Many windows at the Plaza remain dark. One broker estimates that only 10% of its roughly 150 condominium apartments have full-time residents. (Photo: Michael Nagle)

by Sam Pizzigati  /  May 14, 2012

Back in 1863, a short story took the American reading public by storm. Edward Everett Hale’s The Man without a Country told the tale of a poor treasonous soul sentenced to spend the rest of his life endlessly sailing the world in perpetual exile, as a prisoner aboard Navy warships. Today’s awesomely affluent are just as transient — by choice. Take Facebook co-founder Eduardo Saverin. This billionaire renounced his U.S. citizenship in 2011, a move perfectly timed to potentially save him hundreds of millions in taxes when Facebook goes public. Saverin has plenty of company. The number of Americans who formally renounced their U.S. citizenship soared to 1,780 last year from 235 in 2008.

The spark for this surge? U.S. tax officials have been clamping down on overseas tax evasion. This bit of unpleasantness has some wealthy Americans, such as the Brazilian-born Saverin, cutting their ties to dear old Uncle Sam. They simply pay a $450 paperwork fee and an “exit tax” on unrealized capital gains, if they hold assets worth over $2 million or have paid over $151,000 to the IRS in any recent year. But the affluent who’ve formally renounced their citizenship comprise just a tiny share of what the Financial Times has labeled the “stateless super rich.” These uber-wealthy folks shy from the notoriety of citizenship spurned. They just live their lives as if they have no nation to call their own.

The most famous member of this stateless-by-choice community may be Nicolas Berggruen, a 52 year-old “homeless billionaire” worth over $2.3 billion who has spent the last decade hopping the world from one five-star hotel to another. But few of the stateless super rich settle for hotel suites. Most of the vagabonding wealthy own personal residences. Lots of them. Typically, the Financial Times reported last month, a stateless super-rich household will have one or two properties in their “country of principal residence,” another in London, New York, or some other “global city,” a “holiday home” in a warm climate, and maybe another pad somewhere snowy. Among the super rich, this perpetual-motion existence has become almost de rigueur, notes Jeremy Davidson, a London realtor who handles properties that run at least £10 million, the equivalent of over $16 million. “The more money you have,” explains Davidson, “the more rootless you become because everything is possible.”

That rootlessness is keeping the price of luxury real estate soaring. So far this year, in Manhattan alone, four luxury co-op apartments have sold for over $30 million each, notes Crain’s New York Business. Just how many potential stateless super rich are currently roaming the world? Late last year, the Singapore-based Wealth-X consulting firm put the overall global number of people worth at least $500 million at about 4,650. These super rich together hold an estimated $6.25 trillion in assets. That’s more than enough, note urban planners, to create havoc in the hotspots where the stateless super rich most often gather. Their gentrification on steroids supersizes prices for local products and services — and prices out local residents in the process.

One real estate broker said he had dealt with condominium buyers from London and Hong Kong, Minnesota, New Jersey and Texas – but never New York. (Photo: Michael Nagle)

The massive mansions and apartments belonging to these homeless billionaires can also exacerbate local housing shortages and constitute an assault on any healthy sense of urban community. The super rich, as they flit about, leave their properties unoccupied most of the year. The resulting emptiness, notes Columbia University sociologist Saskia Sassen, sucks the neighborhood vitality out of great urban centers. The super rich don’t notice. Or care. They have no interest in putting down roots. During their brief seasonal sojourns, they live in isolation from the greater community around them. They venture out into local public life only long enough to corrupt it with trinkets for local pols who promise to keep tax rates toothless. The stateless protagonist in the classic short story Edward Everett Hale penned nearly 150 years ago desperately yearns to rejoin the society he so treasonously spurned. Today’s stateless super rich don’t figure to display any similar yearning. They’re having too grand a time. At our expense.

The Art of Not Being Governed: An Anarchist History of Upland Southeast Asia
By James C. Scott / Reviewed by Andrew J. Nathan / Jan 2010

Scott has put rural and marginal people at the center of his previous studies, and here he offers a history of the estimated 100 million people who live in a vast hill and mountain zone that runs across southwest China, northeast India, and parts of five Southeast Asian countries. These populations fled into the hills over the course of two millennia, he argues, to avoid the imposition of slavery, indentured labor, and taxes by expanding states. There they evolved languages, economies, and ways of life designed to keep the state at bay. Outside of Asia, too, such fugitive populations define the “ungovernable” territories and “minority” or “tribal” identities usually thought of as exceptions to the norm. Scott often returns to the complex example of Myanmar (also called Burma) to explain how states mapped terrain, classified populations, and acquired resources as they expanded — and to show how the Kachins, the Hmong, and others resisted. He believes that the uplanders’ strategies of avoidance are approaching an endgame as new technologies give the modern state a longer reach. But the news from Afghanistan and Pakistan, as well as from Myanmar, suggests that these ungoverned groups may hold out longer than Scott thinks.


Stateless High Society
by Tanya Powley & Lucy Warwick-Ching   /   Financial Times  /   May 1 2012

As most people continue to batten down the financial hatches, an elite group of the world’s “stateless super-rich” is blossoming, and transcending geographical boundaries to purchase properties in major cities across the globe. With no strong ties to specific countries, these individuals lead nomadic, season-driven lives. Their choice of where to live at any one time is based on that location’s climate, their children’s education, tax constraints or which of their friends they want to lunch with on any particular day. “The more money you have, the more rootless you become because everything is possible,” says Jeremy Davidson, a property consultant who specializes in properties that cost £10 million ($16.2 million) or more in the most sought-after post codes in London. “I have clients who wake up in the morning and say, ‘Let’s go to Venice for lunch.’ If you’ve got that sort of money the world becomes a very small place. They tend to have a diminished sense of place, of where their roots are,” he says.

This increasingly global lifestyle has led to the stateless super-rich buying a larger portion of the world’s most expensive homes as they look to park their wealth in perceived havens. On average they own four to five properties, usually consisting of two in their country of principal residence, one in a “global city” such as London, Paris or New York, and a holiday home in a hot climate – or one in the Alps. Exclusive research for the Financial Times by Knight Frank shows that foreign buyers now dominate sales of “super-prime” homes – typically defined as the top 5 per cent of the most valuable properties – in the world’s major cities. “I am not surprised that these top-end markets are so international in terms of their buyers, the reality is the super-rich who buy these properties live increasingly global lifestyles,” says Liam Bailey, head of research at Knight Frank. “The super-prime market wouldn’t exist without a global market – it only really got going in the past 15 to 20 years as Russian money poured into London and Monaco.”

This has led to many countries’ super-prime property markets being increasingly dominated by international buyers, turning some cities into playgrounds for the wealthy. The international rich have long-favoured Monaco – confirmed by figures showing 100 per cent of its super-prime property is sold to international buyers – but this demographic now buys as much as 95 percent of the expensive homes in Paris, and 85 percent in London. While these individuals have seen their property investments pay off as high-end housing markets around the world have soared on the back of this strong demand in recent years, it has also resulted in a number of knock-on social consequences for the domestic populations of these emerging global cities. David Adam of Global Cities, a consultancy that works to improve cities’ success in international markets, acknowledges that the globalization of cities can have an impact on their resources. “Cosmopolitanism begins in cities but the challenge for many places will be to ensure that national citizenship enjoys the benefits of this international experience and the local economies are not left behind,” he says.

The most obvious impact in many global cities has been to change the visual order of these cities, especially in well-to-do and desirable areas. Saskia Sassen, a US sociologist at New York’s Columbia University and author of Cities in a World Economy (Sage), says this often comes with a change in the scale and appearance of homes. “Even very good architects manage to generate a style that is not usually much admired by engaged residents and passersby, whether the poor aficionado urban historian, old wealth, or anti-gentrification activists,” says Sassen. Another social impact, perhaps more difficult to measure, is the dilution of what is referred to as the “civic” quality of an area, explains Sassen. “It can feel less like a neighborhood and more like a corporate district in the low density of street life,” she says.

Executive Plaza has the highest percentage of nonprimary residences of any building in New York, 74.4%. (photo: Joshua Bright)

The problem is that these super-prime areas have a high proportion of second, third, or fourth homes that are left vacant for periods of the year as their owners move from one exclusive destination to another. These individuals will spend a few months in St. Moritz, before moving to their trophy mansion in London, and then on to their luxury villa in Sardinia for the summer months. Critics argue that these buyers aggravate the housing shortages prevalent in these cities while spending less in the local economy than permanent residents. Sassen says in some extreme cases poorer local residents can start to develop a sense of distance from their city. “In my research I found that in several cities across the world, locals – often high-income and old rich locals – did not mince their words when saying that all of this was a loss to their neighborhood and city,” Sassen says. “This was especially the case in places where the impacts of this rebuilding of vast stretches of their cities were the most negative, for instance, raising local prices, pricing out locals and not paying taxes on income or on the neighborhoods’ or cities’ real estate.” The gentrification of areas tends to drive out services for the local people who need them, explains Rohit Talwar, chief executive at Fast Future, a research company that analyses future trends. “Councils argue that they are justified in getting rid of services such as post offices and pubs because the people who would have needed them have sold up and moved away.”

There is also a lack of integration between the incoming stateless super-rich and the communities into which they are buying. “Some foreign nationals will come to London or New York because other wealthy individuals from overseas are buying there, but they are not interested in getting to know the local community in those cities. They also tend to bring their own domestic staff with them,” says Talwar. Davidson agrees. “The super-rich will often lead their lives quite in isolation. They are not going to be greeting fellow parents at the school gate as they don’t do the school run as the kids will be dropped off by a chauffeur in a bullet-proof Range Rover.” The combination of these issues, along with a move towards protectionism by governments, has meant a backlash in some global cities is emerging against foreign ownership. Even those that define themselves as “global cities” are becoming increasingly intolerant of super-rich incomers. In Hong Kong, there are growing grumbles from the indigenous Cantonese about the influx of mainland Chinese buyers. “The flow of new wealth from these countries is arriving in austerity-soaked UK, US and France,” says Bailey. “There is a reaction politically in the recipient countries – note mansion tax arguments in the UK, new ban on second homes in Switzerland and arguments over tax rates for ‘the 1 per cent’ in the US.”

CitySpire is one of the least occupied buildings in Manhattan. (photo: Joshua Bright)

Some countries have gone even further to curb the influx. Singapore has introduced a 10 per cent additional buyer’s stamp duty to all foreign purchases in Singapore, while in March the Swiss public supported a referendum for a 20 percent limit of second homes. This was largely aimed at countering “cold beds” – second homes in resorts occupied in peak periods but empty otherwise – and providing affordable housing for locals. China has introduced a raft of measures including property taxes and credit quota limits. Dr. Yang Liang Chua, head of research for southeast Asia at Jones Lang LaSalle, says the concern over the potential destabilizing impact of money coming from wealthy buyers from the US and Europe has been one of the triggers for Singapore’s preemptive measures. Commentators say it is hard to know what further impact this dominance of the international rich will have in the coming years, but many believe some cities have already lost the strong “community feel” and public-spiritedness they once had as more and more properties are owned by people with multiple homes worldwide.

The True Purpose of Art Basel Miami Beach
by Felix Salmon

Last night in Miami, I found myself at a party. Rich and glamorous and beautiful people sipped top-shelf liquor by the swimming pool, expertly ignoring the black-tied waiters passing meticulously-assembled canapés. In that respect, the party was not unlike many, many other parties in Miami this week. But there was one thing that made this party different: it didn’t even pretend to be about art. It wasn’t put on by a gallerist, or a private bank, or a luxury brand seeking to hijack some of the glamor of Art Basel Miami Beach. Instead, the party took place in Coconut Grove, far from the South Beach and Design District craziness, and it was connected not to any art fair but rather to the World Economic Forum. Was this an Art Basel party, all the same? Yes, it was. Art Basel Miami is an orgy of luxurious excess, and it always has been — that’s its raison d’être. The main fair itself, of course, is wildly profitable: galleries from around the world pay tens or even hundreds of thousands of dollars for the privilege of being able to stake out a few square meters of exhibition-hall space and hawk their wares to a crowd of ultra-wealthy art collectors, all of whom are pumped and primed to buy buy buy, lest someone else buy the piece in question first.  But the main fair is merely the eye of a much, much larger storm. And it’s the storm, not the eye, that people talk about when they talk about Art Basel. The storm that is Art Basel takes place all across Miami, wherever excessive sums of money are to be found. And to understand what propels it forwards, it’s important to understand that the art, and the parties, aren’t the point. Artists, when they come to Miami for Art Basel, are invariably confused and/or angry. Sometimes, indeed, they get so angry that they’ll head-butt 700 water balloons while explaining that they’re “making a statement” because in their art space, “nothing’s for sale.”

Doing this kind of thing makes artists feel better, because they find the shiny billionaire-friendly art with six and seven-figure price tags at the convention center to be boring. Art Basel looks just the same as the Armory Show; this year’s fair looks just the same as last year’s fair; what’s fresh? What’s new? What hasn’t even been made yet? (The most-read article at this year’s fair was DT Max’s profile of Hans Ulrich Obrist, the curator who is “obsessed with the not-yet-done” and who is criticized as being “fast-moving and superficial”.) These art-world kvetchers, however, are making a category error. They think that Art Basel is about art, when in fact it’s about money, and — even more — about the people who have lots of it. At an art fair, paintings and sculptures stop being art — a fair is pretty much the worst possible environment in which to appreciate art — and instead become objects with a dollar value and an asking price and a future value trajectory. If you’re smart, you buy now, before the piece in question soars in value. If you’re stupid, you buy at the top, and find yourself saddled with an expensive work that no one wants. That’s the game, and in order for that game to be played the pieces have to have a certain sameness to them, from one fair to the next and one year to the next. When the name of the game is brand recognition and speculation, the excitement comes from seeing artists rise and fall in value. This Anish Kapoor might look exactly the same as all the other Anish Kapoors you’ve seen at various art shows over the past few years, but when you know how much the asking price was, for each piece, at each show; when you can kick yourself for not buying when he was cheaper, or congratulate yourself on not buying when he was more expensive — then you can start to understand what makes an art fair so exciting to the monied classes.

The Parc Vendôme, with a high percentage of pieds-à-terre and other nonprimary residences. (photo: Joshua Bright)

That’s why an art fair is the perfect thing to have at the center of the Art Basel storm. It’s an orgy of capitalist excess, a place where objects with no intrinsic value sell for millions of dollars. Most crucially, it’s a place where sums which would be enormous in other contexts become commonplace, or even risibly small. When Art Basel started, its main backers were the real-estate developers throwing up identical white-steel-and-glass condominium towers in South Beach. The condo game, back then, was similar to the art game: buy now, for a million bucks or so; flip tomorrow for a healthy profit. And the best way to sell a condo in Miami Beach is to sell to a group of people who are surrounded by sun and sex and sand and who are simultaneously inured to eye-popping price tags. Miami real estate is much like high-end art in another important respect, too: it appeals to an international crowd of people who don’t necessarily like having their assets tracked and taxed by their domestic governments. You don’t hear the term “money laundering” very much inside the art fair, but there are obvious attractions to any asset which is both extremely valuable and highly portable. Then look at the sheer number of nationalities buying high-end Miami condos, invariably through shell companies, and remember that Florida has no state income tax. Let’s just say there’s a natural overlap there. And while the wattage of Miami does dim a little bit during the 51 weeks of the year that Art Basel is notgoing on, it’s also worth remembering that if you’re the kind of person who has eight different residences around the world, you might well only spend a week or two per year in Miami anyway.

Which brings me back to that party in Coconut Grove. The attendees were not Davos delegates: they weren’t billionaire industrialists, or heads of state, or economic policymakers. Instead, they were all in town for something called the World Economic Forum Family Business Community Next Generation Annual Meeting. Essentially, the WEF has realized that a rapidly increasing degree of economic power is being held in the hands of ultra-rich families, and so it has started catering directly to those families. Not just the men at the top who made the money in the first place, but to their children, too, and even, in some cases, their grandchildren.

They’re the stateless rich, and it’s no coincidence that their annual meeting, this year, took place at the same time — and even in the same convention center! — as Art Basel. Because the storm that is Art Basel Miami Beach is, at heart, about creating a reason for the free-spending private-jet crowd to descend upon Miami for a week. The art attracts them, and so do the parties, and so do the celebrities, and so does the December sun. But mostly, Art Basel Miami Beach, and the orgiastic clusterfuck of conspicuous oneupmanship at which it excels, acts as a bat-signal for the obscenely wealthy. In a stateless world where everybody is always on the move, Art Basel is one of the few rocks in the stream — it’s the one week per year that you can put in your calendar, safe in the knowledge that all your gazillionaire peers are going to be there as well. That alone makes it almost worthwhile to buy a condo.


Leave a Reply