Luxury sales slow after banner year in 2012

GOOD INVESTEMNT: Despite a $45 million asking price, the Newport property at 339 Ocean Avenue could turn a profit for a buyer willing to subdivide and develop. / COURTESY GUSTAVE WHITE SOTHEBY’S
GOOD INVESTEMNT: Despite a $45 million asking price, the Newport property at 339 Ocean Avenue could turn a profit for a buyer willing to subdivide and develop. / COURTESY GUSTAVE WHITE SOTHEBY’S

The last time a mansion at 339 Ocean Avenue in Newport changed hands, in 2004, it was known as Avalon and set a record for a Rhode Island single-family residential sale at $10.3 million.
Now the 45-acre oceanfront estate, featuring a newly built stone villa and named Seaward, is on the market for $45 million, a price that would more than double the state’s current record sale.
In a year when luxury home sales have slowed slightly from a booming 2012, smashing the state record and quadrupling the property’s value from nine years ago might seem unlikely.
But Paul Leys, broker owner of Gustave White Sotheby’s International Realty in Newport, said the market is healthy enough, and size and location of Seaward rare enough, that $45 million is far from unreasonable.
“All of those big sales last year – Clarendon Court, Hopedene, Belcourt all were on smaller lots – this is 45 acres and has the potential for further development,” Leys said. “When we looked at the top comparables and adjusted for potential, and looked at the prices on Martha’s Vineyard and the Hamptons with this kind of acreage, it made sense. This is a special property.”
Seaward’s Ocean Avenue neighborhood is zoned for lots of at least 160,000 square feet, or 3.7 acres, which would allow a developer to, theoretically, subdivide them into more than 10 individual properties.
With other Ocean Avenue homes on 4 acres reliably selling at or above $10 million, Leys said the math might work for a developer to invest $45 million.
The record for the most expensive residential sale in Rhode Island is currently held by pop star Taylor Swift, who bought an 11,000-square-foot mansion perched on a bluff in Westerly’s Watch Hill for $17.75 million in April.
Swift’s home edged out the state’s previous top sale of $17.15 million set in 2006 by the buyer of Miramar on Bellevue Avenue in Newport. Miramar is still the highest Newport sale.
Yet despite the big transactions in Watch Hill, 2013 has been a bit of a disappointment for luxury sales compared with 2012, when the number of $1 million-plus sales climbed 46 percent from the previous year. “For our company 2012 was a record year and we had more $5 million-plus sales than ever before,” Leys said. “In 2012, for some reason the high-net-worth buyers got off the fence. In 2013 that has continued, but it is not going to surpass 2012.”
Melanie Delman, president of Lila Delman Real Estate in Narragansett, said there was no question luxury sales were off from 2012 in most price categories, but that the market remains headed in the right direction long term.
“Sometimes there is an emotional aspect to these sales and you have to have consistent sales and a stable luxury market to compete with places like the Hamptons and Nantucket,” Delman said. “At the same time you are going to have these good years and off year before you get to that point. The inventory is low and we are in the spotlight with some interesting sales to celebrity-type users.
“We feel comfortable we are going in a good direction,” Delman said.
She declined to hazard a guess on whether a Seaward sale could approach $45 million, but said the asking price reflected Rhode Island’s aspirations to the exclusivity of some luxury markets.
“That will be interesting to see because a private residential site has never gone past the upper teens,” Delman said about whether Seaward can fetch $45 million. “But anything can happen if we are open minded and unique situations occur. Those numbers in other areas are not out of whack.”
Before being sold to its current owner, who Leys would not disclose but is listed as Atlantic Properties Revocable Trust in city records, Seaward was the longtime estate of James Van Alen, a descendent of John Jacob Astor and founder of the International Tennis Hall of Fame.
Avalon was a sprawling, white stone-clad home first built around 1905 and rebuilt by Van Alen and his wife, Candace, after a fire in 1976. Van Alen died in 1991, followed by his wife 11 years later, prompting the sale.
The new owners razed Avalon to make way for the current six-bedroom, 7,700-square-foot “indigenous stone” main residence and three-bedroom guest house in 2009. Leys said when the current owners took over the property, it was overgrown and they did significant landscaping to open up the grounds not only to ocean views but also the abutting Newport Country Club.
Leys acknowledged that there are no comparable sales in Rhode Island to what Seaward is asking for, but said that is because there aren’t any other properties with the same kind of development options.
“When the property went for $10 million, at that time they didn’t see the potential,” Leys said. “If you wanted to subdivide and create individual lots, there is a lot of flexibility to do so with that much space. We are hoping to catch different types of buyers, including developers and high-net-worth individuals who might want a family compound.”
David Godden, director of distinctive homes at Randall Realtors in Westerly, said he could not recall a Rhode Island property listed in the $40 million neighborhood before.
But he added that doesn’t mean the price isn’t warranted and potential subdivision could justify the price.
“It will take a special buyer and there are not that many in that range,” said Godden, adding that he wasn’t familiar enough with Seaward to comment on it specifically. “If there is development potential, that opens up the buyer pool to more people and it’s possible.”
Godden said setting high asking prices can be counterproductive, but not if you can justify the value, or even close to it.
On the broader southern New England luxury market, Godden said the flurry of big sales in 2012 was a result of pent-up demand, good inventory and fears of federal tax changes that didn’t end up materializing.
“There were some pretty magnificent trophy houses on the market in 2012 and not as many in 2013,” Godden said. “That had a lot to do with it and people were scared tax wise and wanted to buy and sell sooner. We had tremendous product on the market in 2012, while we have very good product in 2013.” •

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