Saturday 17 August 2019

Price cut of 40pc values Bel Air land at $290,000 an acre

Swathe of green space priced at $75m, but buyer faces planning battle

Tract: Senderos Canyon is a ‘raw parcel of land with everything built up around it’. Photo: Compass
Tract: Senderos Canyon is a ‘raw parcel of land with everything built up around it’. Photo: Compass
Valuable: Senderos Canyon, on the edge of Bel Air, is listed for sale at $75m (€66m) Photos: Compass

James Tarmy

SENDEROS Canyon, a roughly 258-acre tract of land on the edge of Los Angeles's Bel Air neighbourhood, came on the market in 2013 with an asking price of $125m (€111m). Three years later, without any takers, the owner delisted the property.

"As far as I know, there were no offers, and nothing was serious enough to make it go anywhere," said Scott Tamkin, a broker at Compass.

On Monday, the property came back on the market with a heavily reduced $75m (€66m) price tag, which comes to about $291,000 (€258,000) per acre.

"If you're looking at a map of the area and zoom out, you can see this raw parcel of land with everything built up around it," said Mr Tamkin, who is representing the listing with his wife Melinda Tamkin. "It's really exceptional."

Covering what Mr Tamkin says is 6pc of the total land area of Bel Air, the tract is indeed unique. But it is also notable for other, less glittering reasons.

While the average sales price in Bel Air has sagged this quarter by 6.1pc, according to a report by Douglas Elliman and Miller Samuel, Senderos Canyon's 40pc price cut puts it in a league of its own.

What could cause such a singular property to depreciate so dramatically over the past six years?

First, Mr Tamkin says the property's initial asking price was unrealistic.

"At that time, the market was a little bit different, and developers and sellers were listing properties at high numbers," then willingly taking major price cuts, he said. "We're in a market now where the reality is that prices need to be in the range that buyers want."

The second reason has to do with zoning.

The land, which comprises three separate assessed parcels, is completely un-entitled. That means there is no power, plumbing, roads, sewers, or infrastructure of any kind, and whoever buys the property would need to get permission from the city before they could install that infrastructure.

"Someone is going to have to do their due diligence," Mr Tamkin said.

"We haven't done any exploration with the city, and frankly, zoning changes frequently, so what we find out now might not be the reality in a year's time."

For any developer beginning to feel out what that process might look like, they might find the story of the Park Bel Air instructive.

"The big difference is that we bought land that was already zoned for residential use," said Barry Watts, the president of Domvs, which co-developed that 10.6-acre, $150m (€133m) property with Junius Real Estate Partners, the real estate investment arm of JPMorgan Chase.

"We weren't going to the city for a change of use, which is pretty significant."

Even so, Mr Watts had to go through a four-year process that included submitting plans for houses, schedules for hauling dirt, and requests to cut down trees in order to make the land "shovel-ready".

Just the permit to cut down a tree took him 18 months, he said.

A Senderos Canyon buyer might find it all a much longer journey. Emphasising that he was speaking speculatively, without detailed knowledge of the logistics of this particular property, Mr Watts says that he "wouldn't be surprised if this would be a 10- to 15-year project".

The planning process could take three years alone, Mr Watts said, and the permitting process an additional three or four.

"And that's if you don't get any [nearby] residents saying they don't want dirt getting hauled," he said. "At the moment, they're staring at a beautiful hillside, and one would think the residents wouldn't accept that you're going to change that."

Mr Tamkin, for his part, says that the tract is brimming with possibility.

"Two of the parcels are zoned equine-ready for horses," Mr Tamkin said.

"What kind of things can be done [on the property] needs to be explored, but it could be a country club with a riding ring and riding trails, it could be a vineyard. There are multiple opportunities."

There is also potential for the property to be subdivided into smaller lots.

"Could 20 single-family home parcels be built?" Mr Tamkin asked. "There's a real possibility that that could happen."

That, however, might run into the area's relatively recent "anti-mansionisation" codes, which are intended to curtail the construction of mega-mansions and the resultant disruption to the neighbourhood.

"There was a lot of upset about the amount of earth being removed," Mr Watts said.

So what is the whole tract actually worth? On this, Mr Watts decides to keep it vague.

"How long is a piece of string?" he said. "It totally depends on what you're trying to achieve."

Depending on a developers' goals, Senderos Canyon's $75m price tag could either be prohibitive or a bargain. Taken in a vacuum without considering the land's unique development costs, $3.4m per acre is roughly on par with other undeveloped land in the area.

"To be totally frank, the calculation for prices for raw land like this is like throwing a dart at a board," Mr Tamkin said. "There's really nowhere definitely that says: 'This is what the value is.' It's not like selling a home, where there's an exact comp."

Given the apparent decline in high-net-worth overseas buyers in the LA market, and with financial markets signalling an imminent downturn, the price could still be considered fairly optimistic.

In that respect, while the property might be marketed to billionaires, it's much like the rest of the American West Coast housing market, which has officially become a buyer's market.

"The seller is motivated," Mr Tamkin said. "He'd definitely like to sell it and be done with it."

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