Burned out parcels in Pacific Palisades

[George Hatch]

In this region the property doesn't even have to be close to the ocean to command the high prices. This one is 2.5 Miles inland of Newport Bay. Otherwise a vanilla subdivision of tract homes with no distinguishing features other than being close to employment and UC Irvine.



Acquisition price for this 8000sf parcel in 2020 was $2,055,000, at which point the property looked like this:


That was a 1971yb home of 3024sf. At least 30% of these parcels with the 1970s homes on them have already been redeveloped into bigger and better, which demonstrates that the original homes are underimproved relative to the HBU. Their "Average" physical condition notwithstanding, at the current trend their REL is at or approaching zero.

But the same home located 5 miles inland would have an indefinite REL; too far out in the future to forecast. It's all about the location.

 

[Joe Flacco]

I'm not surprised about the value of the land. Just surprised about the contributory value of the improvements.

 

[Joe Flacco]

We have sales of single-family lots around $5 million but it's only small pockets where they pay that. Most of the areas with top schools are in the $800k-$2 million range for land. Places with not great schools could range from $300k-$600k for land.

 

[George Hatch]

One other aspect is that a previously improved lot will usually sell for more than a never-developed lot. If 50yr old homes in Irvine are getting purchased for $2M as land value to get redeveloped then I don't see why the same cannot happen in Pacific Palisades. Possibly. There's more "high value" employment and imported family wealth in the west L.A. than in Irvine.

 

[Fernando]

They like to call that "arbitrage" - I like to call it stealing.

Or call them speculators.