First published in The Real Deal
When Hard Rock Café founder Peter Morton sold his beachfront Malibu mansion for $110 million last month, it was the first nine-digit home sale in Los Angeles in over two years. But it wasn’t a complete outlier.
So far this year, at least 12 ultra-luxury estates have sold for a combined $632 million, according to a tally by The Real Deal. Half of those topped $40 million, a prodigious number, brokers say, even in a town where a $10 million listing hardly turns heads.
This roster of megabuck mansions that closed in recent months is a long one. They include billionaire Daryl Katz’s $85 million purchase of broker Kurt Rappaport’s massive estate in February — he paid another $21 million for the artwork and furniture — and another $85 million sale of a Bel Air compound belonging to a Seagram heir. Also on the list is private equity executive Bruce Karsh’s purchase earlier this month of the late film executive Brad Grey’s former Holmby Hills estate for $68.8 million; and a local investor’s acquisition of a 10-bedroom mansion in Bel Air for $56 million, once owned by developer Mohamed Hadid.
What’s fueling the recent surge in top-tier home sales?
Brokers say it’s a cocktail of factors, including interest from a new demographic of domestic buyers, favorable market conditions and homes that generally offer more bang for your buck on a square-foot basis than those in other top-tier cities.
Josh Flagg, a broker at Rodeo Realty, has still another theory: that L.A.’s luxury residential market had previously been overlooked.
“We’ve always been undervalued,” he said. “Until recently, we weren’t even close to the prices of London and New York. Now we’ve surpassed some of these places.”
Jeff Hyland, co-founder of boutique brokerage Hilton & Hyland, attributes the recent uptick in transactions to homeowners who want to cash in on a hot market, and buyers flush with capital looking to make prime real estate plays. “Everything is cyclical and very smart people remember that,” Hyland said. “Others don’t and they think that it will always be sunshine.”
A good chunk of the recent buyers in this segment of the market have been American, in contrast with the wave of overseas buyers who were flooding the market a few years ago, said Sally Forster Jones, a broker at Compass’ Beverly Hills office.
“There’s something about wanting to be here in L.A. that is just attracting the affluent buyer from California and the rest of the country,” she said. Foreign buyers still invested in luxury real estate, however. From March 2016 to March 2017, about 9 percent of L.A. home sales over $1 million came from overseas buyers, according to a January report from Beauchamp Estates and Leslie J Garfield & Co.
The recent high-priced resi trades seem to have encouraged more owners to put their luxury homes on the market at especially high asks. Brokers say because the luxury market is so strong now, an increasing number of sellers are closing at or very close to those initial prices.
Among those are a Beverly Park palace listed for $165 million, Danny DeVito’s former home asking $85 million, a Holmby Hills mansionseeking $70 million, a cliffside Malibu mansion, whose owner wants $58 million; and a Wallace Neff-designed nest, asking just under $40 million. The list goes on.
All those zeros have homeowners champing at the bit. Hyland calls it “price creep,” and it can be tempting to keep pushing the numbers.
Then there are the aspirational price outliers, or rather the outlier. Take Nile Niami, the mega-mansion developer who builds nine-figure homes for “normal dudes.” “The One,” a 100,000-square-foot Bel Air mansion he is building on spec, is seeking $500 million.
But even with celebrity pedigree, architectural flourishes or decadent amenities — Niami’s estate will offer a ceiling of jellyfish tanks — many developers and sellers say setting a price on ultra-luxury is still very much a guessing game.
“A lot of these prices are not really an expected sale price — they’re just a strategy to get the attention,” Jones said. “The goal is to get the attention, do the marketing, get as much excitement and get the highest price that you possibly can.”
Brokers said homes that are listed in the $50 million to $100 million range will sometimes see offers that are 30 percent lower than asking. A recent study by Concierge Auctions found that homes in the toniest neighborhoods of L.A. saw prices fall dramatically each day they spent on the market. The top 10 sales averaged a drop of about $44,000 per day on the market. After 250 days on the market, the homes sold for about 70 percent of their initial asking price. Meaning the longer sellers waited, the more money they lost on the deal.
Real estate, even the ultra-luxury residential variety, is like bread, Hyland said.
“If it stays on the shelf,” he said, “it gets moldy.”