Speculators see hills of gold

Jan.January 12, 2017 07:00 AM
The Hollywood Hills, where home prices have soared.

Tourists who flock to the Hollywood Hills for a photo op with the city’s famous sign may imagine that the hills are alive with the impressive mansions of the Silver Screen’s rich and famous.

They are, but many of the homes and building lots are also in the hands of Internet entrepreneurs and speculators — especially in the sections where it’s relatively easy to win permission to tear down existing structures in order to construct custom homes to desired specifications.

The uptick in teardowns, driven by tech titans as well as financiers and real estate investors, is pushing up home prices in the Hollywood Hills.

“Today, tech entrepreneurs will pay over $20 million for a property because they not only have that money, but they are making money on top of that,” said Zach Goldsmith, an agent with Hilton & Hyland and Christie’s International Real Estate, which are affiliated.

Welcome to the Wild West

Market experts say the far west side of Hollywood Hills is a bit like the Wild West of old when it comes to development.

Crosby Doe, founder of brokerage Crosby Doe Associates, said the mansion-studded west side of Hollywood Hills — starting around Laurel Canyon and extending to the Bird Streets in the far west — has benefited in recent years from a small number of speculators purchasing lots and properties in the $14 to $20 million range in an area not wedded to neighborhood preservation.

However, he cautioned that the rampant price appreciation on the west side of the Hollywood Hills could lead to disappointment in the next economic downturn. “Speculation is less prevalent” in the east side of Hollywood Hills, he said.   

Some of the loosest building restrictions are found in the Bird Streets, dubbed for street names such as Oriole Drive, Skylark Lane, Nightingale Drive and of course Blue Jay Way, which was immortalized by former resident George Harrison.

As a result, many big spenders — from rap stars to high-tech entrepreneurs — are drawn to the area, which lies north of Beverly Hills and Bel Air, as well as to Sunset Plaza, which overlooks the Sunset Strip of West Hollywood.

“Even five-year-old homes are being torn down for new houses,” said Ben Bacall of Rodeo Realty. “To get the dream house with the view, clients are getting their hands on any property with a view and spending $5 to $10 million to grab that piece of land.”

This was evidently the case when hip-hop mogul Dr. Dre sold his home in the Bird Streets for $32 million to private equity firm founder Alex Soltani in January 2015. The Oriole Way abode was purchased for its land value, and the new owner tore it down to build a massive new estate on what was regarded at the time as the lot with the best view in Los Angeles.

This trend has been driving up home prices even when the buyer intends to live in the house rather than tear it down. While Bird Street home prices averaged as little as $2 to $3 million in 2009, today brokers say the cheapest listings are around $8 million.

Bacall said he noticed a real turning point in the market when he sold a client’s house to Matthew Perry, the actor from “Friends,” who paid $8.5 million for 9010 Hopen Place, or $2,260 a foot — a record at the time of the sale in 2011. Bacall said that prior to 2009, the going rate per square foot in the Bird Streets area was around $1,400 to $1,500. The actor’s three-bedroom, four-bathroom, 4,000-square-foot home is a custom-designed structure with a mid-century modern aesthetic and features a solar-and-gas heated spa and stunning city views.

But it’s not all the Wild West — there are some areas in the Hollywood Hills where building regulations are strict, notably the Hollywoodland neighborhood on the northern end of Beachwood Canyon. Here, neighborhood meetings are held to discuss minute home renovation details, such as putting up a new fence.

Tech-titan neighbors

While the Hollywood Hills aren’t exactly crawling with the billionaires and multimillionaires who have cashed in on the tech boom, there are plenty of notable neighbors from the industry.

In January 2012, venture capitalist Peter Thiel — PayPal’s co-founder and an early Facebook investor — paid $11.5 million for a 6,000-square-foot house above the Sunset Strip that was once owned by Hollywood restaurateur Dave Chasen.

From left: Cameron and Tyler Winklevoss, Peter Thiel

The Paul Williams-designed 1954 home, which was crafted with materials such as hand-split cedar shakes and Palos Verdes stone, also has features such as an open floor plan and curved walls.

Venture capitalist twins Cameron and Tyler Winklevoss (the guys who sued Mark Zuckerberg over the origins of Facebook) are also in the neighborhood. They put their 8,000-square-foot property in the Bird Streets up for rent with an asking price of $150,000 a month in March 2015. By October 2015, they had dropped the rent to $110,000. It was still available for rent at press time. Purchased in 2012 for $18 million, the contemporary two-story structure is outfitted with amenities including a theater, bar, office, five bedrooms and nine bathrooms, and an infinity-edge swimming pool with a spa.

Megan Ellison, daughter of Oracle chief Larry Ellison and founder of movie production company Annapurna Pictures, spent her downtime between 2008 and 2011 amassing several neighboring Bird Street homes for the then royal sum of $32.6 million. The properties included two brand-new homes and another home that received a “down to the studs” renovation to update its appearance. 

In 2013, Ellison sold the properties for a total of $46.8 million, over $14 million more than what she paid. She sold one house to Gateway cofounder Ted Waitt for $20.5 million. She sold the other two homes to Ashley Tabor, son of British bookmaker Michael Tabor, for a total of $26.3 million.

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