We are seeing luxury scaled down on many fronts, and luxury hotels and timeshare resorts are taking it on the chin as well.

For the first five months of this year, according the the Wall Street Journal, U.S. hotel occupancy has declined 53 percent. This is the lowest drop in occupancy since 1987, when Smith Travel Research began tracking these numbers.

While both luxury and budget hotels are ailing with declining revenues, those hotel investors suffering the most (just like homeowners) are the ones who bought their real estate at the top of the market with loads of debt. Defaults on these hotel loans have spiked, and securitized mortgages (where loans are chopped up and sold to different investors as bonds) are also expected to rise from 4.7 percent to over 8 percent by year’s end, according to Morgan Stanley.

Timeshares are faring not much better. The biggest timeshare operator in this country, Wyndham Worldwide Corp has seen timeshare sales plunge 39 percent from a year ago. Another big loser is Marriott International, whose timeshare business reported a $17 million loss in the first quarter of this year.

And then we have luxury hotel operators like Four Seasons, which manages a number of luxury hotels, and is facing pressure from hotel owners to discount room rates in response to economic pressures. Recently, the owners of the Aviara Four Seasons Resort in Carlsbad, CA (north of San Diego) tried to divorce themselves from Four Seasons, who have a 30-year management contract with Broadreach Capital Partners of Palo Alto, CA. The owners are trying to preserve financial viability, while Four Seasons is trying to protect its non-discounting luxury reputation–and its contract.

Four Seasons, incidentally, was the only luxury hotel not to discount room rates after the 9/11 terrorist attacks. This was broadly seen as a brilliant move. Four Seasons, with its 82 hotels around the world, maintained both its profitability and its luxurious reputation.

These harsh economic times, though, are weighing heavily on the luxury hotel market. Their fixed costs are higher with staffing, valet service and maintenance–while corporate travel has shrunk and leisure travelers are bargain hunting. This has caused many hotel operators to discount room rates and offer bargain travel packages.

This is a market that surely has not only the venerable Four Seasons on guarded watch, but also the Ritz Carlton, the St. Regis and other five-star destinations throughout the world.

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(It is with sadness that we learned of Michael Jackson’s death due to a heart attack this afternoon, apparently at his Holmby Hills mansion.  In the days ahead, many will be wondering about the fate of Neverland. Our prayers and kind wishes are extended to the Jackson family.)

Over two years ago, we were speculating about the fate of Michael Jackson’s Neverland and wondered if it would become a Ghost Land instead. The animals were gone, helicopter landing pads were still–and recently, according to the Wall Street Journal, bats took to hanging from the doorway over Jackson’s once-famous gaming arcade, leaving piles of guano below.

Thought Neverland could never come back to life? Well, never say never.

A year or so ago, Michael Jackson defaulted on his $24.5 million mortgage which was bought for $23 million by a Los Angeles investment group. They, in turn, formed a private partnership with Jackson with the intent of bringing Neverland to a fruitful investment. There is speculation that the Santa Barbara County property could eventually and realistically be worth $70 to $90 million.

In the meantime and to date, Colony Capital LLC has spent over $3 million and hired 80 workers to rehabilitate Neverland. Electrical and plumbing systems are being brought up to date, and landscaping is being redone. The Neverland gates, amusement rides and zoo may be gone, but evidence of Neverland’s former glory remain–including two railway lines , a 50-seat theater and the English Tudor-styled buildings.

Michael Jackson paid $19.5 million for Neverland in 1987 and poured hundreds of million into it over the next 18 years. In 2005, after Jackson was cleared of child molestation charges, he swore he would never return to Neverland. The estate was abandoned in July of that year and was reported to have been subsequently marketed to David Beckham and his wife, Victoria (Posh Spice). The price tag expected in those heady real estate days?

$50 million.

Neverland may have been decimated not so much by Michael Jackson’s legal troubles, or even its eventual neglect, but by market conditions that have decimated property and home values all over the country. And perhaps Neverland’s sale at $23 million simply reflects a market bottom–of sorts.

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But had I draped a black cloth over it on April 24, 2009 you might have understood. That’s the day my Dad and best friend died in Encinitas, CAafter a lengthy illness. It’s really tough to become an orphan when the last parent exits–especially if the relationship has been a close one. I shared this loss equally with my sister Gayle, in Houston who also misses the sage advice and counsel of our patriarch.

Our mother, Edith Michelson, died in 2006. Her husband of 59 years and a heroic pilot of three wars, Retired Lt. Col Robert Michelson, would spend the next three years of his life gently encouraging the dreams of his two daughters and five grandsons. On a personal level, Bob Michelson in his 80’s also abandoned a lifetime of agnostic views, and to our absolute amazement, developed a wondrous faith in God the last two weeks of his life.

He was also enormously curious about new technologies. Dad was the first person I knew to download Window’s Vista–and wished for stem cell technologies that might one day cure his own illness as well as those of others. He loved our country, watched Wall Street closely, was an Astros and Padres fan, and hated Nancy Pelosi. Dad’s idea of a perfect meal would be a bowl of spicy bean soup and a crusty piece of bread. He was modest, generous to a fault, and promised to be a guardian angel for us all.

We miss him terribly.

And that is probably why my writing gears have been frozen this past month or so. And though our real estate business continued and even flourished, I just couldn’t bring myself to write about San Diego real estate, market conditions or luxury homes–and remain indebted to my husband and partner Mike as well as associates in our company who so kindly aided me and our clients during this personal and unprecedented period of grieving.

I spoke with a Philadelphia food writer a week or so ago and she could not understand how I could abandon writing during this grieving period–because writing would be her salvation. I didn’t write because I feared alienating you with my sadness and the process of putting a deceased parent’s affairs into final order. At the same time, I didn’t feel able to write about the things I usually favor because of this big life transition. A simple diagnosis might be writer’s block. And that is something that just has to work itself out.

Those writing gears, though, have begun to thaw and life’s rhythms are returning to normal. Laughter is easier, tears have subsided and reconnecting with friends–and you– is now a priority. It feels good to be home. –Roberta Michelson Murphy

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According to Forbes.com, now may be the best time to make some of those major purchases wise shoppers have been putting off for so long, particularly if one has the luxury of capital.  The Forbes list:

1. Homes. Low prices fueled by foreclosures and short sales, coupled with low interest rates and possible income tax credits, make this an opportune time to shop real estate.

2. Cars. Automobile dealers are dealing as never before: 0 percent financing, big cash rebates and other incentives make for some historic deals. Even used car prices are down 10 percent from a year ago.

3. Vacations. Las Vegas hotel room rates are down an average of 34 percent from a year ago, cruises are offering some amazing bargains, like $1000 per person for summer week-long Alaska cruises (including airfare).  Airlines are also offering some bargain fares.

4. Toys. Prices for playthings are headed down this summer and are expected to stay down for holiday shopping.

5. High Dividend Stocks. With the S&P down 40 percent (more or less)  from a year ago and the prospect of inflationary times ahead, now may be a great time for the courageous investor to pick up some stock bargains that have a history of divident payments.

6. Laptop Computers. Prices for laptops are falling, thanks in part to recent buying activity in those handy little netbooks. Computer deals abound almost everywhere.

7. Diamonds. The recession has dulled even the diamond market, with prices for polished diamonds down an average of 14 percent from their highs last summer.

8. Clothing. Men’s and women’s clothing are filling the clearance racks. Remember how Saks Fifth Avenue started their 80 percent off sales before Christmas last year?  There are lots of bargains, especially with more expensive lines.

9. Televisions. We recently had to replace a large flat panel television, and were blown away with the replacement price at Costco.  As more manufacturers enter the flat panel TV business, prices are drooping precipitously.

10. Furniture. With fewer people buying homes, furniture sales have drastically fallen off. Many furniture retailers are going out of business and clearance sales are driving much of the home furnishings market.

As a San Diego Realtor, I find it interesting that Forbes put real estate in the number one position–and cannot help but recall Baron Rothschild’s famous saying, Buy when there’s blood in the streets.

How much blood is the question….

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It’s a sad fact of life, but unscrupulous vultures are always ready to pick at the flesh of the most financially distressed–which more frequently these days includes the owners of luxury real estate.

Over on our San Diego real estate blog we report that San Diego County District Attorney Bonnie Dumanis is asking San Diego Realtors to help her track down and prosecute real estate fraudsters operating in our county.

We have written before about the foreclosure and loan modification scams that prey upon distressed San Diego home owners who are struggling to stay in their homes. The DA’s office is aggressively trying to warn homeowners to stay away from these San Diego real estate crooks and their fraudulent offers of mortgage and loan modification assistance–and is asking us, as San Diego Realtors, to report any suspicious activity.

All too often, unwitting and desperate home owners will pay an upfront fee to a person or company who promises to prevent foreclosure–or to modify existing mortgage loan terms. And all too often, people are paying for services they never receive–and might be better off with a do-it-yourself loan modification.

Click to continue reading….

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Magic must be in the air.

Even our middle son Eric — who has never, ever cottoned to bagged lunches — packed one the other day and probably saved at least $5. This college student works part time, but last week discovered the agony of having to pay $1,800 or so for a new bumper and rear quarter panel that met a brick wall when he was backing out of a narrow Rancho Santa Fe driveway in the dark recently. This story has little to do with the great money saving tips I am about to pass along, except I’ll insert it first:

1. Pack a healthy lunch, fill a Thermos of coffee, and spare the environment another plastic bottle by carrying water in a reusable container. Eric now saves at least $5 per day out of his pocket. Take away a couple of dollars, max, for ingredients, and you are still dollars ahead

2. Paste a sticker that says, 800-FREE-411 (or 800-373-3411) onto both your cell and home telephone. Instead of paying your telephone service up to $3.50 for a telephone number, why not listen to a 10-second commercial and get the number for free? Makes sense to me.
Click to see the 8 other great money-saving  tips.

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Spelling Mansion for Sale

In 2006, we reported that Candace Spelling, 63, and widow of the later Aaron Spelling, was shopping for a $150 million buyer for her Holmby Hills home:

….Candy Spelling, widow of the late Aaron Spelling, has quietly put their legendary 56,000 square foot, 123-room Holmby Hills mansion on the market for $150 million. Sources say the Westside Estate Agency (WEA) has the pocket listing and that the property is being discretely shopped among Realtors and their potential buyers.

It is now, at last, officially listed for sale.

Built in 1991, nobody has an exact count of rooms in the Spelling Manse these days–including the listing Realtors. Among the more luxurious, though,  are a bowling alley, wine cellar and tasting room, a humidity-controlled silver storage room, China room, gift-wrapping rooms, library, gym, media room and one of Spelling’s enduring entertaining favorites: The screening room, where the projection screen emerges from the floor at the same time windows are automatically shaded.

The Spellings also finished off the home’s substantial attic and had a barber and beauty salon installed.

The servants’ quarters alone feature a large kitchen, 7 bedrooms, 5 fireplaces and 4 wet bars.

Outdoors are 18th century gardens and citrus orchard, swimming pool and spa, reflection pool, waterfalls, and spacious pool house with a kitchen.  Additionally, there are 16 car ports and room for valets to park over 100 cars.

This luxurious mansion sits on 4.6 acres, is a neighbor to the Los Angelese Country Club –and is the largest home in Los Angeles County.

Where will the owner move once the home is sold? Candy Spelling has already purchased a $47 million 2-story penthouse that crowns a residential tower in downtown Los Angeles.

And yes, I would love to represent the buyer for this property!

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Good News for Investors!

We now have the chance to read through the recent Stimulus/Spending Bill that was passed largely unread by our Congress. The earmarks and pork anger many, but there is good news on the real estate front:

Owners of second homes and other real estate investments will now be able to refinance their mortgage loans if they are guaranteed or held by either FannieMae or FreddieMac–and if the current value is no more than 5% over the mortgage amount.

Many real estate investors, though, have no idea whether their loans are guaranteed or owned by Fannie or Freddie. However, you may call Fannie directly at 1-800-7FANNIE or visit their site. If you complete the form on Freddie Mac’s site, they will advise you as to whether they are guaranteeing your loan or not.

To qualify for this real estate refi, there may be no late payments (30 days or more) for last year. FICO and credit scores, though, are not considered–nor will private mortgage insurance start anew.

This could be a great help for many investors and second home owners who thought only primary homes could benefit from the Fannie and Freddie refi’s. This may also be a potential Godsend for tenants who face eviction because of foreclosures. This may allow investment property owners to keep their properties–and their tenants in place

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Mexico is struggling with a number of serious problems, including failed real estate developments along the Baja coastline–just south of the San Diego border. From the northern tip of Tijuana’s coastline down to Ensenada, Baja beach areas are spotted with the rusting remains of failed high rise condo projects.

And one of the biggest failures is the Trump Ocean Resort Baja just north of Punta Bandera, where unwitting U.S. investors thought they were buying into one of the safest investments possible: A beach condo development offered by none other than Donald Trump and his family.  Up to 600 buyers paid 10 to 30 percent down on condos ranging from $274,000 for a 485-square foot studio to nearly $3 million for a 2685 square foot penthouse.

Today,  infuriated real estate investors have lost millions of dollars–with scant chance of getting anything back.

Some people refinanced homes in 2006 to come up with the $100,000 to $1 million deposits–which were subsequently and legally spent by the developer. Today, all that remains is an aging billboard with a large photo of The Donald, a shuttered sales center and showroom, a parking lot and a number of excavation holes and standing construction equipment.

This year, parents are warning kids not to head to Baja for Spring Break.  Mexico’s drug violence has escalated and kidnappings are all-too-frequent.  These tourist fears coupled with the global economic meltdown make real estate speculation investment in Baja a risky proposition.

In 2009, our family will remain in Southern California for Spring Break.  And until Mexico gets drug violence under control, we join countless others in avoiding a border crossing.

Call it a protest–or just protective parenting instincts.

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Hart Family Winery

I’ve been visiting the Temecula Valley for wine tastings over the years–usually as a substitute for the richer (and more distant) wine experiences to be found along California’s Central Coast and the Napa/Sonoma wine countries.

A couple of weeks ago, we had a visitor from Europe who wanted a California wine experience. Not having the time for a long drive North, we headed out to Temecula, just northeast of San Diego County. Once there, we visited a half dozen and were generally unimpressed–except for one:

HART WINERY

Not only was the Hart experience the least expensive in our outing ($5 for six tastings–or $10 to include the Reserves, all poured freehand), it was also the hands-down best find of they day. All of their wines were luscious, but the Hart 2004 Zinfandel Huis snatched my heart. It also has a whopping alcohol content of 16.6 percent!

What can I say–it was so rich and lush, I had to buy a bottle ($24).

But for me to really appreciate a wine, I need to sit down with a proper glass and a lovely meal. Good friends who also love good wine also help. So, a call was made to friends (Mike and Roberta Murphy) to enjoy this great new find with me.

As I sipped this Hart Zinfandel, the true complexities came through. This wine was so thick and wonderful I felt like I could almost chew it! Peppery and smoky, I have been longing for another bottle ever since.

Making fine wines since 1980, this boutique winery only produces around 5000 cases annually.

Take my advice and place Hart Winery as a must stop next time you are wine tasting in the Temecula Valley. It’s conveniently open 7 days a week from 9 to 4:30. If you are not that close, join their wine club or just order a bottle or two….you will not be disappointed.

Na Zdrowia!

Wine Tip: What is tannin?

Tannin is a tart chemical substance found in red wine that serves as a natural preservative. Tannins originate from the skin, seeds and the stems of grapes–and are dissolved into the wine as it is made. Tannins can even be found in wine barrels (that is, if the barrels have been used before). Tannins add that “mouth drying” finish to red wine which lends a distinct character to the wine. Tannins from a bad vintage or unripe grape can seem bitter on your tongue and roof of your mouth. Over time, though, tannins act as a preservative and mellow within the wine, helping it to grow into its complexity and become truly exceptional.

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