident summer neighbors to drive to the nearest bicycle shop and purchase shiny new two-wheeled vehicles, while others are hiding their tattered, barely ridden bikes in their multi-car garages for fear of, well, being left in the dust by the fast-paced pedals of the Tour de France king. (The Hamptons is, after all, the Hamptons, thanks to a competitive spirit imported from Manhattan that keeps it from being like any old vacation spot where you can kick back and relax anytime and all the time.)

Songwriter Denise Rich-single since her marriage to Clinton-pardoned billionaire convict Marc Rich dissolved some years ago-has also ditched her Mediterranean-based yacht to rent on Captain's Neck Lane for about $350,000 for what is said to be one month.

Then there's Andrea and John Stark, of Stark Carpet, who are also renting on Captain's Neck after selling their Westhampton home while building their new dream home. The new home, developed by Joe Farrell, may take under a year to build, sources say.

For now, perhaps, such high rents are helping the high-end mortgage business. While Whitall says he often helps buyers get $5 million mortgages to help them buy $15 million homes, he says $2.5 million mortgages are actually more common.

And even if some hedge funds are taking hits, it has yet to have an impact on the East End. "People's investments may be under pressure, but as far as forcing mortgages in jeopardy, that form of private hedge fund investment is not rippling through to investors paying their mortgages," Whitall says. "For the typically well-diversified folk [on the East End] it's all fairly relative.

just look at Captain's Neck Lane, in Southampton's tony estate district.

Their liquidity may change but not the way they service their debt. That may be a longer way down the road, if at all."

Along with the big mortgages, there are also lots of people who took out cash flow mortgages to buy East End homes in the $1-3 million range around three years ago. Those properties were often spec homes for investment rather than homes to live in. Now those mortgages are coming due-just as, coincidentally, inventory for homes in that price range is getting bigger.

"That's the softer area in the market. The inventory is higher," says Whitall, although Corcoran broker Michael Schultz says he's been doing well in this price range.

The potential problem, Whitall continues, is that cash flow mortgages allowed people to take them on two or more properties instead of one because they were allowed to fall short of their full monthly mortgage payments for a limited period of time, which is usually two to three years. Now that time is up at the same time that homes in that price range are taking longer to sell. (Cash from one sale is what the sellers had hoped to use to service their other mortgages and fix up other properties; hence the potential problem.)

"The three year period is already starting to end and people are starting to get squeezed," Whitall says, adding that it's too early to predict what impact this will have on the market.

For now, Whitall says, the change is subtle. "While there are a lot of $2 million homes, not all $2 million homes are alike," he emphasizes. "The market is already making adjustments. There is a flushing out of some properties that have always been overpriced. Now, there's more scrutiny. People are looking at the quality of design and materials used in a home. They're looking under the hood. It's no longer just 'build it and it will sell.'"

That's the Ticket
For now, the big-ticket homes are selling fastest, in some cases faster than brokers can list them and developers can build them.

In the past nine weeks, developer Joe Farrell sold properties that include one on Ox Pasture for around $19.5 million, another on Further Lane for around $19.5 million and another on Halsey Lane for about $13 million, plus a home at 10 Morgan Hills Way for just north of $13 million, "and we were only into the job for 90 days," Farrell says.

"The big stuff is flying out the door. Big deals close before the homes are finished and sometimes even before a shovel hits the ground," adds Farrell. The developer is also selling his own home in Water Mill for $6.5 million. (Farrell is moving to 612 Halsey Lane, which has 12 acres in Bridgehampton. He already sold a two-acre piece of the property to a Manhattan real estate developer.)

On another note, sales are so good that Farrell has also expanded to other areas, like Noyac, where he's building five $2.5 million homes around 4,000 square feet. The price-$2.5 million-is an "entry level" in the Hamptons, Farrell says. Two of the homes will be for sale and the other three will be high-end rentals, for about $140,000 a year, he adds.

Farrell's first deal with the Carlyle Group-a partnership announced about four months ago-is also launching: 799 Daniel's Lane, with ocean access, for $20 million.

Other hot properties currently on the market include a 2.2-acre listing on Cobb Isle for just under $20 million. The current owner merged two one-acre lots and worked with architect Peter Cook, landscape architect Ed Hollander and land planner Richard Warren of Inter-Science to get the permits necessary to create a 10,000-square-foot house with a pool and tennis court-if a new owner so desires. The property with ocean views is listed by Corcoran's Gary DePersia.

The Party Line
The hedgies and finance types are not the only ones traipsing through the East End looking for hot properties. The current batch of presidential candidates are visiting and seeking Hamptons summer power people delighted to show off their homes and prospective donors willing to part with some money.

Candidates like Senator Clinton, Senator McCain and former Mayor Giuliani are flocking here to attend everything from thousand dollar-plus dinners to pancake breakfasts at $500 a head.

"Everybody is using their home to do something," says Dolly Lenz, who is scheduled to host a fundraiser for the Giuliani campaign in her home. Southampton's Howard Gittis hosted a fundraiser for McCain.

And Senator Clinton-trying to out-fund Senator Obama-has a whirlwind schedule in the Hamptons this month: $500 for pancakes at Susan and Alan Patricof's East Hampton home. (It goes up to $1,000 a family.) There's also cocktails at Revlon billionaire Ron Perelman's manse for $1,000-dinner costs $4,600, the max federal guidelines allow-an afternoon at Robert Entenmann's North Fork vineyard and a reception at Bernard Schwartz's Southampton home. There will also be a poolside barbecue at Morris Reid's East Hampton home, where the Democratic political consultant told The New York Sun he hopes to raise $200,000. -J.G.K.

Homeless on the Beach
Real estate records for the first six months of '07 are in and, as previously noted in these pages, fewer homes were sold-at increasingly higher prices. The wealthiest among us seek waterfront and the most seriously wealthy crave oceanfront. What's a person to do?

How extraordinary it is that only one house is for sale on the ocean in East Hampton. It's as though the dear, dead past has left the wealthiest of would-be home buyers a horribly deficient legacy to the high life. Owned by the children of Wall Street financier Robert Towbin, the property, which sits on West End Road, is about as good as it gets in East Hampton for serious oceanfront. The asking price is $40 million. As for the house, it's a timeworn antique adhering to no particular style, as though it were plunked onto the sand by forklift. Still, it resides on handsome beachfront that would ultimately make mildly discerning buyers smile.

Some might argue that Lily Pond Lane oceanfront properties are better in terms of view and proximity to the shore. It's a matter of taste. West End is a bit tricky, however.

Accessing the beach from many of the houses can be somewhat of a chore since the dunes have eroded badly. The Towbin property remains passable, one of its few attributes.

In my opinion, in terms of exclusivity West End has the edge. It's at the end of the road and has the feeling of a well-tended private enclave. In fact, part of the road is a private road. Notable residents include Kelly Klein, former wife of Calvin; Kathy Raynor, heir to the Cox Communications fortune and Norma Lerner, widow of MBNA credit card magnate, Alfred. Next door, heading west, is the spread of the duo of film director Michael Cimino (Heaven's Gate) and his next-door neighbor, protege and one-time producer Joann Carelli. On the pond side sit a few top Wall Street executives, plus Steven Spielberg and Courtney Ross, the widow of former Time Warner notable Steve Ross.

With such a scarcity of suitable housing, what's one to do? Simply resort to unsolicited offers. Many brokers specialize in this kind of cold calling. Sometimes they don't even have a particular buyer in the wings and tender huge offers in the hopes of getting a listing. These efforts usually go nowhere, but you never know. Recent popular targets include Jane Wenner, who was reportedly offered $85 million for her 11-acre oceanfront compound on Further Lane. It was turned down flat. The aforementioned Michael Cimino and Joann Carelli, who share a driveway leading to their respective houses, were supposedly offered $100 million, a high-flying query that went unanswered. The Cimino-Carelli compound would be quite compelling. Together, they have about seven acres spanning 500 feet of frontage and a quarter acre on Georgica Pond. The houses are early shingle-style and a megabucks buyer might tear them down to build a more suitable beachfront estate.

The possible big prize some brokers are salivating over is whether the Lily Pond Lane house of the late Claudia Cohen (Ron Perelman's ex-wife) will come to market. Many have assumed that Perelman still owns it. Public records show that he still does. If it were for sale, a buyer would have eight stunning acres and nearly 400 feet on the ocean. The house was never considered great and might be torn down. How much might someone pay? Do I hear $125 million?

There really isn't anyone else to approach, even if you have unlimited cash or chutzpah. The best are still owned by those unlikely to sell. On Lily Pond Lane there's Carl Icahn's seven-acre estate, with two tennis courts and three houses. Other unlikely sellers-at any price-include Jerry Della Femina, Josephine Chaus, Bernard Goldberg, Mort Zuckerman, et al. Then there's Loida Lewis's seaside retreat. It was part of the 10-acre Minskoff estate, some of which was sold to current neighbor Lew Sanders. It's a great example of early 20th-century shingle-style beach house but intimates have said that she vows never to sell it.

All this having been said, I predict that by the time the summer ends, there will be some big, surprising sales. There is too many people with much money around to sit idle and homeless. One of our longtime residents or lesser-endowed residents on the beach might just be tempted. -S.D.