Bloomberg News

San Francisco Mansion Discounts Luring Tech Millionaires

December 28, 2012

San Francisco’s Mansion Discounts Luring Technology Millionaires

The 15,000 square-foot custom built waterfront mansion on Belvedere Island in Marin County, California, boasts a view of the Golden Gate Bridge. Photographer: David Paul Morris/Bloomberg

Jeff Paster, a developer of luxury homes in California’s Marin County, couldn’t find a buyer for the brand-new waterfront mansion he listed in January for $45 million. He’s expecting that one will turn up at an auction this weekend, with a starting bid set at $25 million.

“People at this income level always have money,” Paster said in an interview at the 15,000-square-foot (1,400-square- meter) residence on Belvedere Island, a tony enclave north of San Francisco that’s known for views of the downtown skyline and Golden Gate Bridge. “We had qualified buyers circling for months, but with no sense of urgency. This sets a deadline.”

Technology executives paying discounts to listed prices have been active buyers of luxury properties this year in the San Francisco Bay area, where the growth of social-media and Internet firms including Twitter Inc. and Yammer Inc. has created a new wave of millionaires. Some older homes sat unsold for years before finding buyers, said Rick Turley, president of Coldwell Banker Residential Brokerage of Northern California.

In 2012, there have been 13 publicly recorded transactions for more than $10 million in exclusive San Francisco neighborhoods such as Pacific Heights, Presidio Heights and Sea Cliff, according to DataQuick, a research firm. That’s up from six sales last year and a dozen in 2007, the previous high mark. The numbers don’t include deals in expensive areas outside the city, such as Belvedere or Tiburon, in Marin County; Atherton in San Mateo County; or Palo Alto in Santa Clara County.

Home Demand

“Over a long listing period, it’s hard to say what will happen, because obviously the market is constantly changing,” Turley said. “The success of tech and social media means people are looking very generally at San Francisco and the Silicon Valley as places to live because these businesses are sourced here. It’s highest on their radar.”

Initial public offerings in 2012 by Bay-area companies raised a record $17.5 billion in public equities markets, including sales by Menlo Park-based Facebook Inc., Yelp Inc. (YELP:US) in San Francisco and Workday Inc. of Pleasanton, according to data compiled by Bloomberg. The total is more than double the $8.3 billion reached in 1999, the height of the dot-com boom.

This year’s Bay area IPOs generated $9.4 billion in cash for selling shareholders. Other investors have been able to generate money before initial stock sales through the rise of secondary-share markets such as SharesPost Inc.

Yammer Founder

Yammer Founder David Sacks, who sold the social-media company to Microsoft Corp. (MSFT:US) in June for $1.2 billion, earlier this year bought an unfinished home in Pacific Heights that had been listed for $38.5 million. The transfer tax indicated a $20 million sale.

Sacks’s new residence, built in the style of a French chateau, was last purchased by Peter Sperling, incoming chairman (APOL:US) of Apollo Group Inc. (APOL:US), who paid $32 million in 2002, said David Barrett of listing brokerage Warwick Properties Group.

“It’s built to be the finest residence in San Francisco, from limestone quarried in France and with the same glaziers who worked on the Eiffel Tower renovation,” Barrett said.

This month, Jay Paul, the San Francisco-based developer of 6 million square feet of Silicon Valley offices, including Google Inc.’s four-building complex in Sunnyvale, completed a purchase in the same neighborhood, said a person with knowledge of the transaction who asked not to be named because it hasn’t been made public. The house sold for $28.25 million, said Dona Crowder of TRI Coldwell Banker, a co-listing broker on the home. She declined to comment on the buyer.

Seller Deals

The deal was at a 48 percent discount to the asking price in 2007, around the time U.S. housing prices peaked. The seller had most recently sought $34 million, Crowder said.

Paul didn’t return a telephone message seeking comment.

In some cases, luxury discounts this year in San Francisco and the Silicon Valley are a reflection of aged homes built decades ago that needed extensive renovations, Crowder said. Sellers were also motivated by the prospect of higher capital gains taxes in 2013, she said. Her listing on Broadway in Pacific Heights received higher bids in the past, including one earlier this year, which were rejected by the seller, she said.

“The generations are turning over in this neighborhood,” Crowder said in a phone interview. “If it were understood back then that record prices were being offered, it would have been wise to sell” in 2007.

Dorsey, Benioff

Jack Dorsey, a Twitter co-founder, paid $9.9 million in February for a “humble” two-bedroom house in Sea Cliff that had been listed for $12.5 million, said Olivia Hsu Decker, owner of Tiburon-based Decker Bullock Sotheby’s International Realty and Dorsey’s agent on the deal. Salesforce.com (CRM:US) Inc. Chief Executive Officer Marc Benioff bought a nearby house in 2009, Decker said.

The Sea Cliff neighborhood is named for its location high above the Pacific Ocean, west of the Golden Gate. In May, Dorsey, who is known to take public buses to work, tweeted a quote from the Chilean poet Pablo Neruda, “I need the sea because it teaches me,” Decker said in an e-mail.

Other multimillion-dollar homebuyers this year include Mark Pincus, founder of online game maker Zynga Inc. (ZNGA:US) He purchased a Pacific Heights house in July for $16 million after a $500,000 price cut, said Decker, who represented him in the past and also is the listing agent for the Belvedere home.

Rising Prices

The region’s broader housing market is also showing strong demand, bolstered by the addition of 32,400 new jobs in the San Francisco metropolitan area in the year through November. House and condominium prices in the nine-county Bay area last month rose almost 21 percent from a year earlier to a median $438,000, the highest since August 2008, according to San Diego-based DataQuick. Sales jumped almost 16 percent.

Paster has been developing the Belvedere estate since 2008, when he acquired two adjacent lots for $9.3 million, and put the property up for auction in November after two price reductions, the most recent to $35.9 million. The decision was made with the aim of “causing those interested to act,” he said. There is an undisclosed reserve beyond $25 million.

“This is one-of-a-kind property,” he said in an interview at the home earlier this month, seated behind a French antique desk in the library, the town of Sausalito visible through floor-to-ceiling windows behind him. “It’s like a Picasso. How much is that worth?”

The 1.14-acre (0.46-hectare) site hugs the shore, with the house laid out in two wings on three levels. The seven bedrooms and living areas have mahogany flooring, and the nine full bathrooms are tiled with marble and limestone. Terraces paved with fossil stone from India are accessible from most rooms on the main floor through oversized folding doors.

‘Beautiful Spot’

Belvedere, about 17 miles (28 kilometers) north of San Francisco by car and less than a square mile in size, became a favored spot to build summer homes at the end of the 19th century, said Dave Gotz, archivist of the Belvedere-Tiburon Landmarks Society. The community, connected to Tiburon by a natural causeway so not technically an island, had the virtues of a warmer climate compared with the windy city.

“It’s a beautiful spot, with small streets and steep hillsides coming down on the west side,” said Mike Fuson, Belvedere’s interim city manager. “The housing stock is expensive.”

To contact the reporter on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net


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