1 Photo
An oceanfront house in Southampton Village, seized by the federal government last spring after its owner was indicted for fraud, was sold recently for $25.9 million, the highest closing price for a house on the East End in nearly a year, according to an agent involved in the transaction.
The house, which sits on 2 acres off Southampton’s posh Meadow Lane, was purchased for $27 million in December 2008 by James Nicholson. Almost immediately after the purchase, Mr. Nicholson re-listed it for $34 million. In April, Mr. Nicholson was arrested on federal fraud charges of bilking investors out of $160 million by falsifying financial records of several hedge funds he operated. He was dubbed a “mini-Bernie Madoff” by multiple New York City media outlets.
The house was later seized by the federal Securities and Exchange Commission and was in receivership, making it a complicated sale process. Two unnamed buyers entered a bidding war before a sealed bid was accepted and the house sold on August 13.
Before the sale could go through, the receiver, a Manhattan attorney, had to be satisfied with the price first and then the federal government, being the official seller, had to comply with laws governing the sale of what is effectively public property.
“It was an extraordinary process,” said Jennifer McLauchlen of James R. McLauchlen Real Estate, the buyer’s broker. “It was an excruciating six weeks. It was very complicated, very harrowing and very interesting. I’m glad it worked for my customers.”
Because the house was in receivership, Ms. McLauchlen’s clients had to meet the price asked by the receiver. Once a $23.5 million bid was accepted, the SEC posted the proposed selling price in a public listing for two weeks. A second interested party made an offer and a bidding war ensued between the two prospective buyers with the final price of $25,895,000 finally coming through sealed bids.
“My customers certainly wanted this particular house,” Ms. McLauchlen said. “With the federal government involved, and the receivership, it gave anybody in the world the opportunity to bid, which is exactly what happened. This was a very different situation than I’ve ever had to deal with—probably than anybody out here has ever had to deal with.”
Sotheby’s broker John McHugh, who sold the house to Mr. Nicholson last year and held the listing for the subsequent re-sale, said the sale was highest price paid for an East End property yet in 2009.
Working with a house in receivership, he added, was a rare concern for an East End broker, he added, for now.
“I’ve never had to deal with it before, but I have a feeling there are a few more coming down the road,” he said.
on Aug 31, 2009