After $50 Million Price Cut, a Vast Bel Air Property May Still Struggle


(Bloomberg) -- Senderos Canyon, a roughly 258-acre tract land on the edge of Los Angeles’s Bel Air neighborhood, came on the market in 2013 with an asking price of $125 million. Three years later, without any takers, the owner delisted the property. “As far as I know, there were no offers, and nothing was serious enough to make it go anywhere,” says Scott Tamkin, a broker at Compass.

On Monday, the property came back on the market with a heavily reduced, $75 million price tag, which comes to about $291,000 per acre. “If you’re looking at a map of the area and zoom out, you can see this raw parcel of land with everything built up around it,” says Tamkin, who is representing the listing with his wife Melinda Tamkin. “It’s really exceptional.”

After $50 Million Price Cut, a Vast Bel Air Property May Still Struggle

Covering what Tamkin says is 6% of the total land area of Bel Air, the tract is indeed unique. But it’s also notable for other, less glittering reasons. While the average sales price in Bel Air has sagged this quarter by 6.1%, according to a report by Douglas Elliman and Miller Samuel, Senderos Canyon’s 40 % price cut puts it in a league of its own.

What could cause such a singular property to depreciate so dramatically over the last six years?

Aspirational Pricing

First, Tamkin says the property’s initial asking price was unrealistic. “At that time, the market was a little bit different, and developers and sellers were listing properties at high numbers,” then willingly taking major price cuts, he says. “We’re in a market now where the reality is that prices need to be in the range that buyers want.”

After $50 Million Price Cut, a Vast Bel Air Property May Still Struggle

The second reason has to do with zoning.

The land, which comprises three separate assessed parcels, is completely un-entitled. That means there’s no power, plumbing, roads, sewers, or infrastructure of any kind, and whoever buys the property would need to get permission from the city before they could install that infrastructure.

“Someone is going to have to do their due diligence,” Tamkin says. “We haven’t done any exploration with the city—and frankly, zoning changes frequently, so what we find out now might not be the reality in a year’s  time.”

The Process

For any developer beginning to feel out what that process might look like, they might find the story of the Park Bel Air instructive. 

“The big difference is that we bought land that was already zoned for residential use,” says Barry Watts, the president of Domvs, which co-developed that 10.6-acre, $150 million property with Junius Real Estate Partners, the real estate investment arm of JPMorgan Chase & Co. “We weren’t going to the city for a change of use, which is pretty significant.”

Even so, Watts had to go through a four-year process that included submitting plans for houses, schedules for hauling dirt, and requests to cut down trees in order to make the land “shovel ready.” (Just the permit to cut down a tree took him 18 months, he says.)

A Senderos Canyon buyer might find it all a much longer journey. 

After $50 Million Price Cut, a Vast Bel Air Property May Still Struggle

Emphasizing that he was speaking speculatively, without detailed knowledge of the logistics of this particular property, Watts says that he “wouldn’t be surprised if this would be a 10- to 15-year project.”

The planning process could take three years alone, Watts says, and the permitting process an additional three or four. “And that’s if you don’t get any [nearby] residents saying they don’t want dirt getting hauled. At the moment, they’re staring at a beautiful hillside, and one would think the residents wouldn’t accept that you’re going to change that.”

Tamkin, for his part, says that the tract is brimming with possibility.

“Two of the parcels are zoned equine-ready for horses,” Tamkin says. “What kind of things can be done [on the property] needs to be explored, but it could be a country club with a riding ring and riding trails, it could be a vineyard. There are multiple opportunities.” 

There’s also potential for the property to be subdivided into smaller lots. “Could 20 single-family home parcels be built?” Tamkin asks. “There’s a real possibility that that could happen.”

That, however, might run into the area’s relatively recent “anti-mansionization” codes, which are intended to curtail the construction of mega-mansions and the resultant disruption to the neighborhood. “There was a lot of upset about the amount of earth being removed,” Watts explains.

The Cost

So what is the whole tract actually worth? On this, Watts begs off. “How long is a piece of string?” he says. “It totally depends on what you’re trying to achieve.”

Depending on a developers’ goals, Senderos Canyon’s $75 million price tag could either be prohibitive or a bargain. Taken in a vacuum without considering the land’s unique development costs, the price is roughly on par with other undeveloped land in the area.

“To be totally frank, the calculation for prices for raw land like this is like throwing a dart at a board,” Tamkin says. “There’s really nowhere definitely that says: ‘This is what the value is.’ It’s not like selling a home, where there’s an exact comp.”

Given the apparent decline in high-net-worth overseas buyers in the L.A. market, and with financial markets signaling an imminent downturn, the price could still be considered fairly optimistic.

In that respect, while the property might be marketed to billionaires, it’s much like the rest of the West Coast housing market, which has officially become a buyer’s market.

“The seller’s motivated,” Tamkin says. “He’d definitely like to sell it and be done with it.”

©2019 Bloomberg L.P.

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