It seems that Hollywood A-list celebrity Michael Douglas, and his wife Catherine Zeta-Jones, are getting more serious about finding a buyer for his spectacular Mallorcan estate S’Estaca, located on 77 hectares of Mediterranean bundu on the Sierra de Tramuntana north west coast near the picturesque town of Valldemossa. Fortunately for property watchers, this has been a well-publicised sales process from the start, and makes a good case study for ultra-high-end property sales in Spain.

S’Estaca’s origins date back to the 19th century when Archduke Ludwig Salvator of Austria acquired the country estate and set about redeveloping it for his mistress, a local wench. Douglas bought it in 1990 with his then wife Diandra Luker, for a reported $3.5m (€2.6m) and then spent something like €5m to €6m renovating the estate, which has a total living space of 1,000m2 including 10 bedrooms in seven buildings centered around a white torre, or tower, with decorative roof crenellations that give it a sort of moorish look. The property also boasts a gym and private spa, an artist’s studio, a home cinema, wine cellar, library, marble-lined pool, staff accommodation, vineyard, and olive groves. You get the picture from the photos below.

S’Estaca ultra high-end property sales strategy

Mr. Douglas first put S’Estaca on the market in 2014 with an asking price of €50m (around £40m at the time), exclusively with Sotheby’s International Realty. The asking price and choice of broker suggests he was aiming for the billionaire segment, as you don’t spend €50m on a second home if you are only worth €100m. You have to be worth at least a billion for that price tag.

The local press reported that his decision to sell was motivated by health issues, and declining use since divorcing Luker and marrying Cathy Jones in 2000. Mr. Douglas is now 74, and would have been 69 years old when S’Estaca was put on the market. Age brings health challenges to us all, and it’s understandable that age saps the time and energy you need to maintain lots of properties – Douglas and his wife reportedly have a $100m property portfolio, including a ranch in the Bahamas. Mrs. Zeta-Jones has admitted that they pick up houses like others collect art and, according to the Daily Mail, “the couple now spend more time at their homes on the other side of the Atlantic where they have an apartment in Manhattan, a summer home in Bedford, New York, and a ranch in Bermuda, which Zeta-Jones has made no secret is her favourite home.”

Remember that back in 2014 Spain was just starting to recover from it’s monumental real estate crash, though Mallorca got off relatively lightly compared to mainland Spain. Considering he spent around €8m in total buying and doing up S’Estaca, a price tag of €50m at a difficult time for the market suggests he wasn’t the most motivated vendor on the block back then. Considering the property, the market situation, and the motivations of Douglas as reported in the press, I get the impression he was a vendor in no hurry to sell, waiting to find a buyer prepared to pay top dollar for a trophy home with a royal and celebrity backstory. That’s fine if you are patient and stay off market, don’t set an asking price, and just let it be known you might sell if the price is right. But in my limited but relevant experience it’s a mistake to actively search for a buyer with a price tag that is too high. You end up wasting time – your most precious resource as you get older – and end up selling for less than you might have achieved with a better strategy.

By 2016 the Mallorcan press was reporting that Douglas would consider offers in the region of €40m (£34m), so a drop in price expectations of around €10m in two years, a decline of 20%.

By January 2018 The Daily Mail reported that Douglas had dropped his asking price to €36.5m for his “dilapidated Majorca party palace that has failed to sell for FOUR years… despite boasting a home cinema, gym and vineyard.” Claiming there had been zero interest from buyers at the higher price, the Daily Mail also said that the “sprawling property reportedly holds only bad memories for Zeta-Jones because it’s co-owned by her Douglas’ ex-wife Diandra Luker in a timeshare pact.” So now the sales strategy was starting to generate bad press as the property failed to sell.

Now here we are in May 2019, and it looks like Mr. Douglas is getting more serious. He has dropped the asking price to €28.9m (down €21.1m or 42% since 2014), he has given Engel & Völkers Mallorca an exclusive sales mandate to find a buyer, and even recorded a very personal voice over for a new promotional video in which he describes S’Estaca as a “magical retreat” and explains how he “fell under its spell and bought the property” when he first visited in 1990.

He goes on to say: “But my life has taken a new course, and now it’s time for me to let someone enjoy the privilege and the adventure of S’Estaca. Someone who will appreciate the beauty, the privacy, and the uninterrupted views. Someone with the vision and the spirit of the creator of S’Estaca, Archduke Ludwig Salvator.”

You’ve got to admire the way he is pitching the offer. It’s like he’s doing you a favour if he lets you buy it from him. It’s always a pleasure to listen to Mr. Douglas delivering a script. He’s one of my favourite actors.

Ultra high-end Spanish property sales strategies

As I mentioned above, I have limited but relevant experience of ultra high-end property sales in Spain having managed the sale of a family home in the Balearics that falls into this category. This gives me first-hand experience with which to compare the sales strategy taken by Mr. Douglas.

In our case, after foolishly rejecting an unsolicited cash offer of €30m in the boom years, we finally put the property on the market exclusively with a leading international agent for €46m in 2013, then dropped to €36m in 2014, and €29m in 2015, before taking it off the market for a year to try and shake off the ‘no interest’ vibe that makes potential buyers nervous about properties that have been on the market too long. By 2017 we were back on the market actively seeking a buyer with a guide price somewhere around €20m, and by the summer of 2018 the sale was completed after an acceptable discount.

In retrospect I wish we had done things differently. I suspect we would have seen better results starting with a much more aggressive guide price of around €25m working through a small selection of brokers operating discretely off-market. I’ll never know for sure, but I suspect we would have sold quicker, for a better price, and certainly a better net price after tax. It illustrates how important it is to get your price expectations right when you first start looking for a buyer. This is true whether you are offering a trophy home for millions, or a small flat in Torrevieja for tens of thousands.

But how do you get your price expectations right when the ultra high-end market in Spain is so thin, and the properties so different? There are very few second homes in Spain worth more than €15m, and not many buyers for them either (most of them foreign). So you don’t really have any good comparables in Spain when you come to work out what your price expectations should be. This is true for both sides – vendor and potential buyer. In our case I found that some potential buyers didn’t care if the price was €20m, €30m, or €50m, what mattered was the freedom to build whatever they wanted, which we could not offer, and without which some potential buyers had zero interest, regardless of price.

Given how tricky it is to calibrate price expectations for ultra high-end second homes in Spain, one potential strategy, if you are not in a hurry to sell, is not to set a guide price at all. Just let it be known through the right channels you will sell if the price is right, and leave it up to potential buyers to make offers. If this strategy is well managed, and you reach potential buyers who are serious, at the very least you get some real market information on pricing to help guide your expectations. At the end of the day, with few reliable comparables, ultra high-end second homes in Spain like S’Estaca are only worth what someone from a small pool of potential buyers is prepared to pay at that moment in time. One year that might be €30m, and the next year it might be €10m, it’s a thin and therefore volatile market segment. That’s certainly what I found.

Priced to sell?

With a new price, a personalised video message, and a new exclusive agent, it looks like Mr. Douglas is serious about finding a buyer in 2019, and the next few months are key. By dropping the asking price  to €29m he is still targeting the same market of billionaires, and I’m sure some of them are keeping an eye on the price until they think it makes sense for them. S’Estaca is a spectacular property in a sought-after location, and I’m sure Mr. Douglas will find a buyer with the right price, but we’ll have to see what happens at €29m. He will be in good hands with Engel & Völkers Mallorca, one of the most professional outfits on the island.

Using my own experience and S’Estaca as case studies – just two examples in a very small market of second homes worth more than €15m – it looks like ultra high-end second homes in Spain tend to start with an asking price that is too high, and then take five years or more to find the right price and buyer. I have personal experience of one other ultra high-end case study: Back in 2006 I went to see Casa La Manzana in Sotogrande, Andalusia, which was on the market for €24m, for an article for the Sunday Times, but I don’t know how that story ended – I’ll have to find out.

For any potential buyers out there, “S’Estaca is an absolutely dream home for any buyer interested in history and architecture,” explains Florian Hofer, Managing Director of Engel & Völkers in the Balearic Islands. “Hardly any other property combines luxury, privacy and natural scenery in such a pure and romantic way as this country estate.”