Luxe Living

What do a New York City hedge fund billionaire, a Los Angeles mayoral candidate, and a Hollywood film executive have in common?

Each bought an ultra-high-end home in Orange County last year.

In yet another record year for the county’s luxe residential sector, 25 homes sold above the $18 million price point last year. The year prior, only eight homes sold above $18 million.

The top 25 homes sales of 2021 traded hands for a cumulative $668 million, or $26.7 million on average. That’s up 37% from the 2020 sales volume of $489 million for the top 25 sales, when the average price was $19.5 million, and $12 million was the lowest priced home on the Business Journal list.

“2021 brought record sales pretty much all over Orange County,” John Stanaland of Villa Real Estate said.

Those records are prompted by an ongoing dynamic that only accelerated during the pandemic: steadily increasing demand for homes, and a rapidly shrinking supply.

“The luxury market continues to soar with supply dropping and demand surging,” Kathryn White of Compass said. “Sellers are experiencing a high number of showings with multiple offers and are dictating the terms during the negotiating process.”

Despite rising prices, out-of-town buyers are increasingly snapping up homes along the coast, seeing OC’s luxe market as a relative bargain compared to other coastal regions.

$100M Collectors

Buyers paid top dollar for homes last year, with shoppers largely coming from denser California cities like Los Angeles and San Francisco.

That stands in contrast to 2020, when OC-based business execs bought the year’s three most expensive homes, including a $61 million Crystal Cove estate that marked the biggest home sale in OC’s history at the time.

Orange County also continues to see strong activity from repeat buyers, with many investors continuing to accumulate properties in the region as home values soar to new highs.

“There are several individuals in Orange County who own over $100 million in residential real estate, and are actively looking for more homes,” Rob Giem of Compass said.

The Business Journal’s fourth annual listing of OC’s Top Home Sales begins on page 38.

Data for the list was provided by Irvine’s Land Advisors Organization with input from the area’s top brokers.

Dominant Cove

The top three home sales of 2021 alone represent $154 million in sales volume, a price that, by comparison, exceeds the cost of the just-traded, 295-room Fashion Island Hotel in Newport Center (see story, page 3).

That’s due in large part to the top luxe sale of the year: the record-breaking $70 million sale of Laguna Beach’s 2585 Riviera Drive.

The buyers were Joseph Edelman, founder and CEO of New York biotech hedge fund Perceptive Advisors, and his wife, Susan Lebovitz-Edelman. Forbes estimates their fortune at nearly $3 billion.

The price the couple paid was more than twice what the sellers paid three years prior for the home, situated on a 1-acre lot in Abalone Point, the exclusive 13-home enclave within Irvine Cove, just south of Crystal Cove State Park.

Irvine Cove, a 109-home gated community, has historically captured top-dollar deals from local and out-of-town business execs, but that was especially true last year, with the neighborhood represented in a handful of the top 25 deals, including the top two.

“Irvine Cove climbed dramatically in 2021,” Stanaland said.

Masimo founder Joe Kiani and billionaire philanthropist Sue Gross are among local high-end individuals who count homes in Irvine Cove; the latter has five in the neighborhood, including three in Abalone Point.

“Irvine Cove remains one of the rarest guarded communities in Orange County,” said White, who represented Kiani and Gross in their respective deals. “It’s an attractive, beachfront location with lots that are larger than other Laguna Beach neighborhoods like Emerald Bay.”

Irvine Cove is also said to have brought in a new buyer demographic last year: Hollywood actors and executives.

Sources indicate actors, such as Leonardo DiCaprio, frequently scouted for homes in Irvine Cove last year, while two executives with Hollywood ties purchased homes in the area. One sold at 2620 Rivera Drive in Laguna Beach for $24.3 million in May and is No. 8 on the list, while the other, a nearly 5,000-square-foot home at 2566 Monaco, sold for $15 million in October and did not make 

the ranking.

“Our county has largely escaped some of the major issues that have been plaguing cities like Los Angeles, which has only increased our buyer pool,” Rex McKown of Compass said.

Buyer Pool 

One such buyer was billionaire businessman Rick Caruso, the founder and chief executive of commercial real estate development firm Caruso, best known for the Americana at Brand shopping center in Glendale.

The investor, who last month entered the race to become the mayor of L.A., paid $18.6 million for an 8,546-square-foot home at 2102 E. Balboa Blvd. on the Balboa Peninsula. Caruso, a long-time member of Irvine Co.’s board of directors, owns other nearby homes in the Newport Beach bay community. His mega-yacht has been an occasional sight in the city’s harbor.

“The depth of the buyer pool is extreme, even at the higher priced levels,” Steve High of Villa Real Estate said.

Undervalued

Though OC prices climbed to record highs, Giem notes the market is still undervalued when compared to other markets, but prohibitive tax laws have kept prices from climbing even higher.

“If California did away with their tax regulations, that $70 million sale would have been closer to $150 million,” Giem said.

Despite these restrictions, which has resulted in some wealthy individuals leaving the state for more tax-friendly markets like Florida, California’s luxe market grew faster in 2021 than any other previous year, according to Concierge Auctions.

The average sales price of the top 10 luxury home sales in Orange County last year was $29.2 million, according to Concierge Auctions, a 74% jump from 2015.

Selling Out 

In 2020, buyers were looking for private, turnkey properties along the coast—preferably new.

While those properties are still in vogue, many buyers don’t have the luxury to be picky anymore.

“There’s nothing for sale in Emerald Bay and Irvine Cove, and the inventory of bayfront homes for sale dropped to seven homes not long ago,” Giem said.

As neighborhoods sell out, “the next transaction that takes place is up to 30% higher than the preceding deal,” Giem noted.

The “selling out” of luxe neighborhoods within Newport Beach and Laguna Beach has many shoppers turning to the less active coastal communities of Dana Point and San Clemente.

Both cities saw record home transactions last year.

Dana Point saw the $23.5 million sale of 39 Strand Beach Drive in Dana Point, and San Clemente saw the $34 million sale of 4130 Calle Isabella, a nearly 13,000-square-foot estate.

The guard-gated Calle Isabella compound is near Casa Pacifica, the 5.5-acre San Clemente estate that was once  home to former President Richard Nixon. That estate, now owned by Allergan co-founder Gavin S. Herbert, was previously on the market for $65 million, but the listing has since been pulled.

Dana Point was also home to the priciest reported single-lot oceanfront residential land sale in Orange County, when a 10,642-square-foot front-row lot at 6 Ritz Cove in the gated Monarch Beach community sold for nearly $14.3 million.

“I think we will see Monarch Bay continue to climb in 2022,” Stanaland said.

Drop-Off Looming?

The volume of high priced sales meant record years for each broker the Business Journal spoke with, but the question remains: How long will the momentum last?

“I don’t expect this year’s sale volume to be as high as it was last year,” McKown said. “The market will stay steady, but there just isn’t enough inventory to support demand.”

This was echoed by Giem, who said sales volume will “drop precipitously in 2022 because we are running out of homes to sell.”