It’s well known that even the most successful venture capitalists occasional suffer from boo-boos.
Like the rest of us, they sometimes lose money on bets that don’t play out. Like the rest of us, they sometimes lose face when they do something that seems smart but turns out to be studip.
Last year, Yuri Milner, who had Facebook and Groupon among other ventures he helped capitalize, decided to take some of his walking around money and buy a house. Not just any old house, of course, but the sort of mansion that befits someone who was smart enough to get the hell out of the cement-block world of the Soviet apparatchik and into Wharton for an MBA.
The object of his affection was quite the manse:
Nestled among 17 hilltop acres in Los Altos Hills, Calif., the mansion encompasses 25,545 square feet of living space including 14 bathrooms, two dining rooms, a ballroom, a library and staff quarters. Outrageous amenities include a home theater, a wine cellar, a gym, an indoor pool, and a sauna. There’s also a 4,600-square foot guest house and two three-car garages, even a private car wash. (Source: Boston.com)
I’m a bit surprised that someone would term pedestrian features like “a home theater, a wine cellar, a gym, an indoor pool, and a sauna” as outrageous amenities. Yawny-yawn-yawn to those, I say. Even I know people with wine cellars and gyms.
But private car wash?
Now you’re talking.
I wonder if the guys who do the final chamois wipe downs are among those who live in the staff quarters.
Anyway, Milner broke Silicon Valley records when he paid $100 million for the Palo Alto Loire Chateau, which is a French chateau-knock-off knocked up with amenities like the private car wash that I suspect is not all that common in the Loire Valley.
Interestingly, when the Santa Clara County assessor went to put a price tag on it, they found that it was worth about half of what Milner paid for it.
“For whatever reason, and we don’t know, Mr. Milner purchased the property at more than it’s fair market value,” explains Larry Stone, Santa Clara County Assessor. “It doesn’t happen very often and we knew it was unusual…since the highest assessed residential property in Silicon Valley prior to that time was $28.5 million.”
Now it’s nothing unusual for a place to be assessed for tax purposes for an amount that is less than what you could actually get for it on the open market – I just looked at our latest property tax bill, and the assessed value is probably off market by about 15%. And there’s also the difference between fair market value, and what you get taxed on. But what’s stunning is that this looks like Milner overpaid by 50% (which is probably a familiar feeling for those who bought Groupon shares on IPO day).
The assessors did not pull the value out of thin air, of course. They had three separate appraisers make assessments, plus they looked at 11 comparables – similarly tricked out manses in similar ‘hoods.
The good news for Milner - who, after all, didn’t get to be a billionaire by not being something of a shrewdy – is that he will only be paying $600K a year in taxes. While this figure is double the tax bill for the same property the year prior to Milner’s purchase – when it was obviously undervalued – it’s still roughly just half of what he would have to shell out if the assessed value equaled the sales price. At this rate it will only take him 8-9 years to recoup the overpay, after which it’s clear sailing. (I told you he was a shrewdy.)
This is, of course, disappointing news for Los Altos, which had been hoping for bigger bucks.
Oh, well, I’m sure they’ll make it up somewhere.
Value, like beauty, is, of course in the eye and the checkbook of the beholder. So if Milner was willing to pay $100 million for a house then the house is obviously worth that much. To him at least. Perhaps it was the private car wash.
Meanwhile, while our condo is not for sale, if Yuri Milner is interested in a pied a terre in Boston, let’s talk.
Let’s clear a few things out first. We have 2 bathrooms, not 14. No wine cellar. No staff quarters. No indoor pool. No gym. No private car wash.
But we are a hop, skip, and jump from package stores, hotels, the pool at the Holiday Inn, plenty of gyms, the Boston Common garage – which is a lot bigger than two three-car garages (or was it three two-car garages) - and, over in Park Square, I believe there’s still a car wash.
We have a very cool living room and, while you can’t exactly treat a condo in a building that went up 150 years ago, in a neighborhood that watches over its history like a hawk, as a tear down, you’d certainly be welcome to gut the period 1980’s bathrooms and kitchens. Have at it.
For you, $2 million.
I’m telling you, it’s a bargain.