The Queen of Versailles
I watched this documentary tonight. It’s about time share mogul David Siegal and his trials and tribulations over the past few years. It appears that they started making the documentary before the crash of 2008, when they were an extremely wealthy family that was in the process of having the largest house in the United States built. The final cost of the house was estimated to be in the area of $100 million and was made to vaguely resemble Louis XIV’s Versailles palace in France, after getting inspiration from visiting said palace. They named the house as “Versailles”, thus the name of the documentary.
When everything started crashing down in 2008 Westgate, Siegal’s company, lost access to the easy credit they depended on. Revenues from timeshare payments dropped as many people around the country had a hard enough time making the payments on their own homes, let alone a share of a penthouse in Las Vegas. Siegal’s business was built on the premise that the cash flow would keep coming in and there would always be someone willing to loan them money based on that cash flow. When the downturn hit, Siegal was left with his dick in the wind as his assets declined in value, cash flow dropped and his debts remained the same. He went from being on top of the world to being in an extremely precarious situation within a very short period of time.
His large family had to make some meaningful cutbacks in their household, such as cutting down their staff of maids from 19 to 2. Over the course of the year or so they followed the family around you can see the household turn into complete disarray and the family structure break down as David Siegal spent most of his time in an office surrounded by stacks of papers trying to figure out how to get out of this mess. I don’t demonize success and wish ill-will on people that have more than I do, but I have to admit it’s kind of funny to watch these guys completely unravel. The hubris of this guy is unreal plus he’s in kind of a scummy line of work.
I’m not sure if I have my numbers right, but I think the family sunk about $40 million into the house and took out a mortgage on the remainder. That $40 million bought them the land and a good portion of the structure and that’s as far as they got. Siegal said he didn’t pay cash for it because he figured he’d keep having money flowing in and he’d rather put it into his business. That’s generally not a bad idea, but this is certainly a case of counting chickens before they hatch. After everything started coming apart for the guy, the bank insisted that he put the house on the market. Finding someone willing to buy a house like that isn’t exactly an easy chore, let alone for a price anywhere near what they borrowed. In fact, I think it’s still on the market and unfinished.
One thing that struck me throughout the documentary is how they kept insisting their their troubles were temporary and there was a way out of it. He spent a lot of his waking hours trying to source financing. He kept saying “all we need to do is buy some time” and he found a few ways to kick the can down the road a little bit. His son was the VP of the company and at a certain point everybody’s pay had to be slashed (and 6,000 employees let go). When they interviewed his son I thought it was noteworthy that he said that he had to ask his dad for money due to his low salary, which his dad declined. He said to solve the problem he maxed out his credit cards and took out a home equity loan to get him through it. Some people never learn…
Siegal built his business by luring in naive middle class folks in with free stays, entrance passes to Disneyland, etc. as long as they listened to the presentation. I got the impression that they signed up just about anyone who could fog a mirror. In one scene he rants about how the bankers were a bunch of vultures, which is kind of funny coming from the HMFIC of one of the most bullshit industries out there. What goes around, comes around.
I just stumbled upon this on Netflix and hadn’t read anything about it, but I’m sure there’s a ton of comparisons to Citizen Kane and Xanadu out there. I also think it’s interesting that the real Versailles pretty much sent France over the brink, just like this house did to this family (and maybe the company). Off hand, I think I read that the palace of Versailles cost about 40% of the total GDP of France when it was built. FWIW, tourists from all over the world now come to see the pinnacle of Gallic opulence so at least it’s giving something back now. I’m sure the Versailles Chambre de Commerce is at least glad it’s there. On a side note, now that it’s in my mind I bet that within 20 years Versailles will be purchased by Chinese businessmen or something like that.
I think that if future historians look back to the current economic situation, this very well could be one of the defining historical works of the time by the way it shows how well they were able to live on borrowed money and then how far they fell when they were reduced to their true assets. I really could see future economists throwing around “Versailles” as one of those historical anecdotes like the tulip mania. If things really go south for us, I could see this house used as an example in the future of the highest levels of economic and ecological arrogance of our time.
There are too many lessons to be learned and examples of how not to run your life in this documentary to even list. You name it, it’s probably in there.