Deal Done Down Low, High on the HillPosted on Tuesday, July 28th, 2009 at 3:27am.
Huge: 4br/5ba and 6100 sq. ft., with very big upstairs entertaining spaces and ocean views. We once likened the kitchen island to an aircraft carrier, and we now see that the listing claims it to be "the size of Capri." (We've been on both, and, yes, each description exaggerates a bit.)
Gorgeous: A name architect, lush interior with fine materials, great landscaping. If the layout downstairs was a bit maze-like and peculiar, at least we can say that was in the interest of maximizing private spaces.
But 218 Dianthus crashed against an increasingly dreadful reality – spec construction in the Hills is not working out these days for most of the builders.
Coming on the market in March 2008 at $6.75m, the listing was priced as if the Fall 2007 pre-meltdown financial meltdown hadn't happened, and demand would soon pick up in MB's prestige market.
Well... the price was down to $5.495m (-$1.255m/-19%) by year end, and down further to $4.695m (-$2.055m/-30%) in March this year, meriting a mention at MBC in "2 Classy Hillies Down $2m." It was last at $4.249m.
Now, 218 N. Dianthus has closed at $3.920m (-$2.830m/-42% from start). Yes, that's quite nearly $3m off the top. We're all accustomed to sellers starting a bit high, but 40% too high?
This data certifies the listing as the biggest-dollar cut MBC has recorded in almost 2.5 years online, and it nears the 48% cut from start at 560 36th earlier this year (see "Some of the Biggest We've Seen").
Look at the drop in PPSF as well:
- Start: $1,100/PSF
- Close: $642/PSF
And if we might dial back quite a bit further, almost 2 years ago, a new home at 300 N. Dianthus (6br/6ba, 5500 sq. ft.) went for $4.175m, equivalent to $759/PSF.
That puts 218 N. Dianthus down 15% on a square-foot basis over 2 years, a punishment that's even worse if you consider ocean views vs. city views at 300 and the more private master at 218 versus the not-so-private front-yard master at 300. (See "Privacy is Overrated.")
PPSF among active new construction in the Hills ranges from $623/PSF (903 10th) to $1,026/PSF (645 9th), with many near the mid-700s. There was a time when you could get closer to $1,000/PSF for new.
We're not privy to this project's details, but we do know the lot for 218 N. Dianthus was acquired for right about $2m in Dec. 2005. Setting aside carrying costs, and estimating costs of sale at around 4% in this case, that would leave about $1.75m to cover construction costs – $286/PSF. Can you build a luxury home in the Hills, seeking absolute top-dollar when you hit the market, for <$300/PSF? Doubtful. It had to be below replacement cost at the end.
Now, why again did people think, at the end of 2005, that a tricked-out luxury speckie was a good idea?
And how long before someone rolls the dice like this again?
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