(Bloomberg) -- In the mid 1990s, John Blazevich was looking for a project. At the time, he was president of Contessa Premium Foods, a frozen-food manufacturer he founded in 1984, “and my dream was to build an architectural tribute to California, in the style of the Getty Villa or Hearst Castle,” he says.
After buying adjacent lots in a gated community south of Los Angeles called Rolling Hills, he began a construction process that lasted more than a decade.
First Blazevich knocked down the property’s existing home, dwelling through the construction in a one-bedroom guest house that was completed in 1999. Three years later, he moved into the 51,000 square-foot main house, which was built primarily underground as a result of the community’s zoning restrictions. He named the property Hacienda de la Paz.
But after a few years he got antsy. His company Contessa had filed for bankruptcy in 2011 (it emerged from bankruptcy in 2013, paying creditors in full, according to a release), and “I had other projects I wanted to complete and other challenges I wanted to do,” says Blazevich, who was also the chief executive officer of the shrimp importer, Viva Food Group.
So he put the 7.4 acre property on the market, listing it in June, 2013, for $53 million.
“I wasn’t planning on it being sold right away,” he says. “I would have liked it to be, but I was living here and enjoying it.”
After three years, he took it off the market for a few months, and then relisted it with a $5 million price cut. Yet the home still failed to find a buyer. Earlier this year, its price was lowered again, this time to $40 million.
“The house is in immaculate shape,” Blazevich says. He acknowledges, though, that, despite its moneyed inhabitants, “Rolling Hills isn’t a well-known area like Beverly Hills or Malibu,” which could deter buyers looking for a recognizable address to match the home’s price tag.
The auction will take place on July 26 and has no reserve, meaning that technically, the home could sell for a fraction of Blazevich’s initial listing price.
Asked how much he spent to build the property, in order to get some sense as to whether he’d be selling at a loss, Blazevich offers only: “I had no budget, and I exceeded it. That was pretty much it.”
How to Exceed a Limitless Budget
Many of the costs associated with the property stemmed from Blazevich’s self-professed passion for the home-construction project.
“This project was not your typical residential home,” he says. “It was more like a commercial project”—not that many commercial projects involve and 10,000-square-foot underground hamam and spa, replete with a lap pool. (Blazevich says he oversaw the hamam’s construction in northern Africa before the parts were shipped to California to be reassembled: “We were in the desert in Morocco with 300 nomads,” he says.)
The house also has a 15,000-square-foot indoor tennis court whose walls are decorated with trompe l’oeil paintings. “You’ve seen tennis courts? Well, this one is styled as a ballroom,” he says. “I didn’t want to have a high-school-gym kind of look.”
There is also an outdoor clay tennis court with ocean views, along with an outdoor swimming pool.
Other costs came from Blazevich’s attention to detail. “Just think of the hardware,” he says. “I had molds made for the doors handles and hinges, embellished with the Hacienda de la Paz dove and olive branch,” a design he commissioned specifically for the house. “This wasn’t like you went shopping at Home Depot,” he says.
In total, the property has nine bedrooms and 25 bathrooms, along with multiple elevators, a gym, a wine cellar, a bocce court, and a six-car garage.
What It Means to Auction a House
Auctions are an increasingly popular method for selling houses that have proven impossible to sell through traditional means. By putting the house at the mercy of an immediate bidding process, a seller, in effect, is letting the market decide what it’s worth.
But it’s not a free-for-all. “When bidders register to bid on this property, there’s incentive for them to tender an opening bid,” explains Chad Roffers, the chairman of Concierge Auctions. That incentive, he continues, is substantial: Concierge Auctions charges a 12 percent premium on all sales; but when a qualified buyer tenders an opening bid ahead of the sale, that 12 percent premium is paid by the seller, not the buyer.
Moreover, if the bidding exceeds a buyer’s opening bid, the buyer pays only a 12 percent premium on the difference between the opening bid and the sales price. If a buyer’s opening bid is $10 million and wins at $20 million, the buyer would pay a premium only on $10 million, thereby saving $1.2 million.
The auction house, in other words, is able to line up offers on the house before the sale. And if they don’t get enough qualified offers ahead of time? “We reserve the right to cancel the sale” before it begins, Roffers says.
Blazevich, for his part, is mum as to what he thinks the home is actually worth. “I guess on the day of the auction we’re going to find that out,” he says.
©2018 Bloomberg L.P.