The Rich Splurge on Recession-Created Bargains
The recession gripping the country has left a broad swath of Americans agonizing over $60 gas fill-ups, ballooning grocery bills, and homes lost to foreclosure. But for the region's class of superrich, downtimes have made for a bonanza of deals on luxurious pleasures, from sports cars and yachts to pieds-a-terre and airplanes.
more stories like thisAt the Rolls-Royce dealership in Wayland, the Rolls-Royce Phantom Drophead is sold out into next year, and orders are still rolling in. Ferrari Maserati of New England in Foxborough notched more sales in April than in any of the previous 14 months. Boston Yacht Sales of Weymouth last week closed on three boats valued at a total of $1.6 million, helping to push business up by 9 percent over last year. Business has been so brisk at Shoreline Aviation in Marshfield that the wait time to purchase a sleek Cessna Citation jet is two years. Million-dollar condo sales, far from stalling like some other sectors of the real estate market, have continued at a pace about like last year's.
In all of those things, dealers say they see no signs of a slowdown in coming months.
"If I had five Rolls-Royce Phantoms, they'd be gone the next day," Paul Downey, sales manager of Herb Chambers Rolls-Royce Motorcars of New England and Bentley Boston, said of the convertible that retails for $440,000.
For the class of rich who make more than $1 million a year and have several times that in the bank, the time is right for indulgence. Falling interest rates have made luxury goods cheaper to buy, and the items, which tend to be considered investments because they retain their value, are proving attractive alternatives to the volatile stock market. There is also the foreclosure factor: A growing number of high-end boats, cars, and homes have been foreclosed upon by banks and can be had for cut-rate prices.
"Ultrahigh-net-worth individuals are looking for bargains with which to invest their money," said Karl Hahn, managing director of Deutsche Bank Securities Inc. in Boston, who advises "high-net-worth individuals" on their investments. "Their spending habits have not changed, but their mindset has changed."
Recent purchasers of high-end baubles were reluctant to speak on the record, particularly at a time of economic woe for so many, and in a region where flaunting one's wealth is not always viewed kindly.
One executive, who asked not to be quoted by name, said that as a business owner, he is not immune to the economic downturn, which has cut into his company's profits. Like many Bostonians, he said, he is watching his spending habits and has cut back on dining out and is traveling less. But that didn't stop him from recently purchasing a Ferrari.
"With a Ferrari, that's the car I like, and that's the car I drive . . . so the economy is not going to affect that," he said.
Luxury dealers across the region report that they have seen fall-offs in sales of their slightly more down-market items, such as smaller boats. They attribute the declines to their increasingly skittish upper-middle-class clientele, often midlevel executives earning $100,000 to $500,000 a year, who are scaling back and trimming unnecessary indulgences from their budgets. But dealers say that their superrich clients have not been deterred, and sales of luxurious indulgences have ticked upward, more than offsetting any losses.
"The economy is on everyone's minds," said Michael Myers, of Boston Yacht Sales. "But the consensus is that there is a much greater upside to this, and [my clients] are trying to take advantage of the lower interest rates and the buyer's market."
"Racetrack Rick" Scourtas, general sales manager of Ferrari Maserati of New England, said his customers - many of whom are venture capitalists or entrepreneurs - are natural risk-takers, and thus undeterred by the economic climate.
"These are movers and shakers, and they are positive people," he said. "So a little downturn, they power right through it."
There are signs the economy is affecting some local luxury markets. At the exclusive clothier LouisBoston in the Back Bay, overall sales remain strong but menswear purchases have declined slightly, much as they did after the terrorist attacks of Sept. 11, 2001, and at the start of the Iraq conflict in 2003, said Debi Greenberg, LouisBoston owner.
Still, from the vantage point of some of the region's wealthy residents, doomsayers have overexaggerated the economy's weaknesses. Jonathan Bush, president and chief executive officer of Athenahealth Inc., a Watertown-based medical billing and electronic medical records firm, took his company public last year and said the outlook is sunny.
To that end, he said he has donated money to nonprofits that he said he has wanted to support for many years, and he recently purchased a house in Cambridge's Hubbard Park. The price was $3.1 million, according to the Middlesex Registry of Deeds records.
Bush, a cousin of President Bush, said he's not a car guy, and has no immediate plans to purchase other big-ticket luxury items. But, he said, "Maybe the materialism is waiting to punch through."
© 2008 The Boston Globe