Towers of Babel
Meet the NFTs of real estate.
Happy New Year, fam. I hope your holidays were great and that 2023 is treating you well. The big news today is the House and Charlie crushed that story this morning in, so I’m going to counterprogram. This is one of those pieces that’s a journey.
But before we go: In addition to doing The Next Level live in Seattle (on January 21), Sarah, Tim, and I will be doing a live show in LA on January 19 with special guest Jon Favreau. If you’re in the SoCal area, I hope you’ll come and hang out with us. I can promise good people, lots of fun, and tons of Xanax.1
1. Supertall Superslims
Bianca Bosker has a long piece in the Atlantic about the rise of a new class of skyscraper: The supertall superslim. These are terms of art: Supertalls are buildings higher than 300 meters; superslims are buildings in which the height is at least 10x the width of the base. Not every supertall is superslim and vice versa. But some new buildings are both. Hence the new category: The supertall superslim.
The piece has a lot of interesting background about the history of building high:
Archaeologists have called the Tower of Jericho, completed about 10,000 years ago, the “super-skyscraper of its day.” It reached a grand total of 28 feet. Around 2,600 B.C., the Great Pyramid of Giza broke records when it hit 480 feet—less than half the height of the Eiffel Tower—and humans took nearly 4,000 years to go higher. (The spire of an English cathedral eventually surpassed the Great Pyramid in 1311, but only by about three floors.)
You should read the whole thing; Bosker has done an amazing job.
There’s also a lot of interesting engineering talk, because the truth is that architects and builders are working out the kinks of this new class of building as they go. As a result, the supertall superslim maybe is not an especially great place to live? The condo board of 432 Park in New York is currently in a lawsuit against the developer:
The plaintiffs claim that the building is riddled with more than 1,500 defects that have led to leaks, cracks, electrical explosions, and elevator shutdowns that trapped people for hours—as well as “horrible and obtrusive noise and vibrations,” including clicks, creaks, and a trash chute that thunders “like a bomb.”
Also: The buildings sway. As much as 3 feet.
But ultimately, what interested me most in the Atlantic piece is the following detail: Historically, tall buildings were the province of spirituality—the Tower of Jericho, the Pyramids, Europe’s cathedrals.
In the age of the skyscraper, supertall buildings were for commerce: They housed offices and workers.
The supertall superslims are residences. They are private property for the exceedingly rich.
And not just private property, but mostly anonymous private property: The ultra rich go to pains to conceal the ownership of these residences:
According to public records, lots of the units in Midtown’s residential supertalls were purchased by anonymous limited-liability companies, many of them with names implying a bored exhaustion with shuffling money around. Apartment 40A at 432 Park belongs to an entity called 432Park40A LLC. Other LLCs read like AOL screen names: Ashmonster, Cupcake Lily, Bigappleview, Euclidean Taco Distance. Rarely do you come across an actual person’s name . . .
No judgement here. If people want to spend $190 million on an apartment and the legal means to conceal the identity of the purchaser exist, then . . . it’s a free country, brother. All we’re talking about is wealth and consumption, which is a story as old as time.
But there’s one more layer: Many of these supertall superslim residences have never been occupied:
This fall, four properties for sale at 432 Park advertised that they’d never been occupied.
That includes the penthouse. “Never before lived in,” beams Ryan Serhant, a former star of Million Dollar Listing New York and one of the brokers who has represented the apartment, in a home tour he posted on YouTube in 2021. “A true one of one. A world marvel.”
Think about that: The prize unit of a 7-year-old exclusive residential building is being bought and sold without anyone ever having spent a night in it.
And now you get it: The supertall superslim isn’t a building or an apartment or anything else we would understand from traditional patterns of wealth and consumption. It’s a token. A brick-and-mortar NFT.
The short version is that an NFT is an artificial construct designed not to perform a function, but to create artificial scarcity. The NFT is a counter-revolution against the internet’s revolutionary proposition: Reducing marginal cost to zero. The NFT says, “I will do a lot of math to create something on the internet which is scarce and you will then value this token because of its scarcity.”
Which might as well be the mission statement for the developers of supertall superslims. The design and construction process is like crypto mining; the building is its own blockchain; the individual units are the NFTs; the HOAs are DAOs.
In real estate you own property. The penthouse unit at 432 Park is rights to a specific volume of air, commingled with some notional share of common elements entangled with a condo board.
Here’s the guy who’s brokering 432 Park, explaining why supertall superslims aren’t really real estate:
“I don’t really see us as selling real estate,” Serhant told me. “I sell a transfer of enthusiasm and excitement and brand.”
Like I said: Tokens.
The crypto / NFT boom (and then bust) was the product of many inputs. The biggest of these was ZIRP: Free money meant that people would take on just about any amount of risk in search of a return. As the low-risk projects were filled out, dollars kept chasing riskier and riskier bets.
The supertall / superslim boom is similarly the product of many inputs: Not just ZIRP, but advances in engineering, concentrations of wealth, and policies which allow Saudis and Russians and Chinese to treat American real estate like Swiss bank accounts.
And maybe there’s no harm in it. But this transformation is something new in the lives of cities. And I’m not sure we understand what the downstream effects will be.
2. Santos and Benedict
To the extent that people were following the news last week, the story was George Santos. And I get it. This story needs to be unwound and Santos needs to be dealt with by the law. But ultimately, this is one House seat and a guy who will, four years from now, be nothing more than the answer to a trivia question.