Los Angeles voters recently passed Measure ULA which calls for a 4% tax on the transfer of properties in the City of Los Angeles valued between $5 million and $10 million, while those valued at $10 million or above will pay a 5.5% tax rate on sales, starting April 1, 2023. The question is how will the new tax affect high-end real estate transactions and prices.

Measure ULA may have been a factor in the $55 million sale of Mark Wahlberg's mansion and the $52 million sale of Villa Firenze. It would not be surprising if there are other high-end sales completed in LA prior to the ULA effective date, and then we might expect a slowdown in sales given that sellers will get hit by the extra tax starting in April. It also appears to be a factor in the pending property auction that has been the subject of several press articles (links below). Senderos Canyon is a 263 acre property representing a hard to believe 6% of Bel Air California. Sendero is Spanish for walking trail, or path. It has been on the market for years, most recently for $60 million, down from $125 million in 2013. It is now up for auction with a minimum bid of $39 million. Bidding opened January 24 and scheduled to end on March 15 with the seller likely hoping to close before ULA becomes effective on April 1, 2023.

There is a chance Senderos Canyon will not sell given they have a $39 million minimum, it will take a lot of time and money to develop the property, interest rates have risen sharply, and now we have a banking crisis that could be affecting some potential buyers. Yet many of the comps below imply a higher valuation. After last year's auction of The One (which sold for $141 million net of fees) many were surprised when Richard Saghian (Owner of Fashion Nova) announced he was the winning bidder, and there is of course a good chance the next buyer of Senderos Canyon will be a surprise. Councilwoman Katy Yaroslavsky has proposed the City of Los Angeles should buy Senderos Canyon. For fun, below I've listed some some potential buyers of Senderos Canyon. Each is a long shot, but I would not be surprised if one of these were involved.

Links and Refences

• Senderos Canyon Website with 2 minute Vimeo video (or here on youtube)
• Paramount Realty Auction
• PR Newswire Press Release
• Tamkins Listing
• Compass Listing
• Asked $125 million in 2013.
• Scott Edward Video with listing agent Scott Tamkin (2/3/2023)
• Articles
  • Land in Bel-Air Hits Auction Block at 70% Discount. Bids Start at $39 Million by John Gittelsohn for Bloomberg (1/24/2023). In a 2/3/2023 follow-up, Gittleson wrote about Councilwoman Katy Yaroslavsky's motion that the city of Los Angeles should try to acquire the tract to protect the canyon from development and preserve it for wildlife and public access. The suggestion is to identify government sources of funds while potentially partnering with conservation groups.
  • MansionGlobal article by Fang Block (1/24/2023)
  • A huge chunk of land in Bel-Air is going up for auction by Jack Fleming for The LA Times (1/25/2023)
  • 260 Acres of Private, Undeveloped Land in Bel-Air Are up for Auction by Dana Givens for Robb Report (1/26/2023)
  • DailyMail (UK) article by Alex Oliveira (1/26/2023) suggests about 20-acres are construction ready.
  • Bel Air’s 260-Acre Spread, Representing 6 Percent of Neighborhood, Goes to Auction by Degen Pener for HollywoodReporter (1/28/2023)
    “This property falls into a category we commonly refer to as unique and difficult to value — these types of properties really make great candidates for an auction ... Someone could build up to 17 homes by right ... This could really be the ultimate playground for the high-net-worth individual.”
• The Comparables
  • Large properties that can be developed into trophy mansions or can be sub-divided into multiple large homes.
    • The Mountain is a 157 acre property that is not currently publicly listed, but was on the market several times (once asked $1 billion) before being auctioned and returned to the Mark Hughes Estate. Senderos has more acres and is west of The Mountain, but is primarily a canyon, whereas The Mountain is the highest point in Los Angeles. The Mountain is also effectively ready to build (either one massive structure or configured for six still huge homes). See Vanity Fair 2022 article and video.
    • Enchanted Hill is a 120 acre property that previously had been the playground of Hollywood stars before being acquired and flattened by Paul Allen, who had plans to redevelop it before he passed away in 2018. Eric Schmidt of Google fame purchased the property at the start of 2022 for $65 million (Jeff Bezos almost bought it before Schmidt did). Also east of Senderos, but like The Mountain has lots on high ground, is ready to build, and also has two access streets.
    • Olive Hills (9650 Royalton - 66 acres) and Cedarbook (37 acres). Mohamed Hadid had planned multiple nine figure properties for the hilltops just east of Franklin Canyon, but ran into snags including well funded and legally adept local residents, which appears to be similar to Michael Scott's abandoned plans to develop his "Giga Mansion" that ran into opposition from Save Our Hillsides.
    • 3075 Nicada Drive is a 25 acre parcel in upper Bel Air by the Stone Canyon Reservoir on the market for $15,000,000. Like Senderos it can be developed into one or many (5 in this case) properties. It also has two addresses (second at 2825 Bottlebrush).
    • Park Bel Air is a 10 acre property that was marketed for $150 million then split into three properties with the first selling for $25,000,000 while the second and third are still on the market.
    • Stella Nova is a 30 acre partially developed hilltop property just southeast of Senderos. It was marketed for $60 million in 2019, but ended up selling for $20,600,000 in 2021 (video).
    • 10701 Levico Way 90077 is an 8.8 acre parcel that was asking $24,995,000 (listing removed 2/1/2023) (down from $35M - don't know if it can be sub-divided).
  • Single property lots that support a high valuation for Senderos based on actual sales.
    • 800 Stradella is a just under 2 acre site that sold in 2019 for $37,500,000 (with a very interesting history).
    • 1100 Bel Air Road is an over 4 acre partially developed property that sold for $35,000,000 in 2022 (and also has some interesting history).

Potential Buyers?

• Larry Ellison. Why? One of the world's richest people and one of the biggest residential trophy property owners in the USA, Ellison reportedly already owns at least a dozen properties in Malibu.
• Ken Griffin. Why? Because he's been buying more trophy real estate globally in recent years than anyone else, and his hedge fund just had the best single year ever for any hedge fund. I haven't seen any publicly disclosed purchases in California for Griffin, but its possible he owns some. He does however own a home on the Big Island of Hawaii so if he wants a stop over in California to escape the summer humidity in Florida, Europe, and the East Coast, why not diversify into a massive chunk of Bel Air.
• Stan Kroenke. Why? He built the massive SoFi Stadium where his Los Angeles Rams play, and he is also one of the biggest land owners in the world.
• My favorite for a developer of Senderos is Rick Caruso. He knows how to get projects approved, develop them, has the cash, and loves LA. Now that he's freed up from politics, maybe he'd like to take a shot at improving LA by developing Senderos Canyon. Fight On Rick!
• Local developers that could be logical buyers include Scott Gillen and Ardi Tavangarian. But both are already involved in huge projects. Gillen previously bid $400 million for The Mountain, but after being spurned went on to pay $50 million for a huge property in Malibu that he is currently developing into five high end homes, the first now listed for $70M. Tavangarian recently sold several trophy properties, but also recently purchased several other properties that we'd assume he is now developing including several properties from Elon Musk.
• There are many other experienced local developers that might be logical prospects for Senderos, but there is also a lot of high-end inventory on the market. For example, Jeff Greene has the experience from developing the huge 25 acre masterpiece Palazzo di Amore, but he's been trying to sell or lease that property for years.
• One of the dozens of owners of adjoining properties. Imagine owning a home in Bel Air next to Senderos canyon and being able to put in a gate and walk right into your own park (in particular the owner of Stella Nova - see above).
• A collective of local residents that want to keep the property undeveloped and available for hiking, like the group led by Attorney Ron Richards that bought one of Mohamed Hadid's properties (see above).
• Very Long Shots
  • Jeff Bezos almost bought Enchanted Hill and also reportedly considered buying The Mountain.
  • Jan Koum bought multiple Nine Figure Properties (NFPs) in recent years in Beverly Hills and Malibu, so why not go even bigger (in terms of acres).
  • Elon Musk sold his properties, but he's also pragmatic and takes on big challenges.

Last updated 3/14/2023. Copyright © 2023 InvestorHome.com. All rights reserved. Disclaimer