$70 Million Price Cut for Massive Peninsula EstateNovember 11, 2016
On the market for $100 million in 2013, the asking price for the 47.5-acre de Guigne estate at 891 Crystal Springs Road in Hillsborough, which includes a classic 16,000-square-foot mansion, was dropped to $39.9 million last year and the condition that the buyer grant the seller, Christian de Guigne IV, a life estate in the property, maintaining his exclusive use of the estate until he passes, was dropped as well.
Seven months ago, the list price for the estate was reduced to $34.9 million.
And this afternoon, the asking price for the mansion – which was designed by Bliss & Faville (architects of the St. Francis Hotel), built for the de Guigné family in 1912, and last renovated by Anthony Hail in the 1960s – was quietly reduced another 14.5 percent to $29.85 million.
A proposal by Mr. de Guigne to subdivide the estate, which is one of the largest privately owned parcels on the San Francisco Peninsula, and build 25 new homes upon the property (versus 10 as the town’s general plan would appear to principally allow) was floated in 2009 but never came to fruition.
Comments from Plugged-In Readers
Let me get comfortable in my ersatz developer armchair: at the current price this ought to pencil out. Figure a million to implement the lot split and construct the needed roads/utilities. At this point you’ve invested $31M and have one complete mansion and nine undeveloped lots, each about 4.5 acres. Figure conservatively $10M for the existing mansion and $4M for each of the 9 lots for a total of $46M revenue. Profit of $15M. Extend the plan by building spec homes on each lot and you can probably juice another $2M per lot. The big risk is carrying costs: grand mansions don’t move as fast as modest SFHs.
Oh wait. Parcel is quite steep, so figure maybe ~2 usable acres per lot (but still tout 4.5 on the listings). Each lot goes for $3M. That took a deep stab at the profits.
That’s a decent framework, but you’re dramatically underestimating the cost of running utility lines and new infrastructure.
Ah yes, the perils of doing armchair analysis based on made-up figures that sound reasonable…but aren’t.
And speaking of reasonable – or not – I wonder when we periodically see these grossly over-asked for properties (at least as can be implied by the reductions that ensue) what the motivation is for the ridiculous initial price: is it to satisfy some irrational owner’s vanity? is it just for the publicity? is there “nothing to lose by it” b/c you can always reduce the price but can’t make up for underpricing? is the market for these iconic places really so limited that no one really knows what it should be? (If the latter, it seems like an unflattering comment on broker’s abilities to understand the market and come up w/ reasonable estimates.)
Or maybe such cases are few and far between and we only see the notable ones here. Hmmm…
Well there probably weren’t a lot of comps for this, they they were shooting in the dark. From $100 mil down to $30….poor guy. And he doesn’t even get his last days on the estate. I tell ya, things are getting rough for the billionaire class out there.
98.7% of the time, it’s the seller. The mental gymnastics that many sellers take to justify their pie-in-the-sky prices never ceases to amaze.
This is particularly the case at the high-end, where the lack of concrete comps allow imaginations to run wild. “But but but I have a 10-car garage and that comparable sale only had four, that has to mean something to the right buyer. I’m holding firm to my price, I can’t just giveeeeeee it away”.
The brokers/agents are almost always in the right ballpark from the get-go but the seller determines their price and sticks to it. Agents will stick with the listing because good agents can chip away at the price over time to get it to where it needs to be, and have the negotiation, client control, and experience to hold it through those reductions. Bad agents will often lose the listing due to lack of those same qualities, but may take the risk anyway.
Long story short, if you know you can get it sold for $10M but your seller is demanding $20M, you do an amazing job advertising it, and buckle in and know it’ll be for the long haul.
Is it that dramatically low? I was figuring 3300′ of roadway @ $350 per lineal foot of sealed roadway with buried utilities. No laterals to the parcels, that would be the responsibility of the parcel developer.
You also have to battle the Sierra Club to develop this property! Spotted Owl and other habitats including the Crystal Springs Creek/ San Mateo Creek watershed protection… Better have thick skin and be cash heavy!
I hope someone preserves the forest around this mansion. It’s what makes the property special and all forests are worth preserving. It benefits everyone to preserve trees, creeks and natural habitats in general. Eventually, there will be no trees left at all if we just let property developers have their way. Resistance to this sort of development is crucial.
UPDATE: Massive Silicon Valley Estate Sells for 30 Percent of Original Asking Price
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