Fit For A Prince: How Might The Duke And Duchess Of Sussex Finance A New Malibu Property?

Montecito To Malibu?

Earlier last week, reports surfaced that the Duke and Duchess of Sussex were potentially exploring a move to a new Malibu mansion - away from their $14 million Montecito home. The couple apparently toured a plot of land in Malibu with ocean views. The 5-acre plot is thought to cost around $8 million, and comes with plans for a $10 million home which is, as yet, unbuilt. While the reports are unsubstantiated, a move to Malibu would see the couple closer to Los Angeles than they are in Montecito, with Hollywood being a 45 minute drive away, and would see them join a host of stars who live in the sought-after Malibu area. 

After ‘splitting’ from the UK monarchy in early 2020, the couple moved to the US and eventually fell in love with their current Montecito property, despite initially ‘not having jobs and not being able to afford it.’ The couple ultimately chose - and were financially able to - take out a mortgage on their current Montecito property, probably financed, in part, by deals struck with Netflix and Spotify for the couple’s involvement in various creative projects. The mortgage was reportedly the equivalent of £7 million on an £11 million property, meaning the couple will have found around £4 million as a deposit. A mortgage was also believed to have allowed the couple to buy the property without financial assistance from the Duke’s family, which may have been complicated given the couple’s desire to attain financial independence and break away from the Royal family.  

It’s not known if the couple will use a mortgage again for their potential new purchase (or if the couple are truly considering a move to Malibu), but having taken out a mortgage before, the couple is likely to do so a second time if they buy more real estate. They are likely to have increased the value of their Montecito home with renovation work, which may cover some of the cost of the new property if they sell it before moving to Malibu, but in any case, a mortgage will probably make sense for the couple, given they are only relatively recently gaining significant wealth in their own right and will want to use their personal cash reserves to fund business projects and ventures.

The Couple’s Current Montecito Property: To Sell Or To Keep?

The couple’s current home in Montecito is relatively well-publicised, although the couple have rarely shown photos of it and it is relatively secluded. However, the property is now likely to have real ‘star power’, having been owned by Royalty. If the couple do make a move to Malibu, one question will be whether they keep the Montecito property (potentially taking out a second mortgage to buy the Malibu home) or if they choose to sell it and ‘upsize’ to the coast. The Malibu property will potentially be an easy rent on the basis of its glamorous previous owners and the couple may be able to bring in significant rental income by retaining it. 

The couple may potentially be considering building their wealth and diversifying assets, and they may wish to retain ownership of their Montecito property and rent it out as a source of income and as an appreciating asset. As a result, they could take out a second mortgage, with rental income covering the mortgage payment on their Montecito property. If they took this route, they may be able to access a lower loan–to-value ratio on the Malibu property on the basis of having two mortgages, although the couple’s net worth is likely to have increased since their move to the US, and they are likely to be viewed by lenders as higher-calibre borrowers.   

Non-disclosure Agreements

Over the summer, reports suggested that the Duchess was in talks to become the face of Dior, which was later denied by the French fashion powerhouse. However, it raises an interesting point: the couple are likely to have more projects in the pipeline which will support their finances and build their net worth. Some of these deals may be completed already but in the ‘pre-launch’ stage, and others may still be in the process of negotiation. Whatever the case, the Sussexes are likely to be able to use them to show their future earning power, enabling them to access more finance and a larger mortgage. 

But where lenders are often ‘in the driving seat’ of negotiations, the Duke and Duchess of Sussex have real star power and are likely to be able to pick and choose who they borrow from. Relationship, quality of service and discretion are likely to be important considerations for the couple, as is confidentiality. Non-disclosure agreements are likely to be non-negotiables for the Duke and Duchess, who are probably under obligation to keep future projects under wraps.

Earning Power, Expenses, Income

While the couple will likely structure their income via corporate entities through which they pay themselves a monthly or annual salary. Lenders will ultimately look at their monthly income to determine what they can afford in terms of a mortgage, although they will also consider the couple’s net worth and future earnings. 

The Duke and Duchess, like most entrepreneurs, will also have what lenders deem to be ‘unusual income’, because they are effectively brand and business owners. They are likely to generate income in two ways: in installments for ongoing projects, like the Duke’s role of Chief Impact Officer at BetterUp (he reportedly earns seven figures a year) and advances or lump sums for one-off projects, like the couple’s Spotify deal and the Duke’s book, Spare, which is part of a four-book deal with Random House - he is thought to have received an advance of around £16 million for the best seller. 

However, just as for many entrepreneurs, the Duke and Duchesses income and finances aren’t likely to be as straightforward as a ‘salaried’ individual’s. The Duke’s advance for Spare was well-documented, but he will also need to pay tax on the amount, and there are various expenses that need to be considered: the ghostwriter’s fee, and the Duke’s commitment to give some of the proceeds of the book to charities close to his heart, which include Sentebale and Wellchild. The couple’s Spotify deal was also mutually discontinued by both parties after just one season, reportedly because of Spotify’s financial challenges (they recently laid of 100 staff) and because the couple didn’t meet the productivity requirements set by the platform, so while they will have a chunk of their $20 million fee, they are unlikely to have the full amount. 

The couple’s expenses and liabilities will also be considered by a lender, especially in the light of things like the couple’s security expenses, given they need to pay for their own security team, and the cost of ongoing litigation, which is likely to be costly, and a lender will take all these into consideration.