Showbiz Wealth Management Report 2011

Traditionally, real estate has been a hedge against the vagaries of the stock market and other sometimes volatile investments, but that hasn’t always been the case during what has come to be known as the Great Recession that began in 2008.

Yet, despite dropping housing prices across most regions, savvy investors have found blue chip properties that have resisted the downward pressure and even managed to rise in value. And the showbiz elite in Los Angeles has taken advantages of some rock-solid opportunities in its own backyard.

“Generally speaking, the world is thinking that the United States is on sale right now,” says Billy Rose, prexy of the Agency, a Los Angeles-based real-estate brokerage firm. But his own experience belies that belief.

The former agent is in expansion mode as his appropriately named company opens offices worldwide in order to reach international buyers seeking security. “Most everyone wants to invest in North America; both the U.S. and Canada are perceived as stable,” he adds.

Much of that worldwide interest is focused on Los Angeles and in particular, Beverly Hills, one of the world’s strongest markets.

BevHills arose as a bedroom community for industryites in the 1920s, and remains embedded in Hollywood’s homeowner and real estate investor psyche. “We’re seeing a lot of second, third, fourth and fifth home buyers,” says Rose pointing, to five $13 million home sales in the past two months to buyers who won’t be living in the properties full time.

Gary Gold, exec VP of Beverly Hills luxury real estate firm Hilton & Hyland, echoes that assessment. “A trophy (Beverly Hills) property, beautifully done, is selling more than it’s ever sold for,” he says. “Beverly Hills real estate is a flight to quality.” He notes that some of residential real estate’s current marquee properties are found in the flats of Beverly Hills, Trousdale Estates and the bird-named streets above the Sunset Strip. He recommends either buying “an ultra premium property or buy the best site and re-do it,” which not for everybody.

Los Angeles’ high-end properties are not the world’s most expensive. Comparatively, London, Hong Kong and Gotham per-square-foot rates exceed those of BevHills — which only increases its attractiveness to investors.

International buyers are driving the high-end market, Gold says. L.A.’s (and Hilton & Hyland’s) priciest home sale in 2010 — $85 million for the mansion that belonged to the late TV tycoon Aaron Spelling — went to an international buyer.

Adding to Beverly Hills’ desirability for investors, as opposed to even Malibu or Hawaii, is its access to commerce, per Gold.

“Any major metropolitan city is always attractive to investment,” says Rose, who recently analyzed the real estate market in Toronto, a boom town in part due to the Canadian government’s conservative fiscal policy.

However, Toronto’s 138 condominium tower projects under construction might raise concerns for investors, as too much of the same kind of product often results in a glut. (Miami’s condo towers or Las Vegas’ housing developments are two examples of too much of the same kind of inventory outstripping demand.)

“Property in L.A. is valuable because there is not a lot of copy-and-paste,” Rose says. “There’s not wide-scale development; every property is different from the next.” To investors, that’s a major positive on a potential investment property’s balance sheet.

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