As L.A. Home Prices Slump, How Will a $65 Million Mansion Fare?
(Bloomberg) -- A $65 million house has been listed in Los Angeles, testing the very top of the city’s market at a time when the ultra-luxury sector is awash in inventory.
The listing, a spec house set on around an acre fronting the sixth hole of the Bel Air country club’s golf course, has 27,000 square feet, with eight bedrooms and 12 bathrooms. Designed by architect Paul McClean and listed with Branden and Rayni Williams, the property was built by Nile Niami, the movie producer-cum-real estate developer best known for his yet-unfinished, $500 million spec mansion in Bel Air.
Niami’s success has come, in part, from developing houses that double as pre-packaged lifestyles. They’re almost always sold fully furnished and will often include art, wine, and a range of luxury cars in the sale.
This home, which could be for a family, Niami says, “has a wine room, pool table, bar, ballroom, separate family room, and a pool.”
It’s designed in a style that Niami describes as “French Regency-Contemporary,” which means that it’s slightly less glassy than his previous houses. He is developing a house next door, he says, “and I didn’t want to do two contemporary houses next to each other, which is why we did this in a kind of French, or European, style.” Still, he says, “it’s California living.” To that end, there’s ample outdoor entertaining space, and French doors open onto a pool that’s intersected by a marble walkway.
Like the rest of Naimi’s projects, there’s a profusion of marble and high-end finishes throughout the house, while the furniture, which comes with the house, is a melange of massive couches, tables, and comfortable chairs. The only thing that isn’t included in the sales price, Niami says, is the art—and, he adds, a motorcycle posed by a spiral staircase. “That’s my personal motorcycle,” he says. “But if someone wants it, everything in the house can be negotiated.”
That flexibility might come in handy, given the current state of Los Angeles’s real estate market. Sales in L.A.’s luxury tier were down 9.6 percent for the second quarter of 2018, according to the most recent report by Douglas Elliman. The average price per square foot, the report continued, was down slightly, and it noted that “luxury listing inventory expanded faster than the overall market.” In Bel Air, the average sales price was down a whopping 21.6 percent, according to the same report, and the average price to square foot fell with it: down 19.6 percent, to $1,207.
“There are a lot of properties on the market, and we’ve found that with some properties, there’s some aspirational pricing that brokers are using,” says Stephen Kotler, the chief executive officer of Douglas Elliman Real Estate’s western region.
Those properties are still selling, he says—his company listed a $78 million, 31,000-square-foot house in Holmby Hills earlier this week—“but you have to work with the seller to come up with a good pricing model that will be well-received by the market,” he says.
Kotler says that his team did a review of the entire LA market for a recent sales meeting and discovered that “inventory is up 50 percent year over year,” he says. “It was very revealing, and the reaction from our sales folks was that it’s a hugely opportunistic time for buyers.”
The cause of the glut, he says, is simply market timing. “When you’re running after a market, you try to bring your product to market while it’s still strong,” he says. “There’s a lot of stuff that was planned two years ago [when sales were booming] that’s just coming onto the market now.”
The Very Top
That roughly tracks with Niami’s timeline for the property. He says he bought the lot about three and a half years ago for around $17 million and then divided it in two. This house has taken him nearly that long to construct; building costs, he says, were $1,200 per square foot, meaning that, all told, he’s spent nearly $41 million on it.
But given that he’s charging $65 million for a 27,000-square-foot house—which comes to about $2,400 per square foot, about 16 percent higher than the luxury average listed by the Elliman report—Niami is still aiming for the very top.
“I just got an appraisal for the house that was almost $60 million, not including the furniture, so I must not be too off-base,” he says.
And if it is too much for the market to bear? “We won’t know until we go in,” he says. “If we need to reduce the price, we will.”
©2018 Bloomberg L.P.