Playboy Mansion Sells!

Hotel Bel Air“Ultra High-End Real Estate: A Collectible, Not A Commodity “
When it comes to Los Angeles ultra-luxury real estate (defined here as $20 million and above), trying to place a rational value on a property is akin to trying to understand why the Kardashians are famous. The short is answer to both of these questions is “because.”
In the sphere of the “mundane mere-mortal” level of real estate (let’s say up to $5 million), real world metrics such as price-per-square-foot and “comps” to similar properties hold sway with regard to valuation. Paying $1,200 a square foot for a six bedroom home can seem rational when you can peg the price to a sale down the block. (It’s also the price point at which banks try to make sense of the value in order to underwrite the loan.)
But when it comes to truly elite real estate, the price tag is tied more to ego and ability (to pay large sums of money) than any rational metric. At this price range, a buyer is not buying a “home,” but rather a “residence” — which means it is more of a collectible than a commodity. Similar to any rarified collectible (such as watches, pens, cars, or art), sellers of ultra-high end real estate set the price based on “Because I can.” Buyers for these properties base the actual purchase price on “Because I can,” “Why not,” and “Let’s see.”
For instance, in 2011 Candy Spelling priced her Holmby Hills estate at $150,000,000. No one who works in this segment of the market dared to ask  “is it worth it?” Rather, we took a spectator sport view and waited to see who would step up to the plate. 23-year-old racing heiress Petra Ecclestone was able to get the property for $85 million (value pricing if I’ve ever seen it). 
Was it worth $85 million dollars? Unequivocally, yes, in much the same way Picasso’s “Nude, Green Leaves and Bust” is worth $106 million: It’s worth that much because someone paid it. The same holds true for unique properties. [The one place where elite properties may possibly have “comps” would be Malibu’s Billionaires Beach, where prices are paid based on beach frontage and Larry Ellison’s mood.]
The current big story is Pabst Brewing & Hostess heir Daren Metropoulos’ purchase of the famed Playboy Mansion. Also priced at $150 million, and purchased for $85 million, in this case, I think Metropoulos got a steal. Why? Well, first off in 2011 the real estate market was still 2 years away from “bubble recovery,” so one might think that the price would have been higher. That said, in this case I would blame a smaller buyer pool on Hugh Hefner’s demand for a lifetime lease. Plus, being 1927 construction, with 27 bathrooms, who would want to be a landlord?

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