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This story first appeared in the Dec. 12 issue of The Hollywood Reporter magazine.
“I’ll take that one,” said a Saudi Arabian royal, pointing down from a helicopter while with his realtor on an aerial tour over Beverly Hills’ tony Trousdale Estates. He was picking out a massive 11,000-square-foot estate (complete with pool, picturesque views and two acres of property) — before stepping one foot inside the off-market listing, which was then home to Mary Hart and Burt Sugarman. Instead, according to property records, he paid north of $27 million from the sky to get the couple, who had lived there 25 years, to move out in three weeks so he and his family could celebrate Ramadan in their new digs (once owned by Elizabeth Taylor), says a source close to the owners.
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Across town, a woman mulled over a coveted Celine trapeze bag that had just been placed on a Barneys shelf. “You’d better make up your mind fast,” a clerk warned. “If you don’t, within 15 minutes 15 Chinese ladies will snap up all 15 of these bags” at $2,500 a pop.
Welcome to the new Beverly Hills, where an influx of chopper-chartering, cash-flashing, uber-monied visitors from Saudi Arabia and China are making a huge splash while stuffing the coffers of real estate agents, restaurants, hotels and luxury retail outposts. These MMTs (Major Moneyed Tourists) are the new wave of Golden Triangle VIPs, supplanting the Japanese and Russians who had been pervasive spenders in the 90210 for years.
So why them? And why now? It’s a complex answer that includes robust native economies (China’s is the world’s fastest-growing according to a 2014 estimate by the International Monetary Fund); the lure of Los Angeles weather; an increase of direct flight options; inexpensive real estate in the area compared to international destinations like New York, London and Paris; and local universities that are drawing foreign offspring. Insiders also point to relaxed visa restrictions that have allowed travelers easier access.
If you’ve spent any longer than a New York minute in Beverly Hills lately then you’ve seen the stacked tour buses carrying dozens of Chinese visitors to and from hotels or family enclaves in the San Gabriel Valley, or pre- and post-Ramadan visitors from Saudi Arabia during the summer months on sidewalks or inside any number of luxury hotels. Now that the city has opened its doors, stores and vacant mansions to MMTs, one thing is clear: The Beverly Hills economy is changing.
MEGACASH FOR MANSIONS
Foreign cash is pocketed in all corners of Los Angeles, but perhaps no industry is counting its blessings more than the real estate business. And those who toil in the mega-mansions trenches confirm that they’ve seen a sharp rise in buyers from China and Saudi Arabia. “There is a lot of foreign money filtering into the market in Beverly Hills because people have come to acknowledge that we are an undervalued market,” says veteran realtor Bobby Syed of the John Aaroe Group, who represented both sides of the Sugarman sale.
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The Agency’s Paul Lester offers startling statistics: Of the buying market for properties from $5 million to $50 million, the active Asian and Saudi Arabian component comprises 15 percent of closed deals, a rise from about 5 percent a year ago. Lester adds that, according to his company’s research, foreign sales are up overall by 30 percent. “A lot of foreign investors are using these homes as a holding place for money. It’s their bank,” says Lester, noting that many buyers never move in or only use the homes a few weeks a year. “The thought is that the U.S. is a safe place to put money and engage in monetary transactions.” Realtors say the majority — if not all — of these types of deals are cash transactions, because of the extreme wealth of buyers and the difficulty foreigners have in obtaining loans from local lending institutions.
Madison Hildebrand of the Malibu office of Partners Trust Brokerage says the largest sale of his career came courtesy of a Saudi buyer who snapped up a Beverly Hills estate for $20 million. “Most often, they are looking for a compound where they can maintain their culture by having their family live in the ancillary houses on the property so that everyone can have enough space,” he says, adding that they even use their own butlers.
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In general, Saudis and Chinese prefer brand-new homes, says Hildebrand, who adds that his Chinese clients “always come dressed to the nines,” translator in tow. There’s another trait both demographics share, says Syed: “Foreign clients will sometimes pay a higher premium because they know their investment in U.S. real estate will be safer in the long run.”
SHOPPING AS A LUXE SPORT
Julie Wagner, CEO at Beverly Hills Conference and Visitors Bureau, says the city is experiencing a complete reversal from 2007, with 63 percent of spending in Beverly Hills now coming from international travelers. “In the last few years there has been such a growth in Chinese visitors that the stores take yuan for pay and most have Mandarin-speaking employees,” says Wagner. (Saks also has Cantonese.) Adds one Beverly Hills retail insider : “In our business, China and the Middle East is a bigger slice of the pie. Stores extend hours for Saudi Arabian customers to pray and there are areas in major stores to accommodate that, too.” One story goes that a Saudi princess arrived in a department story one night at 7:30 p.m. (closing is at 8) – and the store stayed open until 10 for her. This happens on average once or twice a week, says the retail executive.
Michael MacRitchie, founder of Shanghai’s MGI Entertainment, organizes luxury tours for wealthy Chinese in buses that descend on Rodeo Drive and The Big Three department stores: Barneys, Saks and Neimans. “When the Chinese travel, almost 60 percent of their activity is around shopping, a purely emotionally based decision,” he says. “Rodeo Drive represents that emotional connection to the American Dream.” Saudi Arabians “watch movies and TV all the time and love the life and style of California, from Malibu surfers to casual clothing to Hollywood. It’s very intriguing to them,” adds Sama Eyewear designer/honcho Sheila Vance.
Then there are the renovations being done on major Rodeo Drive stores and boutiques: This fall, Gucci was remodeled, with a new VIP room on the third floor; Neiman Marcus, Bally, Chanel and Louis Vuitton are in the midst of remodels; Emporio Armani is abandoning 9533 Brighton Way for Rodeo; and both Ralph Lauren and Salvatore Ferragamo are making moves to reopen in temporary spaces while their stores undergo overhauls. “The merchants are reinvesting in their stores,” says Chuck Dembo of Dembo Realty. “That, coupled with great demand to be on the street, shows the influx of money in our local economy.” And why did Brunello Cucinelli move from round-the-corner Brighton this fall, and Tory Burch open a second L.A. store, just minutes from its Robertson locale? Brunello has a very large following of Chinese and Saudi tourists, who are known for their penchant for Rodeo, and a source says traffic has definitely picked up since the move. With Burch, an inside source says, “Rodeo does tend to draw a more international customer. Now that we have stores in China and Hong Kong, that market is more aware of us, and continues to grow.” What’s next? “Brazil is an important emerging market for us,” says Wagner. “The potential there is huge.”
No matter the culture, the customer always comes first. Nicole Pollard, founder of personal-shopping and -styling company LalaLuxe, prioritizes according to her clients’ holidays. “I always book vacations around Ramadan,” Pollard says, adding that many of her clients are such successful shoppers that “I have to work with freight companies to pick up containers of clothing and accessories to ship back” to their home countries.
EATS AND STAYS, RAMADAN-STYLE
Porta Via bistro, a Canon Drive staple for more than 20 years, hosts many international guests, and owner Peter Garland says business from Saudi Arabian and Chinese guests has been brisk in 2014. “It’s great for Beverly Hills,” Garland says, adding that the timing is good: “Agents, managers and business executives finish lunch by 2:30 p.m., and these other groups come in at 2:30 or 3 p.m., after playing golf or shopping.”
Hotels make special concessions for out-of-town guests. Peninsula Beverly Hills managing director Offer Nissenbaum says the hotel offers prayer rugs, traditional cuisine (with native-language menus) and Arabic- and Mandarin-speaking staff. “We’ve geared the hotel towards their needs,” Nissenbaum says, adding that a chic Peninsula touch — monogrammed pillowcases for all guests — has been updated to include Arabic- and Mandarin-language pillows. “It’s a win-win for everyone. These individuals are contributing to the overall economy of Beverly Hills.” Speaking of the city, says Nissenbaum: “Beverly Hills has done a great job of creating a safe environment — safety is at the forefront of your mind if you’re a sheikh from Saudi or a tycoon from China.” Retailer Cameron Silver notes the resulting influx and laughs: “My Saudi friends complain that there were too many other Saudis in town.”
WHEELS OF DREAMS
After years of young Middle Easterners summering in Knightsbridge with their Ferraris, Bugatis and Aventadors (amassing $30,000 in parking fines in 2013 alone), Arab supercar owners now are bringing their drives to Beverly Hills. Videographer and exotic car enthusiast Drake Mumford, who tracks their movements on his YouTube channel, explains that “until a couple of years ago, the main destinations were London, Paris, Cannes and Monaco. But over time, residents started getting annoyed with their driving habits, which caused police to check for paperwork and impound cars that are missing insurance or registration documents.” The hassles, says Mumford, made L.A., despite the logistics — it can cost $35,000 each way to ship a car by air from the Middle East — an attractive alternative.
The summer of 2012, Mumford says, was L.A.’s first “Arab supercar summer — most of the cool cars in Beverly Hills had Arab plates.” It started, he says, when Saudi racecar champion Yazeed Al-Rajhi, brought a rare $1.4 million Pagani Huayra on a pre-Ramadan vacation stop. “By coming to L.A., he broke the trend and attracted more owners,” Mumford says, adding that L.A. “is a more supercar-friendly place. From Beverly Hills, they’ll travel to Santa Monica, Malibu and Newport Beach for meals.”
But not everybody is loading freight-sized shipping containers packed with high-end cars. Some visitors rent upon arrival, says a local luxury-car dealer. “Have we had as many as 25 cars out to one individual family and the entourage with them? Yeah,” the source tells THR, adding that the tab for such a fleet can run in the six figures. “There are a lot of things associated with that price — you add on drivers and security and bulletproof cars and armored plating.” Summarizes the source: “They come here and they spend like drunken sailors, God bless them.”
Michael Walker contributed to this report.
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