The cryptonaires will see you now: Luxury real estate gets a whole new buyer pool

Even by luxury standards, the estate 40 miles outside Denver was a rare find: a 45,000-square-foot, 11-bedroom mansion with an art and wine collection, four kitchens, three guest apartments and an entertainment wing with a dance floor, bowling alley, indoor pool and spa. The 70-acre grounds included manicured gardens with waterfalls, two stocked fish ponds and a panoramic view of the Rockies.

Potential buyers filtered in from around the world and across professions. Auto collectors loved the space for 29 cars. Equestrian enthusiasts were taken by the area’s riding culture. Titans of industry envisioned corporate retreats.

The property sold in December for $12.5 million, going for just below asking price yet setting a Douglas County record. It went to a guy named Jonathan Yantis. He was a personable, detail-oriented buyer who didn’t use a broker and was drawn to the estate’s privacy, said listing agent Liza Hogan of Douglas Elliman.

He’s also a crypto millionaire.

The 51-year-old, a former U.S. Navy weapons engineer, made his fortune as co-founder of WorldWide Asset eXchange, a blockchain trading platform. He bought the Colorado property from Cal Turner Jr., the 81-year-old former CEO of Dollar General, a company founded by Turner’s father in Scottsville, Kentucky in 1929.

“It was my first occasion to deal with somebody like that, but you know what, it’s less about the details of him, because those really weren’t our conversations,” Hogan said of Yantis. “The conversations we had were primarily about the property. He did say, ‘‘Liza, start buying crypto every month.’”

Yantis and Turner couldn’t be reached for comment.

Changing of the guard

The sale by a scion of a 20th century family business to a prince of the cryptosphere was one of a flurry of purchases by newly wealthy cryptonaires who are forking over nutty money — sometimes $100 million or more — for trophy properties from Los Angeles to Miami and in between. Often, they’re buying from people whose fortunes date back a generation or more.

The flashy purchases underscore crypto’s abrupt rise as well as the unending appeal of luxury real estate — the hard asset where people who earned billions in the quasi-virtual world are increasingly parking their riches.

“Wealthy people love to diversify, and there’s nothing better than prime real estate in one of the great cities of the world,” said the Westside Estate Agency co-founder Kurt Rappaport, who consistently ranks among L.A.’s top agents and has been involved in multiple deals with crypto buyers. “This is part of the way the world’s evolving.”

It’s a strategy that looked pretty smart earlier this year. From late December to late January, the price of Bitcoin plunged by more than 25 percent, or almost $13,000 a coin. Other major cryptocurrencies, such as Ethereum and Binance Coin, tumbled even more.

Yet the decline belies the significance of an ecosystem whose evolution has been among the swiftest, most transformational financial developments of modern times. The idea of a cyber currency began to take hold only in the 1990s, and the first Bitcoin wasn’t mined until 2009. Over the next decade, crypto and the blockchain technology that underlies it emerged from the digital underworld to play a leading role within the world’s largest financial institutions and even some national governments. It also spawned entirely new markets, such as NFTs, digital assets whose authenticity and ownership is verified on the blockchain.

And it made a lot of people very, very rich.

“We’ve had plenty of boom and bust cycles, like the dot-com boom back in 2001 or 2000,” said Jonathan Miller, a real estate appraiser and author of Douglas Elliman’s residential market reports. “There’s always various flavors of this that percolate over time. But the scale of crypto seems way beyond the past events.”

“Metoric” wealth creation

Forbes’ 2021 list of billionaires, based on data from March, counted 12 “crypto billionaires,” including Mark Zuckerberg’s old nemeses, the Winklevoss twins, who were early investors and had each amassed $3 billion; Sam Bankman-Fried, “the world’s richest 29-year-old,” whose crypto exchange FTX earned him a $9 billion fortune; and the Canadian-Chinese executive Changpeng Zhao, who founded the Binance platform and whose net worth was recently estimated by Bloomberg as at least $96 billion.

It all adds up to a “meteoric” creation of wealth, said David Friedman, co-founder of the platform WealthQuotient and an expert on wealth data. While crypto holdings aren’t public, by applying broader wealth metrics to the $2 trillion crypto market, Friedman estimated that crypto has created 11,000 “ultra-high-net-worth individuals,” or people with assets exceeding $30 million.

Much of that wealth filtered into luxury property, an option favored by everyone from the American robber barons of the 19th century, who built magnificent estates, to the 21st-century global oligarchs keen on New York and London penthouses.

“Human behavior is really predictable,” said Eric Sussman, a real estate and accounting professor at the UCLA Anderson School of Management. “Wherever lots of wealth is made in the blink of an eye, you’re going to see equally flashy purchases and investments — and whether it’s crypto or glitter or, I don’t know, Pokémon cards, I mean, you’re going to see those behaviors again and again.”

SoCal crypto buzz

The crypto crowd’s recent purchases, though, have stretched the upper limits of high-end markets around the country.

That includes Puerto Rico, where an influx of cryptonaires attracted by sunshine and low taxes spurred a real estate boom in which once relatively affordable luxury properties routinely trade for $20 million or more. A thousand miles north, in crypto-crazed Miami, one early investor just paid $7 million for a downtown condo. In December, Ivan Soto-Wright, the founder of MoonPay — a three-year-old crypto startup that was recently valued at $3.4 billion — paid $38 million for a 12,000-square-foot North Bay Road mansion formerly owned by NBA star Chris Bosh.

“It was kind of an accident,” Soto-Wright told the crypto news site The Block last month, referring to one burgeoning aspect of his business, in which the company has been guiding celebrities through high-end NFT purchases. “A really happy accident, I’d say.” Soto-Wright didn’t respond to an interview request.

By far the biggest crypto real estate action has come in Southern California, where the newly wealthy have quietly joined a thriving luxury market populated by property owners made wealthy from Hollywood, technology, the sports world and East Coast family fortunes.

Consider the Mediterranean-style Brentwood mansion that Bitcoin investor Josh Jones bought for $26 million from Ben Kohn, the CEO of Playboy Group. Then there’s the modern Brentwood spec home bought for $44 million by hedge funder and early Bitcoin investor Jeffrey Feinberg.

In May, Simon Kinberg, the producer of the “X-Men” film franchise, found a young crypto buyer for his Hollywood Hills pad, a modern 12,000-square-foot mansion with a white and black exterior, expansive glass walls and curved cliffside infinity pool.

“There’s a tendency toward contemporary architecture,” Rappaport said of crypto buyers.

There’s also a trend toward privacy, which makes sense for people whose fortunes came from largely opaque new currencies. Unlike many L.A. denizens, the crypto buyers, who also tend to be younger, “are not looking for attention,” Rappaport said.

Kinberg sold his home for $29 million to Olaf Carlson-Wee, a neon tracksuit-wearing Minnesota native who years earlier had parlayed his Vassar College thesis on Bitcoin into a role as the first employee at the cryptocurrency exchange Coinbase. He quit Coinbase to found Polychain Capital, a crypto blockchain hedge fund that operates from a secret San Francisco warehouse.

“If cryptocurrencies go to zero, we go to zero,” Carlson-Wee, who didn’t respond to an interview request, told the Wall Street Journal in 2018. “I don’t think anyone is under any illusions that’s not the case.”

“Mere mortals” excluded

Yet the Hollywood Hills purchase means that Carlson-Wee at least has a hard asset in L.A. real estate. So does his first boss, the Coinbase founder Brian Armstrong, who in December bought a minimalist, “stacked cube” 4.6-acre Bel Air compound designed by the English architect John Pawson. The property was previously owned by Ellen Bronfman Hauptman, a philanthropist and a granddaughter of the Russian-Canadian Samuel Bronfman, purveyor of one of the largest business empires in North America.

The seller, Japanese entrepreneur Hideki Tomita, paid $85 million for the property in 2018. Armstrong, who declined to comment for this article, paid $133 million, or roughly 2,700 Bitcoin, a stratospheric price that has no guarantee of appreciating. But that markup might be worth it for a less volatile asset.

“If you had $130 million in cryptocurrency, that can turn into $20 million in about three heartbeats,” said Sussman, the UCLA professor. “A $130 million [property] is not going to go to $20 million anytime ever.”

Analysts note that crypto buyers represent a tiny fraction of the luxury market, let alone the broader housing market. Yet they can still have an outsize influence, said Miller, because the .01 percent subset is “the most visceral to real estate.”

“It’s the most visible,” he added, “and gets the most viewer eyeballs because it’s so far removed from mere mortals’ housing experience.”

Many of those mortals have looked at Malibu, where a seven-acre property that sold for $41 million in 2013 changed hands in October for $177 million, the highest price ever paid in California and second-highest in the nation.

The seller was fashion mogul Serge Azria, who bought it from Hollywood producer Jerry Weintraub. The buyer: Marc Andreessen, who made his first fortune in tech, after selling Netscape for $4.3 billion in 1998. In the 2010s, Andreessen and his venture capital firm Andreessen Horowitz became champions of and major investors in companies focused on — what else? — crypto.

UPDATE: This story has been corrected to show that Denver estate has 11 bedrooms and space for 29 cars.

via TheRealDeal