Mega-mansions suffer massive price cuts at real estate auctions
View from the air of Villa Firenze’s grounds in Beverly Hills.
When high-priced mega-mansions languish on the market — sprawling, flashy and unable to attract a buyer — some owners turn to a double-edged option: a real estate auction.
After years of sitting idle, the auction block is able to quickly move expensive properties that have been around for many years. This is a hard reality.
A CNBC analysis of the most recent auctions found that an auction can be a literal real-estate guillotine. It cuts inflated asking price in half, or worse.
Each of the three most costly homes to ever sell at auction came up for sale within the past fourteen months. And while each transaction carried an eye-popping final bid, the three mansions saw their original asking prices slashed by 70% on average — leaving a combined $600 million on the table.
It’s an unfortunate fate that could come about again, this time for a dermatologist-turned-developer whose home has an upcoming date with the auctioneer.
Alex Khadavi (a Los Angeles celebrity skin doctor) was looking for an easy sale and large payday. It took seven years and millions to create a house measuring 21,000 feet.
But a little over a year after he listed it for sale — with a price tag featuring a string of lucky 7s at $87,777,777 — the doctor’s dreams of cashing out are being crushed by a mountain of debt, unpaid contractor bills, bankruptcy court proceedings and trouble with the law.
He is now short on time, luck and money.
Khadavi applied for Chapter 11 bankruptcy protection just two weeks after placing the house on the marketplace.
He told CNBC, “The house is sandwiched among billionaires and I’m not the richest guy on the block,” with a grin.
Dr Khadavi was seated in the DJ booth which rises from the floor of his Bel Air spechouse.
Khadavi said he had a hard time designing the Bel Air home, with seven bedrooms, eleven baths and an over-the top feature list that includes a glass-encased elevator, giant car gallery, stealth DJ booth, subterranean hydraulics-powered marble floors, and high-tech audio-visual systems for projecting non-fungible tokens (or NFTs) inside and outside.
Khadavi explained, “It was a hobby and an obsession that cost me more money than I realized.”
A public record shows Khadavi paid $16 million in 2013 for the lot at 777 Sarbonne Road, which included an existing home he later demolished. A string of financing deals in seven figures followed, with a $27 million loan for 2020 and a substantial loan for the future.
There were nine years of financial turmoil around the property. These included default notices, government liens, threats of trustee sales and mechanic’s lien filings by contractors who claimed that they had never been paid.
Khadavi, a heterophobic homophobic man, was also allegedly captured on surveillance cameras in his apartment building lobby using homophobic language and threats to kill his gay neighbors. Khadavi has pleaded not guilty. CNBC reported that Khadavi had not commented on the ongoing case.
Khadavi completed the home despite his legal difficulties. But he did not expect that he would have to pay the full cost of the property for more than one year, while waiting for a buyer. He has no other options but to accept that the value of his home will be determined soon at an auction.
“I cannot bear the cost.” He stated that he had to do what he had to.
View of the driveway that leads to the Bel-Air residence located at 777 Sarbonne Road, Bel-Air.
Joe Bryant/Aaron Kirman Group
Khadavi, along with Aaron Kirman, of Compass, and Mauricio Urmansky, of The Agency, came up with the idea of selling the house quickly.
His timeline was very precise. Kirman said that he would give up some control and allow the market to determine the price at a tight moment.
Concierge Auctions will handle the sale. The reserve is set at $50,000,000, meaning Khadavi won’t accept any offers lower than that amount. The bidding is set to start on April 21, and the auction will unfold over five days — the standard duration for most of the company’s home sales.
The living room is accessed via a glass-and marble bridge that leads to the owners’ wing.
Marc & Tiffany Angeles / Aaron Kirman Group
Kirman stated, “It’s very short, which could be either good or terrible,” as Concierge recently collaborated with Kirman on the sale of 944 Airole Way. The mega-mansion, valued at $141 million, was up for auction.
Khadavi believes that this big sale will bring good results for his next auction. Although he feels the view from 777 Sarbonne in itself is well worth its $87.78m asking price, Khadavi admitted that he would prefer millions of dollars.
Khadavi said to CNBC, “My magic number” is $77million. His favorite number is 7.
“I would like it to be this. That would be incredible.
Views of the Skyline from Infinity-edge Pool 777 Sarbonne
Joe Bryant/Aaron Kirman Group
CNBC spoke with Laura Brady, Concierge CEO and founder. Brady said that most of their clients choose to auctioneer after failing to sell themselves. However, homes sitting on the market with an extremely high ask for too long won’t be able to fetch that auction price.
Brady explained that “Those who are on the market before auction, particularly if they’ve had a listing for at least a year, will struggle to exceed their list prices at auction as they’ve been exposed at these prices.”
The modern home of Khadavi will be among the most expensive homes sold in auctions if it sells at least $50 million.
Below is a listing of the 4 most costly sales made at auction. Also, a detailed look at who was involved in these mega-deals.
The Hillsboro Beach mansion, measuring 60,000 square feet, was built in Versailles style and first came on the market in 2015. Its record-breaking $159 million price tag made it one of the most expensive homes ever sold. It was at the time the most expensive Broward County listing ever. The county borders Palm Beach County and Miami-Dade.
Le Palais Royal was a luxurious home that featured 22k gold leaf accents throughout. It also features several waterfalls and a large, 150,000 gallon pool with resort size in its oceanfront backyard.
In the master bedroom, gold-trim moldings
Robert Pereira II was the owner of the home at that time. Pereira’s father founded Middlesex Corporation in Massachusetts, which is a Massachusetts-based construction firm. The home went on and off market from 2015-2018. It was renamed Playa Vista Isle to Le Palais Royal.
Concierge put the mansion up for auction in 2018 The highest bidder was an LLC with ties to Andrew Mack, Teavana founder.
It sold with an undeveloped lot right next to it for $42.5 million. At the time, the price was the highest ever achieved at auction — yet it was still $116.5 million short of Pereira’s original asking price, cementing a price cut of about 73%.
Villa Firenze in Los Angeles’ Beverly Park neighborhood reportedly took seven years to build and includes 20 bedrooms and 24 baths, according to the listing brokerage Hilton & Hyland.
Steven Udvar Hazy (Hungarian-born billionaire), who made his fortune in airplane leasing and holds the current executive chair at Air Lease Corp.
He had been trying to sell his home since early 2021.
View from the exterior of Villa Firenze, Beverly Hills. California.
In 2017, the estate was listed for $165 million. This makes it the most valuable home in America. It sat vacant for 4 years, with no buyers. The price was then lowered to $160million in 2020.
However, the $5 Million Discount didn’t convince any buyer to make the leap. 2021 the residence at 67 Beverly Park Court went to auction with no reserve. This auction was also conducted by Concierge.
According to public records, the transaction was closed on April 20, 2021. The auction platform website states that the sale price was $51,000,000, which includes a buyer’s fee of 12% and a commission split by brokers for the listing.
Roy T. Eddleman Trust purchased the property. Eddleman, who was also the co-founder and ex-chair of Spectrum Labs in New York City, was purchased by Repligen Pharmaceuticals for $359M in 2017.
Eddleman’s winning bid for Villa Firenze represented a $114 million decrease from the billionaire seller’s original asking price — a bargain at 69% off.
Beverly Hills’ Hearst Estate is one of Beverly Hills’ most historic homes that has recently been put up for auction.
William Randolph Hearst owned this property, which has eight bedrooms and fifteen bathrooms. It was also featured in movies like “The Godfather” (which featured it) and “The Bodyguard”, where the mansion is seen prominently.
It was originally listed in 2016 for $195 million. The home was sold several times over the years and its value dropped to $48 Million.
The LLC which owned the house was served with notices of default for debts exceeding $26 million in 2019. The estate’s financier and litigator Leonard Ross saw his house go to auction in 2021.
Four listing brokers from three brokerage firms represented the listing, including John Gould of Rodeo Realty and Gary Gold of Hilton & Hyland. Gold and Gould attended the hearing to see the bidding war for billionaires that took place.
Gould says that five billionaires entered courtroom. The judge then started bidding at $48million.
He stated, “It’s exciting.” Judge looked around, taking bids from everyone in the room at $100,000 increments.
With the excitement building, Hilton & Hyland’s Gold said, it started to feel like the once-unattainable price tag could actually be in reach.
Gold explained, “You’ve got all this people absolutely ready to make their purchase and sit there with other people who want to do the exact same thing.”
“The main difference with these kinds of sales is that there are no contingencies. The gavel drops and you’re buying the house,” he stated.
In addition to the auction fee of 12%, the highest bid brought the sale price down to $63.1million. It was then transferred to Berggruen Holdings which is the charitable investment vehicle for Nicolas Berggruen.
The deal was then approved by the judge and each agent split a smaller commission.
The Hearst Estate was the highest-priced home ever sold at auction in October 2021. However, it still sold for $131.9million less than the asking price of 2016. This is a 68% reduction.
Although neither Gould or Gold were involved in the sale of the house when it was first put on the market for sale, both men stated that the difference between the asking and actual sales prices often speaks more to unrealistic expectations rather than market conditions.
Gold stated that anyone could request any property they wanted. The original asking price was $195 [million]”… It was just a pipedream of some seller.”
Rodeo Realty’s Gould explained that there is often “ego pricing,” in which an owner will ask a broker to price his house with a large number of dollars. It’s more about the homeowner’s pride and not market valuation.
He stated that in reality the properties “may be not worth anything close to that.”
Because of its unusual size, the megamansion has been called “the space station”.
The infamous mega-mansion called The OneIt is located high above Bel Air, and covers 100,000 square feet. There are 21 bedrooms and 42 bathrooms, as well as a 30 car garage and a 60-foot indoor swimming pool.
The $500 million price tag was the original reason Nile Niami originally made public about the behemoth.
CNBC’s Robert Frank walks alongside Nile Niami, developer of the megahome.
Built at 944 Airole Way in 10 years, it cost $120M to pay off the debt. Court filings show that the court fileds indicate this.
This mega-mansion was not completed when it was seized in bankruptcy court. It went to auction with no certificate and an asking price of $295million.
Concierge handled the auction. There was not a reserve set up to protect a bidder’s low end threshold. The winning bid in this instance would need to be approved by a bankruptcy judge. This is an uncommon situation. Brady states that only 5% are related to distressed properties.
Richard Saghian (CEO of Fashion Nova), offered $126 million for the mega-mansion. Saghian paid the auctioneer’s standard buyer’s premium of 12%, or about $15 million, bringing the total sale price to $141 million — far and away the most paid for a single-family home at auction.
A formal dining room seats 20 people and has a large glass wine cellar to store larger-format bottles.
In March, a judge in bankruptcy approved Saghian’s sale. But it was not enough for him to be content.
Saghian, a spokesperson for CNBC said that he recognized the opportunity as an “alive Angeleno” and an avid collector of real property.
In a neighbourhood where homes of comparable value can be found for three to four times the price, Saghian paid $1,342 per sq. foot. Experts say that Saghian would need to invest many more dollars to complete the house and get a certificate of occupancy.
This foyer features 25-foot ceilings, large sculptures resembling serpents, and views overlooking downtown LA.
“We did everything that was humanly possible to get the highest number,” said Compass agent Kirman, who served as a court-approved listing agent, along with Williams & Williams.
Kirman expressed disappointment with the outcome of the auction.
CNBC was told by the broker that he expected the winning bid to exceed $177million. That’s a record-breaking price, which was set back in October for a smaller Malibu home.
I wanted to set a new record. “I meant, I wanted, you know. $200 [million]Kirman added that Kirman could have said more. We were disappointed, but it was the market that spoke.”
View of Los Angeles from the megahome at sunset
After the auction fees were paid, Saghian still managed to secure $359million, almost 72% of the original cost, which was set 10 years ago.
Kirman stated that the nine-figure gap was “ludicrous.” If you take a look at luxury real estate’s high end, it is more common than not. when you’re talking about a mega-mansion, they have sold for pretty much half the price.”
Corrected: The story now states that the property at 777 Sarbonne Road will be up for sale starting on April 21. A previous version misrepresented the date. This story was updated to correct the spelling of Roy T. Eddleman’s name and the Roy T. Eddleman trust. This has also been changed. Playa Vista Isle can be found in Hillsboro Beach (Florida); an earlier version of this name mislead the community.