Tuesday, February 12, 2019

Plutocratic Housing

Recently billionaire hedge fund manager Kenneth C. Griffin set, as The New York Times (January 24 2018) put it: “ a new standard for conspicuous consumption by paying a fortune for an unfinishedpiece of property in the sky.”  The fortune: $238 million (later adjusted at closing January 23rd to $239.958 million), the unfinished property: a 24,000 square foot penthouse at 220 Central Park South in New York City. The transaction is the most expensive residential sale in U.S. history. 
It’s not as if Mr.  Griffin lacks for housing. 

He already has a penthouse in Miami ($60 million) and a mansion in London ($122 million). He is based in Chicago where last summer he paid $58.5 million for a the top four floors of a building in the affluent “Gold Coast” neighborhood, in addition to the four other houses he owns in the city. He collects real estate as ordinary mortals collect stamps or bottle caps.

Mr. Griffin who has net worth of  $10 billion has been philanthropic, reportedly donating to date $700 million.  Beneficiaries of his generosity include universities – his alma mater Harvard got $150 million in 2014 – and museums – The Museum of Modern Art received $40 million. However he has declined to sign the “Giving Pledge” organized by Bill and Melinda Gates and Warren Buffett where 150 billionaire signees so far have pledged to give away a majority of their wealth to charity.

Speaking of Mr. Buffett, the contrasts between this legendary investor and Griffin are striking, especially in the life style category. Buffett, whose net worth is estimated at $85.6 billion, continues to live in the same house in his hometown of Omaha, Nebraska  that he bought in 1958 for $31,500. He does have a house in California valued at $4 million (doghouse scale for Griffin) and reluctantly purchased a private jet he nicknamed “The Indefensible” for his corporation. He is 88 years old after all. So far he has donated $35 billion, much of it to the Gates Foundation.

A follow-up article in The New York Times of January 26 offers another contrast, generational and sociological. Brooke Astor (1902-2007), the New York socialite and philanthropist, was content to live in a 5000 square foot Park Avenue apartment. Her wealth, peanuts compared to Griffin’s, was inherited. David Rockefeller ( 1915-2017) and his wife Peggy’s  65th Street town house was 10,000 square feet , but it was their primary residence where they raised their six children. I would venture to say that the real estate activities of Mr. Griffin would be viewed as distasteful to these old money philanthropists. Their personal acquisitions tended more to art and country estates.

This current period of vast wealth, with its yawning societal income gap, has been termed “The New Gilded Age.” Certainly the Vanderbilts and Carnegies liked their real estate too. The 54 room Vanderbilt Mansion in Hyde Park NY, now a National Historic Site, was only lived in a few weeks a year by its owners Frederick Vanderbilt, and his wife Louise.  It was built in the late 1890s when, it must be emphasized, there was no income tax, which was not made law until 1913. Today the top marginal income tax rate is 37 percent, whereas between 1945 and 1980, during prime Astor and Rockefeller time, it was between 70 and 80 percent.

With the additional tax cuts promoted by President Trump, along with the assault on the Estate Tax (renamed the “Death Tax” by repeal adherents),  rates on the very rich may well drop even further.  So there will be even more cash for the billionaire to spend, some perhaps on philanthropy but also on “toys,” such as the $100 million + yacht complete with a certified Imax Theater recently purchased by Washington Redskins owner Daniel Snyder. Perhaps on board he will enjoy big screen replays of his football team’s dismal 7-9 season record in 2018.

Let me end this post with uplift, for as you have read I am not a fan of conspicuous consumption. If you are with me on this, this story from The Chronicle of Philanthropy may provide an antidote.
George Ellis, a small town doctor in the Midwest never forgot his time during the period of WW2 earning his M.D. at the University of Buffalo (UB ) School of Medicine.  After the war he moved to rural Indiana where with his wife as nurse set up a practice in his aunt’s house. He practiced medicine there for years, keeping in touch with the UB Medical School, attending reunions and striking up a friendship with the school’s vice president for advancement David Draper. Over the years, Draper visited Ellis in Indiana 50 times where they discussed how “Doc” Ellis might achieve his wish to help his beloved alma mater.

The Ellis couple was childless and lived simply in a two bedroom ranch house. They drove Buicks and Oldsmobiles. He drank bourbon (Buffalo Trace, of course) from a coffee mug.  When he wasn’t tending to patients the doctor spent time at the public library teaching himself about the stock market, researching and investing, with a small inheritance from his father as a starting point.  Along the way he set up charitable trusts. All the time his aim was UB Medical School and UB knew that.  But no one in his small city had a clue of his wealth.  He died age 87 in 2010.

In 2011 UB announced the receipt of an endowment of $40 million, established by a donor (Dr. Ellis) who wished to remain anonymous .His instructions were that his identity as the donor could only be made known after his wife’s death.  By the time his estate was settled in 2013 the donation had grown to $45 million. His wife died in 2018 whereupon the three trusts Ellis had established years before yielded another $11.8 million. The gift from Dr. Ellis to UB Medical ended up totaling $56.8 million.

I have told similar stories over the years I have been writing these blogs.  They were about quiet philanthropists unknown during their lifetimes, living simple lives, but driven by the need to help places or institutions they loved.  

There ought to be a Hall of Fame built dedicated to them. Perhaps it could even have an IMAX theatre to tell their stories.  The only thing conspicuous about them was the purity of their generosity and they should be honored.

The definition of the word philanthropy bears repeating. The Greek root, philanthropia, means love of man.  Philanthropy is the act of desiring to help humanity and is most often associated with providing financial support. I wish I could coin a word for the love of collecting real estate (suggestions anyone?). I further wish those who have that unnamed condition cure the urges by redirecting more of their vast resources to helping others.  Think of what the $238 million spent on the penthouse in the sky could do for those in need who live on the streets below?

Comments on this and previous posts (see archive to the left) are always welcome at gplatt63@gmail.com