REAL ESTATE
Priciest Property in U.S. History: $100 Million
De Menil-Carpenter estate is sold to financier
By Joanne Pilgrim
(05/24/2007) Ron Baron, the founder of Baron Capital Management, has reportedly completed a long-rumored purchase of approximately 40 oceanfront acres owned by Adelaide de Menil and Edmund Carpenter, his neighbors on East Hampton’s Further Lane, according to a story posted yesterday on Bloomberg.com, which placed the purchase price at a record $103 million.
The price sets a United States residential real estate record, according to Bloomberg, dwarfing the former top price, also set by an East Hampton resident, Ronald O. Perelman, who sold an estate in Palm Beach for $70 million in 2004. Mr. Baron’s investment company manages billion of dollars in assets for its clients.
A large house overlooking the ocean is under construction on Mr. Baron’s land next to the de Menil-Carpenter site, which has been stripped of its residences. In April, the historic houses and barns which the couple had brought to the property over the years and restored as living space were donated for public use: Eight went to East Hampton Town Hall, where they will be linked to become a new municipal office space, and one went to Amagansett, to become part of the Miss Amelia’s Cottage historical site.
According to Bloomberg.com, the previous residential sale record in “the Hamptons” was less than half what Mr. Baron shelled out, some $45 million for Burnt Point, an estate on Georgica Pond in East Hampton.
As of yesterday, a transfer of the deed from Ms. de Menil to Mr. Baron on the Further Lane property, which contains two separate lots, had not been recorded, according to the Suffolk County clerk’s office. Deed transfers are supposed to be filed with the clerk within 14 days of a real estate closing.
The county records show only that in September 2005, the property was transferred from Ms. de Menil’s name to a limited-liability corporation called 260 Further Lane.
Mr. Baron could not be reached for comment, nor could Ms. de Menil, who was out of the country this week.
The big-money sale, along with other recent transactions in East Hampton Town — including the Church estate in Montauk, which recently sold for $30 million, and the Montauk Yacht Club, which sold for $34 million last month — should generate an influx of dollars to East Hampton Town’s community preservation fund, which is used to purchase and preserve open land and historic sites.
Money is funneled to the preservation fund from a 2 percent real estate transfer tax on the portions of sales above $250,000 on improved property, or above $100,000 on vacant land, paid by the purchaser.
“This $2 million will be a shot in the arm that will go a long way to help with the preservation of additional property,” Scott Wilson, East Hampton Town’s land acquisition coordinator, said yesterday. “There are more quality projects available than we have funding for.”
Town Eyes Big Transfers
The reports of the Further Lane sale come as East Hampton’s town attorneys, with an eye to protecting future income to the preservation fund, review other recent land transfers made through corporate entities.
Laura Molinari, the town attorney, said yesterday, “It came to our attention through someone in the community passing on some information to us” that property ownership was in some cases changing hands without an actual deed transfer. And when no deed transfer documents are recorded, there is no indication to county or town officials that a real estate transfer tax is due. Federal taxes, and state taxes such as an additional 1-percent real estate transfer tax and a 1-percent “mansion tax” on properties over $1 million, may also go unpaid.
“Instead of selling through a deed transfer, you’re selling the shares” in the corporation, she said. In some instances, “the only asset of the corporate entity is the property.”
However, Ms. Molinari said, the requirement to pay the 2-percent transfer tax is “triggered by a transfer, and a transfer includes when a controlling interest changes hands. Even though there’s no deed to transfer, you’re obligated to pay.” (And there is no indication that deeds will not be recorded in the sale of the de Menil property.)
Ms. Molinari said East Hampton’s attorneys are coordinating with the New York State Department of State, district attorneys, attorneys general, and with State Assemblyman Fred W. Thiele Jr. to address the problem.
“All those transactions are indeed taxable. It doesn’t matter whether the property is transferred by deed or stock,” said Mr. Thiele yesterday. Because “the state already has a bureaucracy in place” to oversee corporate transfers and track payment of “not just the state tax but corporate tax and income tax,” he has included in a bill amending the community preservation fund law the ability for towns like East Hampton to access the state’s data, and for the two entities to work together on enforcement. Privacy laws have precluded that until now.
The bill, co-sponsored by State Senator Kenneth P. LaValle, also includes a proposal to exempt first-time homebuyers and agencies providing affordable housing from the tax. It has been introduced in both houses and, said Mr. Thiele, “the likelihood of passage is good.”
However, Mr. Thiele said he does not believe “there is wholesale avoidance of the tax. Judging by the amount of money that the towns are collecting, I don’t believe that this is a major problem, but I do believe it is happening.”
Ms. Molinari agreed, and said that she is unaware of any specific instance in East Hampton. “But even a few, obviously, is a problem from the town’s standpoint.”
“Especially because these are usually the really large purchases that should generate a large amount of money for the town,” added Beth Baldwin, a town attorney.
Mr. Wilson, who receives monthly reports from the county detailing real estate transfers, as well as checks reflecting the transfer taxes paid, said he keeps tabs on real estate sales in the town and looks for the subsequent tax income. If the transfer tax does not arrive, Mr. Wilson will forward the information to the town attorneys for investigation.
“There are ways to find out that property has transferred hands,” Ms. Molinari said. “We are actively pursuing acquiring that information, and we’re going to pursue it on properties that we’ve become aware of that have changed hands, or that we believe have changed hands.”
“We have an investigation going on, and legislative action,” she said, to “help us improve upon the reporting and enforcement process.”
According to the community preservation law, the transfer tax is to be paid in a “timely fashion”: within 15 days of a title transfer or a stock transfer, Mr. Thiele said.
Buyers who fail to pay the tax within that time are subject to penalties of 10 percent of the amount due, plus 2 percent per month interest, up to an amount not exceeding 25 percent of the tax due.