Dan Conn is chief executive officer of Christie’s International Real Estate. For more than 20 years, the wholly owned subsidiary of Christie’s auction house has collaborated with leading real estate brokerages around the globe, but in January Christie’s International Real Estate opened its first-ever gallery space in its New York headquarters dedicated solely to the sale of luxury residential real estate. (Erin Boisson Aries is leading Christie’s International Real Estate’s first team of real estate agents.)
Mr. Conn, 51, joined Christie's International Real Estate in 2014 from Brookfield Asset Management, where he managed the company's Hard Rock Hotel & Casino investment.
We caught up with him to discuss his absolute favorite property on the market, a trend he describes as "lifestyle arbitrage," and much more.
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Mansion Global: Describe your dream property.
Dan Conn: I’ll give you a specific answer: My dream home is called Darlington, which is in Mahwah, New Jersey. It was completed in the early 1900s by a family called the Crockers. When it was purchased by the current owner it was 33,000 square feet. Now it’s about 50,000.
You have to see it to really be able to appreciate it. In the library, for example, there are frescoes on the ceiling that were done by a Tiffany’s artist. There are giant Tiffany chandeliers hanging from the ceilings. When the owner bought it, he had as many as 200 artisans in the home at any one point in time.
There’s a three-story pipe organ in the great room. If you look at the way the wood has been carved, it’s incredibly ornate. To me, it’s art. But the house is also incredibly warm and intimate. It sits on 12 acres, and the beauty of the place is just astonishing.
It was once 74 bedrooms, and it’s down to 21 bedrooms, 29 bathrooms. Every one is a work of art and craftsmanship. Each one is stylistically different.
In the lower level, the owner built out a spa, massage room, salon, cigar room, wine room, games room, an exercise room and a full kitchen that can serve 200 to 300 people.
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MG: Do you have a real estate property that got away?
DC: We got married in the Berkshires—in New Marlborough, Massachusetts, so the first thing we thought about buying was a house in Alford, also out in the Berkshires. It was designed by a furniture maker and it was amazing. I told them we wanted to buy it, but the developer had to finish the "basement" floor, which was actually the main floor and was unfinished. He refused to do the work until we closed on the house. I couldn’t get comfortable with a house being two-thirds done.
There was another deal in the Hamptons that I blew up, too. That was a stunning place.
MG: What does luxury mean to you?
DC: If you just use it as an adjective, it’s massively overused and it doesn’t mean anything. But if you think of it as a noun, and you put it in a sentence, "I have the luxury of blank," then you think about what people really want, what they care about, and how that’s different than anything else that’s out there.
One of the things that we recently sold in Asia were Monet’s spectacles. They were not in and of themselves that distinctive. But you’d have the luxury of saying that you get to look at the world through Monet’s eyes.
When it comes to real estate, there are homes that are absolutely fine homes that many people would be thrilled to call home. But there are some homes where you look at them and think, "The people who get to live there are lucky to get to live there." And that’s luxury.
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MG: What area do you think is the next hub for luxury properties?
DC: A couple of years ago, I coined the phrase "lifestyle arbitrage." The idea behind it is that as the more visible centers of luxury get overbought, people who want that lifestyle look at the places adjacent. Brooklyn is the most obvious example of lifestyle arbitrage. If you can have effectively the same lifestyle and access to the same amenities and do it at a lower price, then it’s worth it. The Bronx is the most recent example of this that you hear talked about in New York.
In London you have the same thing; it started in areas like Clapham, Peckham and Fulham.
In places like that, the math is straightforward. In New York, for example, if you can find a place that’s about $700 per square foot, the chances are very good that it’ll be $1,000 to $1,500 per square foot in the next few years. So the return profile on that is really attractive.
MG: What’s the biggest surprise in the luxury real estate market now?
DC: In the ultra high-end spec home category, like in Los Angeles, developers have made the decision to amenitize houses with art collections and car collections, but those are quite personal. I’m surprised at how quickly and suddenly the worlds of art and real estate have converged. That’s really interesting. You really need to be able to talk across categories.
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MG: Where are the best luxury homes in the world and why?
DC: The best luxury home is the luxury home you can afford to buy, at a general level.
But if you want to be more definitive, they’re in global economic hubs like New York, London, Hong Kong, L.A., Sydney. Then there are secondary markets like the Hamptons, the South of France, and some that are not as much on the grid, like Tuscan villas.
Sting has this property in Tuscany that has great wine, olive trees that make olive oil and there’s bee keeping. Although not on the market, you can stay there. There are areas like that that are incredible but aren’t perceived as being as high-end.
MG: What’s your favorite part of your home?
DC: Every night I read with my twin 6-year-old girls, usually in our office, so that’s my favorite.
MG: What best describes the theme to your home and why?
DC: Rustic pre-war. I would also call it slightly distressed because I have two 6-year-old girls.
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MG: What’s the best amenity to have in a home right now?
DC: On the ultra-high end, one of the big things is privacy and security. Other things people amentize homes with are art and car collections, so the garages that hold those things are beautifully designed spaces now.
Large entertainment spaces and ballrooms are popular, too.
MG: What’s your best piece of real estate advice?
DC: It depends if you’re buying as an investor or for personal use. If you’re buying as an investor, it’s about lifestyle arbitrage. You’re trying to get in where the base is, so you can generate a nice rate of return.
If you’re buying it to use it, buy what you love and don’t sweat the small things.
The deal that fell through for me in the Hamptons was a brand new home, and the sealant on the wood floors had started to peel, and that worried me. But in hindsight I probably should have just compartmentalized that.
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MG: What’s going on in the news that will have the biggest impact on the luxury real estate market?
DC: It’s hard to pick one answer. As an overarching theme, in markets that are perceived as being stable—politically, financially, with a good banking system, with a reasonable record on human rights—people will be willing to deploy capital there because it’s a good place to deploy capital.
What interferes with that are taxes that are designed to act as an impediment as opposed to a stimulant, and there are plenty of notable examples of that—Vancouver, Toronto, London, Hong Kong and Singapore.
For what it’s worth, it’s actually the wrong answer. Governments should be focused on supply—and not demand—and on giving people incentives to build housing that people can actually afford.
Interest rates will be a huge variable, too. You have a ton of fiscal stimulus that could result in meaningful rising of interest rates, and that could have an impact across the spectrum. It may not be as impactful at the ultra high end because those buyers don’t rely on financing, but it still has a huge impact. If you think of the bell curve, the bulk of what people define as "luxury" is a home for which people will use financing.
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The third piece of it is geopolitical. There’s a great cartoon in The New Yorker that shows a couple walking into an empty room with a real estate agent and the caption says: "It’s not pre-war...yet." Nobody knows what’s going to happen. It may be business as usual and nothing will happen, but something may happen.
And the other thing is natural disasters, like Montecito’s mudslides. Nature doesn’t respect luxury boundaries, it couldn’t care less.
On one hand, you can’t avoid the issue being political, but on the other hand, it isn’t political at all. You don’t have to have a point of view on whether there is or isn’t climate change or whether the world is or isn’t warming, it’s easily observable by looking at anything. There are massive events now that are wiping out major communities. You have a practical issue at hand—how do you deal with it?
MG: What is the best area now for investing in luxury properties?
DC: If you’re return-focused, you think along the lines I was describing when it comes to "lifestyle arbitrage."
If you’re focused just on diversifying a portfolio, you can be broader in your approach. You just want to deploy capital where there are stable governments and banking systems, great education, healthcare, solid human rights. That’s broader.
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MG: If you had a choice of living in a new development or a prime resale property, which would you choose and why?
DC: Prime resale because I’m attracted to old bones.
MG: What area currently has the best resale value?
DC: Depends on who you are. If you’re a buyer, the best resale value is in a market with high inventory. If you’re a seller, your best resale value is in a market that is hot. Overall, on the West Coast, even with the taxes in Vancouver, it’s fine. In Seattle and Portland, between technology money and the influx of Asian capital, you’re seeing a strong market. San Francisco and L.A. have similar dynamics. In L.A., it’s a slightly different market, since there’s a lot of Gulf money coming in. All of those, if you’re a seller, are great markets from a resale perspective.
If you’re a buyer, you would probably say the Miami area because there’s a decent amount of development and inventory. New York is a pretty good market, too, for buyers. And London because it’s had challenges from two election cycles, Brexit, stamp duty, mansion taxes; it’s been a succession of issues over the last few years, so prices are actually really attractive. But London will always be attractive for global buyers. Yeah, there are some issues with Brexit, but it’s a hub city, and capital will always flow through there—just like New York or Hong Kong.