March 27, 2011

Foreigner with Huge Suitcase of Cash is Real

One of the recurring arguments for Real Bay Area (RBA) prices to never go down is that even if the local economy is in the tank, prices will be pushed back up by foreigners with suitcases full of cash.  Yeah, the idea has become a bit of a joke meme on Burbed, but looks like it has a kernel of truth.

Thanks to Burbed readers nomadic and Perfect Angel for sending this one in.

Mystery surrounds buyer of hilltop mansion in Los Altos Hills

By Pete Carey, San Jose Mercury News

Posted: 03/24/2011 03:30:25 PM PDT, Updated: 03/25/2011 11:30:02 AM PDT

image

Satellite view of the home on La Paloma Road in Los Altos Hills.

Someone paid $75 million last month for a 25,500-square-foot mansion in Los Altos Hills — complete with its own carwash — the biggest price tag for a house in Santa Clara County history. The big mystery is who.

What is known is that the buyer is La Paloma Property, according to county records. That is a limited liability company registered in Delaware, where business laws protect the identities of the principals in companies and partnerships.

The blog TechCrunch quoted “multiple sources” saying the buyer was Yuri Milner, the Russian venture investor who founded the investment fund Digital Sky Technologies, now known as DST Global.

Milner, a former particle physics graduate student, has made a splash in Silicon Valley with large investments in Facebook, Zynga and Groupon. And he’s been shopping for a home in Silicon Valley, real estate agents said.

Wow, who knew the Merc was still such a digital dinosaur?  I mean, seriously, how difficult would it have been for them to link to the TechCrunch article?  Yeah, it’s a little thin, but it’s got an angled overview of the house and it also says Milner isn’t planning on living there much anyway.

TechCrunch and the Merc didn’t print the address, but we will, because this is a housing blog.  This metastasized monstrosity is at 13310 La Paloma Road, Los Altos Hills.  Redfin only details the 1997 sale for $5.3 million, which was before the house in question was built.  The 2009 property tax bill lists the site valued at around $4M for land and $21M for additions, with a total bill of $200,644.

image

The house and 11 acre parcel belonged to Fred Chan, founder of Fremont-based ESS Technology, and was held under Evershine III.  The 5-bedroom, 9 bath house, when construction began in 2003, was going to be the largest private home in the county.  Assessor info says the house was built/renovated in 2009, which means planning and construction took six years from start to finish. Again, the Mercury news says they covered the home groundbreaking, but couldn’t be bothered to link to its old article (no doubt only available as a for-sale-from-our-archive item).  Looks like Chan found a place he liked better: the largest waterfront property in Oahu.

imageWhile some sources claimed the purchaser was not Yuri Milner, the Merc has followed up on its on story and said Milner is definitely the February 3rd buyer of the property.  Milner’s spokesman Leonid Solovyev did deny that pre-IPO shares of Facebook, or any other stocks were used to pay for the home that Milner doesn’t plan to live in much.

Looks like we’re back to the really big suitcase full of cash.

But if Milner doesn’t plan on living there much, maybe he could rent the place out when he’s elsewhere.  Zillow’s rent Zestimate is $4301 a month, which seems a touch low.  I’m sure he could get the upper end of the range, which is $2200-8600 a month.

Comments (64) -- Posted by: madhaus @ 5:28 am

64 Responses to “Foreigner with Huge Suitcase of Cash is Real”

  1. nomadic Says:

    Now we have insight into the way the rent algorithm works on Zillow. It’s only 5 bedrooms, so it’s comparable to any other 5 bedroom rental on the market…

  2. SEA Says:

    “I’m sure he could get the upper end of the range, which is $2200-8600 a month.”

    Think of how ‘expensive’ it would be to rent at $8,600 per month. Who cares that the 2009 property taxes were about double that. I’m sure the landlord would be rolling in the cash, with all that housing price appreciation… When will this place be worth $150 million?

  3. nomadic Says:

    I love some of the comments in the TechCrunch article. Especially the first guy to bring up mini giraffes.

  4. The Gilroy Alex Says:

    Allow me to put my War Nerd helmet on here and say that since the invention of the mortar, a hilltop is no longer the ultimate defensible configuration.

  5. Alex Says:

    For $4301 per month in rent, I’ll take it.

    Rent out a few rooms. BAMM! Live rent free. :)

  6. madhaus Says:

    #3, the comments in TechCrunch are great. Some of those people would fit right in here. They have some interesting ideas for other uses of the house as well.

    One commenter claimed the house is at 13308 La Palona. That could be one of the adjacent parcels mentioned in the first Merc article. When I was putting this writeup together, I found references to the site being 17 acres rather than 11. That could be the total with the other two lots.

  7. madhaus Says:

    http://www.petitelapgiraffe.com/

  8. Real Estater Says:

    Seller is Asian. Buyer is probably Russian. Imagine the property taxes on this one.

    Speaking of taxes, just did mine via Turbo Tax. Despite having had multiple refinances, deductions worked fine without any issue, in contrary to the false info madhaus brought up previously.

  9. Petsmart Groomer Says:

    > Speaking of taxes, just did mine via Turbo Tax. Despite having had multiple refinances, deductions worked fine without any issue, in contrary to the false info madhaus brought up previously.

    This is great!

  10. madhaus Says:

    Consult a tax professional does not mean Run your numbers through Turbo Tax. If you rely on tax information you get from people on a real estate blog, or software, you’ll get the tax headaches you deserve.

    I will be filing in October, as my taxes are far too complex for my myriad investment instruments to make their fillings in time for me to use them. :)

    The way I see it, anyone filing by April 15, and with an off-the shelf tax package at that, is clearly too unsophisticated to understand the investment opportunities out there.

  11. nomadic Says:

    The way I see it, anyone filing by April 15, and with an off-the shelf tax package at that, is clearly too unsophisticated to understand the investment opportunities out there.

    But madhaus, TurboTax is just fine for those who only have earned income and a few stock options. RE isn’t exactly a business mogul.

  12. madhaus Says:

    #11, business mogul? What if he deducts his imaginary rental property as a second residence? Imagine the fun the IRS auditor will have. The auditor will video it and charge his/her fellow auditors to watch the ensuing hijinx! Laffs galore! Especially seeing #8’s face when given the taxes outstanding, interest, and penalties!

  13. waiting_for_the_fall Says:

    Multiple refinances in one year…sounds like someone is desparate to extract whatever equity is left before walking away.

  14. SEA Says:

    Multiple refinances? Sounds like loan originators’/mortgage brokers’ dream.

  15. Real Estater Says:

    >>I will be filing in October, as my taxes are far too complex for my myriad investment instruments to make their fillings in time for me to use them.

    Far too complex for someone who hasn’t worked for a decade. To my knowledge you’re not running a big business, and you only have one house. What is it that Turbo Tax premium can’t handle?

    >>If you rely on tax information you get from people on a real estate blog,

    Who’s relying on such people? I’m just “following up” on an earlier thread to show that you are one of those people providing unreliable info.

    >>What if he deducts his imaginary rental property as a second residence?

    Another made-up problem. The general rule is that you can’t claim a second residence within 50 miles of your primary home. The bank tells you so when you apply for a loan on your investment property.

  16. Real Estater Says:

    >>Multiple refinances? Sounds like loan originators’/mortgage brokers’ dream.

    Actually it’s my dream to have caught the historically low rate, for no point no fee. I’m already enjoying the benefit of it since interest rates have climbed higher.

  17. Real Estater Says:

    Another shameless regime change maneuver under the cover of lies (protecting civilians):

    http://www.mercurynews.com/top-stories/ci_17713170?nclick_check=1

  18. SEA Says:

    “Actually it’s my dream to have caught the historically low rate, for no point no fee.”

    That’s right, there’s no yield spread! It’s FREE, FREE, FREE. Wholesale rate sheet?

  19. nomadic Says:

    Don’t bother, SEA. He also joined the waiting list for a petite lap giraffe.

  20. madhaus Says:

    Did he read the fine print that says royalty cuts to the head of the line? And no interest on that deposit, either. At least he won’t have to worry about deducting it.

  21. SEA Says:

    Petite Lap Giraffes are like RBA property: double in value every 10 years or sooner, but in the case of the Petite Lap Giraffe, there’s far less risk.

  22. madhaus Says:

    #15, the phrase “to my knowledge” pretty much says it all.

  23. PerfectAngel Says:

    The general rule is that you can’t claim a second residence within 50 miles of your primary home. The bank tells you so when you apply for a loan on your investment property.
    —-

    Thanks a lot “bank”! If it did not tell Real Estater about this rule, he would got mortgage deduction from imaginary rentals too.

  24. PerfectAngel Says:

    Especially seeing #8′s face when given the taxes outstanding, interest, and penalties!
    —–

    Penalty? That’s he pays quite often. Not a big deal.

  25. Real Estater Says:

    Where is Steve by the way? A house is for sale on his favorite street.

  26. Real Estater Says:

    29 homes are currently pending in Palo Alto, starting with the most expensive one listed at $8.6M to the least expensive one.

  27. Real Estater Says:

    madhaus says,
    >>Did he read the fine print that says royalty cuts to the head of the line?

    Got more made-up problems?

  28. Real Alex Says:

    Forget cupertinization, here Russians come. :)

  29. Real Alex Says:

    Speaking of zRent. I won’t be surprised if Mr. Milner will buy Zillow and fix the algorithm to his advantage. :P

  30. lapalomaenvy Says:

    That street is the most pleasant corridor of Los Altos Hills. If Milner could give me a slice of his home, I would be over the moon. He will not miss it.

  31. Real Estater Says:

    You don’t hear me say this often, but at this moment South Sunnyvale CUSD is over-priced. Virtually all homes in this market are over $900K, with a substantial number of homes over $1M. At this level, a buyer can buy into real Cupertino, as opposed to just being in CUSD. A lot of the homes in South Sunnyvale are only partially CUSD, or not in CUSD. The schools have a high concentration of Indians and other new immigrants, so you won’t even get the American experience you can get on the peninsula.

  32. madhaus Says:

    #31, what is a “partial CUSD” home? There is no such thing. A house is either in the Cupertino Union School District or it isn’t. You can’t be “a little bit CUSD” any more than you can be a little bit pregnant.

    If you’re mentioning houses that have Nimitz Elemntary (lowest scoring school in the district) or Fremont HS (which is a different school district anyway), that’s a different issue.

    Weren’t you just saying my shack was worth a million when I said it wasn’t? Make up your mind!

  33. PerfectAngel Says:

    The schools have a high concentration of Indians and other new immigrants, so you won’t even get the American experience you can get on the peninsula.
    ——

    You mean American ramen experience?

  34. Real Estater Says:

    madhaus says,
    >>If you’re mentioning houses that have Nimitz Elemntary (lowest scoring school in the district) or Fremont HS (which is a different school district anyway), that’s a different issue.

    That’s exactly what I’m saying. As you kid goes from K through high school, only some of the schools are actually in CUSD, and yet the home is advertised and priced as fully CUSD.

    >>Weren’t you just saying my shack was worth a million when I said it wasn’t? Make up your mind!

    Reading comprehension problem? Your home is worth a million bucks in the market place, but it isn’t worth the price tag.

  35. Real Estater Says:

    PralayAngel,

    “Cupertinonization” is a bullish sign for real estate. It means there’s a movement of the most successful immigrants into a highly desirable area. The competition drives up and sustains prices. This is what got Sunnyvale to the current price level. South Palo Alto is still in the early stages of this trend.

  36. PerfectAngel Says:

    There goes the American experience.

  37. Real Estater Says:

    Making money IS the American experience. That’s why I have my investment property there.

  38. anon Says:

    ” but it isn’t worth the price tag.”

    Good call, real estater. This holds true for all real estate.

  39. madhaus Says:

    Wow #34, so much FAIL in one post. Amazing.

    Nimitz is in CUSD. It may not score as high as most of the other schools in the district, but that’s due to the demographics; lots of apartments and people moving in and out all the time.

    There is not a single house in the district that is “fully CUSD” by your uninformed definition. CUSD is K-8 only.

    Sunnyvale houses in Nimitz attendance area are priced below the others. Similarly, Homestead HS homes cost more per square foot than Fremont HS. Anyone with the slightest understanding of South Sunnyvale knows this.

    And while my house wasn’t worth a million when you first said argued it was, now it’s worth even less. I check the comps and have a decent idea what it would sell for today.

    Your view of the market price tag is amusing, in the same way an English-speaking toddler trying to sing Der Hölle Rache kocht in meinem Herzen is amusing. He hasn’t a prayer of hitting many of the notes or any of the words, but everyone will smile while he tries.

  40. madhaus Says:

    #35, what are you talking about?

    Hoover Elementary is 78% Asian. That sounds like Cupertino to me.

  41. PerfectAngel Says:

    Making money IS the American experience.
    —-

    People who make money takes I-280 ramps. They don’t live on a bus route.

  42. Real Estater Says:

    #39,

    Which part of my earlier post was not accurate? The selling point of these homes in south Sunnyvale is CUSD, yet in reality they are not all CUSD. This is why I’m saying these homes are overpriced.

    It’s funny how you keep claiming your house isn’t worth a million bucks. Unless it’s in shambles or on a high traffic street, there is no way it won’t sell for over a million. This is easily verified by just looking at the current listings on the market. You’re making an argument that isn’t backed by fact.

  43. Real Estater Says:

    Pralay says,

    >>People who make money takes I-280 ramps. They don’t live on a bus route.

    I’ll live on that bus route any day. People who make money mostly prefer to be on the 101 side. This is true in Hillsborough as well as in Palo Alto. I-280 side fails the gallon of milk test.

  44. Real Estater Says:

    >>Hoover Elementary is 78% Asian. That sounds like Cupertino to me.

    Hoover is not a regular school. It is a “choice school”. I’m sure you know that. People who go there are those who want to be academically focused as opposed to well rounded. This self-selected group is reflected in the demographics makeup of that school.

  45. madhaus Says:

    #39, your claim about houses being “not all CUSD” is silly. Anyone buying for schools knows the high school is not CUSD, it’s a different district. There are no “partial CUSD” homes; they are either in the district or they are not, and the pricing reflects it. The fact that 99% of them are also in Fremont Union High School District would only surprise someone either unfamiliar with the area or determined to not pay attention, as school districts are shown on all listings.

    Palo Alto has a unified K-12 school district, but most areas in the county do not. Burbed has already covered this issue.

    The comps around me are not what they were in 2008, as much as you insist otherwise. Yes, at one time this place was worth a million. Now it isn’t. In the same way, in 2008 your home was worth over two million and has dropped a great deal more than my place has. Perhaps you could get almost $1.5M for it today, perhaps not.

    I wonder where the new floor will be? This is so exciting!

    As to Hoover, no I did not realize Hoover was a choice school, and shame on Palo Alto Online for not calling that out. If Hoover emphasizes academics over other aspects of learning, then it sounds similar to Faria in CUSD, which is over 95% Asian. I would imagine PAUSD’s whitest elementary would therefore be Ohlone.

    What percentage of the population should be Asian before you would call an region “Cupertinized”? And have you been following the changes in East Palo Alto?

  46. Real Estater Says:

    madhaus,

    Let’s just put the debate about your house to the test. Find me one house currently on the market in your area that is not over a million. If such a house exists, it must be very close to the freeway or a high traffic street.

    I may not be as intimately familiar with 94087 as you are, but know that even in the Fremont school area a basic 1500 sf home would be easily worth $900K.

  47. Real Estater Says:

    PAUSD gives you plenty of choices. You can be academically focused and go to Hoover, or socially focused and go to Ohlone. There also schools that offer various language immersion programs, so you can take that route as well. Otherwise, the regular schools already offer a great well rounded education.

  48. PerfectAngel Says:

    People who make money mostly prefer to be on the 101 side. This is true in Hillsborough as well as in Palo Alto.
    —-

    Wow! Residents of Hillsborough must have loved 101 so much that they pushed their city eastward and settled on very next to 101. How many exit did they get? Something similar to University Ave? :)

  49. PerfectAngel Says:

    PAUSD gives you plenty of choices. You can be academically focused and go to Hoover, or socially focused and go to Ohlone.
    —-

    And if neither works out, you have train track.

    Just imagine “plenty of choices”. Does Cupertino have “choice” of train track?

  50. Real Estater Says:

    >>In the same way, in 2008 your home was worth over two million and has dropped a great deal more than my place has. Perhaps you could get almost $1.5M for it today, perhaps not.

    Don’t be naive like Bob. There was a dip at the start of the great recession, but the market quickly made up ground. I would agree that prices are still lower than the peak, but nowhere near as much as you think. Depending on the home, you may get a 10 to 15% discount from the peak. As I said, the peak was very brief. Very few people caught the peak, so I generally disregard it. A more accurate statement is that Palo Alto market is still near its high. Generally speaking, this market is always in that state.

  51. madhaus Says:

    #46, I don’t understand what you’re asking. You yourself state that a 1500 sf house in my neighborhood would go for $900K, yet you claim my house is worth over a million. Did my house acquire a few hundred extra square feet that I don’t know about? Wow! I’m going to put in a meditation room!

  52. madhaus Says:

    #50, that poor toddler is trying to hit an F6. Oh, my ears!

  53. Real Estater Says:

    >>Wow! Residents of Hillsborough must have loved 101 so much that they pushed their city eastward and settled on very next to 101. How many exit did they get?

    The most valuable part of Hillsborough is lower Hillsborough close to Burlingame. The least expensive part of Hillsborough is on the 280 side.

  54. Real Estater Says:

    >>I don’t understand what you’re asking. You yourself state that a 1500 sf house in my neighborhood would go for $900K, yet you claim my house is worth over a million.

    Are you playing dumb or what? Which high school do your kids go to? The $900K price home is for Fremont High.

  55. Real Estater Says:

    madhaus,

    With all that equity in your home, I don’t understand why you don’t make the leap to Palo Alto? You’ve wanted to do it for years, so why not make it happen before you get too old to move? Sure, it cost a little more, but you know as well as I do it’s not about how much something costs, but about future value minus current value. That equation is in favor of Palo Alto.

  56. PerfectAngel Says:

    The most valuable part of Hillsborough is lower Hillsborough close to Burlingame. The least expensive part of Hillsborough is on the 280 side.
    —–

    Thanks for admitting that they don’t have “101 side”. All they have is a “Burlingame side”.

  57. PerfectAngel Says:

    I would agree that prices are still lower than the peak, but nowhere near as much as you think.
    —–

    Too bad. That “icing on the cake” is gone for two years now. Looks like Indians, Asians, foreigners are not helping that much.

  58. madhaus Says:

    #55, that’s right, you just don’t understand why everybody doesn’t think like you do. You also will never ever ever sing an F6 no matter how much German you practice.

  59. nomadic Says:

    Wow, #55 sounds like he really wants to live next to madhaus. Is it for the 24-hour access to insults?

  60. PerfectAngel Says:

    We never understood why Real Estater is living in the smallest house of the block on Lincoln either.

  61. madhaus Says:

    #58, my guess is the neighbors all snub #55, and this blog is the only place he gets any attention at all. So, his desire to have me move next door, or to meet #59 for coffee may have a tinge of desperation mixed with naivety (why would anyone willingly socialize with someone that demonstrably boorish?) but does make sense.

    I have seen this behavior in boys who were overindulged by their parents coupled with peer rejection. It’s more common in cultures that overvalue boys over girls, such as Middle Eastern or East Asian. The boys grow up thinking they can do no wrong (look how much better they’re treated than their sisters!) and are dismayed to discover the rest of the world disagrees. Instead of changing that behavior, though, they double down.

    I can think of 2 Iranian and 3 Chinese families with this dynamic going on right now.

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