[MRM]

I gained an unlikely education on developing multimillion dollar houses over the years. I even once had a client fly me out to Beverly Hills with the plan to obtain a lot and build a spec mega mansion, although perhaps not one in the $500 million range. There are a lot of weird developers and there are a lot of games developers play, but there is clearly something not right going on with this property. No developer holds a property longer than they need to and no one gets into carrying costs like that without an exit plan. I can't tell what the scam is, but the developer is up to something. The creditor seems to have a good handle on things. As long as he dots his eyes and crosses his tees he'll recoup his loan amount and may end up owning collateral more valuable than the loan.

There is actually a market for spec mega mansions, even in the tens of millions of dollar range, but this house violates almost all the rules of how to do it successfully. The number one rule is location. The premium quality of the house has to be the location and if it isn't exclusive enough it won't matter what you build. No one pays for a premium house on an average piece of land. Second, the house has to have some style and desirability to it, but it should be plain vanilla. The house has to be completely finished to attract a buyer, but it needs to be so thinly finished that the new owner basically deconstructs the finishings and redoes the house his own way. The deal is that people who want $50 million compounds want the house customized to their needs and tastes but they don't want to spend the five years it takes to build a house as they imagine it. The solution is a spec built house that shows them enough to imagine the final product and is easy to put the final custom veneer onto the structure in a matter of months, rather than years.

With this house the location is desirable, but not so unique that people would buy the house just for the land. The house is customized to someone's taste, but someone smart enough to have a half billion to spend isn't stupid enough to let someone else define their taste for them. I suspect the developer is using the house for publicity. He probably spent $15-$20 million in construction and is living off the rest of the construction loan. He may default and let the property go to the creditor and still get out of it OK because he spent less than the loan on the property. That's the only thing I can think of, but it seems like a strange way of doing business.