GREENWICH, Connecticut (Reuters) - As many hedge funds suffer big losses and anxious investors yank out their money, the town synonymous with the riches of their recent glory is now hurting.
In Greenwich, Connecticut, the luxury car dealers are quiet, the prices of mansions are declining and the retailers who have made a good living serving its wealthy residents are complaining about a sudden drop in business.
“Everything is down. We started to see it in the summer, but October is when the bottom caved in,” said James McArdle, whose family has run McArdle’s Florist and Garden Center in Greenwich for 98 years. “Housing sales are down and so that always cuts into our market. Fewer buyers, fewer makeovers.”
For as long as there’s been a Wall Street, titans of finance and industry have built their palaces in this shoreline town 30 miles from New York. Later it became home to hedge funds — lightly regulated investment pools that made rich clients richer and turned their managers into billionaires.
According to Hedge Fund Intelligence, this town of 62,000 was until recently home to 35 firms that together managed more than $200 billion of assets, greater than the annual GDP of nations such as Chile or Malaysia.
Now, two months after the bankruptcy of Lehman Brothers and the near collapse of American International Group, financial markets are still reeling and government bailouts of banks and other financial companies continue at a breathtaking pace.
After the worst back-to-back months in a decade, some expect one third of hedge funds will be forced to shut down and others will become much smaller than they were. Billionaire investor George Soros, one of the world’s first hedge fund managers and among the most famous, has predicted the industry would shrink by as much as two-thirds.
Visit this town and it soon becomes clear that things aren’t quite what they used to be. One recent weekday morning, the only creature strolling the showroom floor of Carriage House Motor Cars was a tiny mouse.
Richard Koppelman, owner of rival luxury dealership Miller Motorcars, did not want to discuss his sales. “We’re in a cyclical business. It’s obviously down right now. We’ll hopefully see things get better soon,” he said.
For now, there are fewer people able to splurge on cars like the 2009 Bentley Continental GTC, which Miller’s website lists at more then $212,000 or a “base” 2008 Ferrari 612 Scaglietti coupe for just $263,500 and change.
The town itself is bracing for a slowdown in taxes and fees generated by property sales and new home permits. It froze hiring to hold headcount down.
“I think everybody is cautious. There’s a high level of uncertainty,” said Peter Tesei, the town’s first selectman, an elected post akin to mayor.
For years, Greenwich benefited from hosting these funds, he said, but now these benefactors have less to spend. One tree service firm suffered a 30 percent decline, Tesei said, while local charities and cultural centers expect donations to fall.
The town’s top notch Bruce Museum, which is operated by a private nonprofit organization, recently postponed a $16 million expansion in light of the market downturn, Tesei said.
Worries about the future have chilled the heady world of Greenwich real estate, where the average transaction price is $2.5 million and prices exceeding $20 million are not uncommon. Since markets were upended, real estate agents say houses are staying on the market longer and prices were down.
“There are fewer people buying $10 million, $20 million homes. We’re seeing an adjustment, a correction taking place,” said Roxana Bowgen, an estate agent at Engel & Volker, an international broker of high-end properties. “These things have to happen. After a while, things need to be cleaned up.”
Bowgen, a former commodities trader at Phibro, stressed that houses are still being sold, but the pace has slowed. Banks demand two appraisals rather than the one or even none asked for in the past, she said. Mortgages are harder to get.
“People are in a wait-and-see mode. Buyers are not ready to jump in without asking a lot of questions. They’re taking their time — there’s a lot more inventory,” Bowgen said.
Realtor David Ogilvy of Ogilvy & Associates noted many managers he knows have weathered the financial storm, some by holding big piles of cash or correctly betting markets would fall, but they are being discreet about buying big homes.
Still, “We’re definitely slower than we were,” Ogilvy said. “Some people who have taken it on the chin, they were heavily leveraged. We don’t know who they are yet.”
For now, the proud citizens of Greenwich remain upbeat. The heart of the town is Greenwich Avenue, a mile-long stretch of high end shops that rivals the offerings of Beverly Hills. Besides some home grown luxe merchants and restaurants, there are elite national brands such as Coach, Saks and Tiffany’s.
Even the police provide personal service. In lieu of traffic lights, officers stand watch over several intersections to usher shoppers across the street and scold jaywalkers.
Terry Bettridge, whose family has run Bettridge Jewelers on the Avenue since the 1940s, said the fall of Lehman has hurt a business where customers spend $10,000 to $50,000 at a time.
“Business was phenomenal in the first quarter. When Bear Stearns fell apart, things began to get a little wonky but were still up. But when Lehman went under, there was a precipitous fall in business,” Bettridge said.
Another sign of the times is that a third of Greenwich High School’s 2,700 students — most raised in affluence — are seeking jobs through a school-sponsored placement service and the number of new students registering for the service jumped to 230 in September from 170 last year.
In general, people are starting to keep a tighter hold on the purse strings.
“My clients are being a little more cautious. They’re not doing everything at once. They’re being more thoughtful,” said Cindy Rinfret, who owns an interior design and decoration business that carries her name. “Before, it was ‘How quickly can you get it done?’”
Rinfret, who wrote a book on style featuring Greenwich’s colonial, Tudor and English country style houses, said her business has held up well. Some clients who cannot sell their house are spending to improve their surroundings, she said.
Residents have not stopped spending completely, but they’re being a little more thrifty, she said. A friend planning a party for 150 people invited 20 close friends instead after a big drop in financial markets.
Luxury merchants are adapting to the environment, too, reaching out to customers.
“Given everything going on, things are good. But I wont lie to you: are we feeling it? Of course,” said Scott Mitchell, a co-owner of Mitchell’s. The family-owned department store sells high-end jewelry and clothing from brands such as Brunello Cucinelli and Hermes, and even Ralph Lauren sweaters costing
Business has remained strong, though the store is adapting to the environment, he said.
“We are keeping our inventory in balance. That’s our biggest expense. We’re cutting expenses that don’t touch the customer. We are trying to reach out to our customers, one-on-one, and thank them for their business,” Mitchell said.
Greenwich merchants observed that the town was affluent long before the hedge fund boom and has weathered downturns before. Its proximity to New York City and top-notch facilities, they said, will always make it a destination for wealthy families.
“You’re talking about a town that historically has housed some of the greatest wealth in the world,” said Ron Cavalier, who sells artwork at Cavalier Galleries. “My guess is that, of all the towns, Greenwich is going to be affected the least.”
Reporting by Joseph A. Giannone; Editing by Eddie Evans