Posted by Leonard Steinberg on September 5th, 2013

I recently visited Monte Carlo, the wealthiest country/principality in the world with ZERO unemployment and per capita income of around $183,150.00, to tour TOUR ODEON the brand new ultra-luxurious, amenity and services laden 49-storey residential tower being built at the border of Monaco and France. My initial impression was that New York was comparatively cheap: Tour Odeon features a 30,000+sf penthouse with a rooftop swimming pool asking over $ 375 million, and the ‘regular’ apartments below are not much cheaper. The average price for real estate in Monaco hovers around $ 4,750/sf…..Tour Odeon starts closer to $ 8,000+/sf. Here are some observations:

• Very few buildings in Monaco have services or amenities: Tour Odeon is a first with pretty much EVERY amenity you could wish for……from a doorman, spa, to swimming pools, a garden, parking, chauffeur services, etc. Security concerns are not a big issue in this part of the world with 515 police officers for 35,000 people (thats more than triple of New York City).
• Yes, even Monte Carlo has a semi-socialist system and a ‘poor man’s entrance’ just the way Extell has for its controversial Riverside building: the bottom 20 floors of Tour Odeon will be….are you ready……affordable housing that is government owned!  Maybe a lesson for New York whereby the government takes on the responsibility of affordable housing in conjunction with private enterprise, and does not simply provide tax credits. These apartments will be serviced by a separate entrance. They also will be useful in elevating the high-priced units so that they benefit by the better views as the surrounding buildings are not exactly what I would refer to as architectural gems.
• I was quite shocked to learn that in Monaco ALL square footage is counted in the $$$/sf price, making a comparison to New York’s pricing even more acute: in New York only the interior square footage is counted when quoting $$$/sf, hence Monaco is even more expensive than what I had imagined. I do agree with the concept that a price should be attached to outdoor space, especially in a perfectly mild climate where outdoor space is usable all year long……but is the exterior space really as valuable as the interior space?
• Many dream of Monaco as this exquisite French Riviera haven:  I have actually always found Monaco to be rather ugly in areas, with some truly vulgar 70’s and 80’s architecture, painfully treacherous narrow winding roads, excessive vehicular and pedestrian traffic. The older architecture, landscaped squares and panoramic views of the sea and mountains do compensate for the excessive concrete. We suffer from similar challenges in New York with very limited land area: Monaco is a vision of what a future of excessive, weakly designed building can look like.
• Ceiling heights were around 9ft…..in New York that would not qualify as high end, yet for Monte Carlo that is tall!
• The limited supply of space in Monte Carlo speaks volumes how this specific characteristic is highly valuable to real estate, here more exaggerated than anywhere in the world, but not too dissimilar to places such as Manhattan and Hong Kong.
• This building requires paying a 2,5% purchase ‘tax’ (a form of transfer taxes) but NO real estate taxes. Older building pay a 6% ‘tax’.

The biggest question I asked walking away was:  why would extremely wealthy people want to live here, in much smaller homes, in a crowded environment, with not-such-great food? Of course the answer is all about TAXATION. Tax-free Monaco is the ultimate lesson to the rest of the world (New York Mayoral candidates take note!)how very rich people are willing to sacrifice LOTS to minimize their tax exposure. If someone were to buy a 3,000sf Tour Odeon apartment for about $ 30 million, and they had an income of $ 10 million per year, the $ 4 million per year they would pay in taxes elsewhere would pay for this apartment in roughly seven years. Now deduct the savings by not paying real estate taxes….

I would conclude that buying real estate in Monte Carlo is not about dollars per square foot, ceiling heights, amenities or any of the other typical residential real estate considerations: its all about tax savings. And when this is considered, I think for  super-wealthy people who are able to declare their incomes in Monaco alone, Monaco is actually…..CHEAP!