Each week, I normally like to write about cold hard numbers or analyze recent comparable sales.
Numbers do not lie and comps formulate home values. Plain and simple.
That said, for this post, I am going to highlight a few brand new listings. I normally stay away from new listings as they do not tell as much as closed sales data. Until they go to escrow or close, it is merely just a property for sale – that may or may not make a deal.
The properties I am sharing this week are not only fun to highlight, but I am going to break down how one might approach these properties as a buyer.
Now, the best part is that these listings are “ultra-luxury” for the South Bay. Only a fraction of the 1% can afford these properties, but that does not mean we cannot value them.
In fact, it will be a great exercise for readers as they can apply these lessons to their future real estate moves over the course of their lives and careers.
The two properties this week share something in common: double-lots.
Not only are they double lots, but they are in coveted areas where it is extremely difficult to acquire two side-by-side lots, let alone find listings that are totally turnkey.
In brief, there are no exact comps for this listings, but one must attempt to try to find a way to value these special properties. So, I’ll share some ideas and analysis.
For these listings, I am going to hone in on two specific areas, Manhattan Beach’s Sand Section and Palos Verdes Estates’ Lunada Bay Bluffs.
Let’s dive in!
Manhattan Beach Double Lot for $37 Million
First up is the Manhattan Beach Sand Section.
When people think ultra-luxury and record-high pricing, they think about famous homes on The Strand. And, that would be the right thought!
However, this example is maybe the second most popular spot in the Sand Section, Manhattan Beach’s unique and desirable walkstreet properties.
Below, I will break down the stats of each home and then give context for the property.
117 34th Street
7 beds, 10 baths, 7,605 sq. ft., built in 2018
This property combines not one, but two 30 x 90 walkstreet lots, owned and controlled by the owner. As you can see, this is virtually a new home, built in 2018, that boasts a five-bedroom main house.
What walkstreet properties normally lack is its outdoor open space. But, this listing solves that problem with a two-bedroom guest house that allows for more walkstreet frontage to be enjoyed. What’s more, there is a pool/deck area with a disappearing floor system that can convert the space from pool to patio in a matter of minutes. Wow!
So, how does one go about valuing a property like this?
Unfortunately, we do not have all day to do a deep dive analysis, but I am going to give you a summary of how we advise clients on a property like this.
The process to breaking down a property similar to this one is to study sales that determine lot value, as well as brand new fabulous homes on single lots to try to estimate the value of a unique, coveted, and rare property like 117 34th Street.
Below is the most recent 100-block single lot land sale that closed this week.
124 2nd Street
3 beds, 2 baths, 1,750 sq. ft., 30 x 90 lot
This is a single-family home destined to be a tear-down with few restrictions as a SFR unit.
Another example is this home below, which was another recent newer home sale that closed last month and was a topic of a recent blog post.
221 19th Street
6 beds, 7 baths, 5,650 sq. ft., 30 x 90 lot
This property sale was a spec home back in 2019 that resold off-market this summer for a premium.
Now, we can argue that closer to the pier is more valuable or less desirable, or that the homes are different, but I am giving you a baseline summary here to make some quick calculations.
There are a few ways to value a property with these data points using hypothetical scenarios.
Get extremely lucky and acquire two side-by-side lots for around $6 million each, for a total of $12 million.
Then, let’s assume a very generous $1,000 a square foot to build a 7,600 square foot home, which would cost $7.6 million. I think we can even round up to $10 million to be incredibly conservative.
That is $22 million to recreate the subject property asking $37 million.
Get even luckier and buy two brand new homes side-by-side for $13 million each, for a total of $26 million.
And of course, there is always a potential variation of buying a new home for $13 million and then buying a neighboring tear-down property for $6 million and spending, say for example, $4 million to build a guest house and Houdini pool. That would cost around $23 million ($13 million + $6 million + $4 million = $23 million)!
Buy a turnkey-ready-offering like 117 34th Street for $37 million or negotiate lower (or in rare cases beat out multiple bids and buy it higher).
Here is what it comes down to…
Good luck acquiring two side-by-side properties. And, if you do, does one want to spend three to four years of time, energy, stress, and capital to recreate this property?
Many would say to save over $10 million – they might take on the work/stress, but again, one could wait years, if not decades to acquire the right land or combination of home and tear-down.
Or, you can take the numbers above and realize that there is likely a premium one might pay (or discount) to skip the hassle of building and the small chance of finding side-by-side properties.
Is $37 million the price you are willing to pay? Or, is it a number higher or lower?
Each buyer’s answer will likely be different.
Palos Verdes Double Lot for $35 Million
Next up is Palos Verdes Estates’ Lunada Bay bluff-top on Rocky Point.
When people think of record-high pricing in Palos Verdes, they normally think of expansive acreage, big views, and large homes behind the gates in Rolling Hills. And, they are not wrong, but for this scenario, we are focusing on a different highly desirable part of the Hill.
While Rolling Hills a large chunk of ultra-luxury homes on the peninsula, another massive chunk typically occurs in Palos Verdes Estates in Lunada Bay, Montemalaga, and Malaga Cove (sorry, Valmonte).
So, this listing example below at the tip of Rocky Point is where you will find some of the most highly desired properties on all of the Palos Verdes peninsula.
Again, I will breakdown the stats of each home and then give context surrounding each subject property.
245 Rocky Point Road
7 beds, 9.5 baths, 12,472 sq. ft., built in 2016
This special property combines not one, but two bluff-top lots on the western-most point of Rocky Point. That is an incredible 1.15 acres atop pristine southern California coastline.
This estate offers multiple residences with over 12,000 square feet of living space. The finishes are to die for with no expense spared, from French limestone to Waterworks fixtures to reclaimed wood beams to a 1,200 bottle wine cellar…I could go on and on.
You have it all from views to the sound of the ocean, a pool, and large estate, all within the privacy of a gated property in Palos Verdes just a short drive to all of the South Bay and much of greater Los Angeles. What is not to love?
So, how does one go about valuing a property like this?
The process the second time around here is to find lot value and newer construction comps…although, new construction is rare, if not impossible to find on the Palos Verdes Estates bluffs.
These are the most recent sales one would look to…
269 Rocky Point Road
2 beds, 3 baths, 14,243 sq. ft. lot
This home is essentially tear-down value on Rocky Point, however, the lot is quite small and one would need to acquire, not two, but three of these lots to truly match up to our subject listing.
2005 Paseo Del Mar
5 beds, 4 baths, 4,582 sq. ft., 51,277 sq. ft. lot
This Paseo Del Mar sale demonstrates what a larger estate or lot could sell for. However, I would argue that although it may be livable for some, it is in essence a tear-down for most.
As much as I would like to use it as a “newer” comp, a 1970s-era home just doesn’t qualify.
Unfortunately, there is just nothing along the Palos Verdes Estates bluffs that has sold even close to this $35 million offering in newer condition, which makes valuation even more difficult than the Manhattan Beach example above.
So now, let’s again use hypothetical scenarios with land value, construction costs, etc. to brainstorm our approach to this analysis.
When it comes to lot value, one can argue essentially two ways: 1) the $6.8 million Rocky Point sale times three, or 2) the Paseo Del Mar sale at about $12.5 million.
If you assume 12,427 square feet at $1,000 a square foot to build, then that cost is about $12.5 million. And, quite frankly, the foundation and caisson work on the edge of a bluff is a massive construction job unto itself.
Do you round up to $15 million to be conservative? And, throw in another $5 million for caisson and foundation work?
I am no engineer, contractor, or architect – so again, use these as extremely rough estimates (and as always be sure to solicit proper professional advice from the appropriate experts).
So, is land value $12.5 million to $20 million? And, are construction costs $15 million to $20 million?
A wide range would be $27.5 million to $41 million to replicate this offering, and if I had to estimate, you would likely land somewhere in the middle.
As another option, do you set your sights on a property that is a little older to claim a discount to $35 million? I am talking about a 2007 build, on a smaller lot with different views/privacy…
2729 Via Oleadas
5 beds, 8 baths, 11,810 sq. ft., 35,179 sq. ft. lot
There is no denying that this is an incredible Lunada Bay property, but does it live up to the Rocky Point Road offering? And, would one be willing to “settle” for this home to save $11 million?
Side Note: Via Oleadas has been on and off the market for years asking around its $24 million price since 2018. I think it was a very smart and strategic move to for it to hit the market yet again just six days after Rocky Point Road listed. This one will be fun to monitor and see which coveted listings makes a deal first.
And finally, let’s dive into the last scenario similar to our Manhattan Beach case study.
Does one absolutely fall in love with the $35 million property? Is it even worth the time, energy, and stress to build the home from scratch by acquiring lots to try to match this estate? So, do you just go for this now and start negotiating?
Do you pay-up on the $35 million price or work to negotiate to a price that makes you happy?
As always, each and every buyer’s answer will be different based on their unique motivations.
Final Thoughts / Conclusion
In turn, all buyer’s have different motives for purchasing or recreating an amazing estate property, but the scenarios above are just a few of the many options one has when valuing and analyzing their home purchase and building options – especially when it comes to these unique, once-in-a-lifetime ultra-luxury listings.
My hope is that this general outline of how we breakdown ultra-luxury properties is valuable to you.
1. Figure out land value.
2. Understand rough construction costs to recreate.
3. Soul-search on if you have the time, energy, and stress tolerance to build? And based off that, what is the premium or discount would you be willing to pay for these truly special properties?
From there, you can make the best decision for yourself.
Each buyer is different, and will likely come up with their own numbers.
With that said, for the 99.99% reading this – these $30+ million listings are out of reach, but it is fun to dream.