Did Amazon’s Jeff Bezos Hugely Overpay for His Latest House?

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Jeff Bezos has been shopping Los Angeles’ priciest properties of late, and he’s reportedly found the perfect person for some high-end wheeling and dealing: record producer David Geffen, who just sold him the Warner estate for $165 million—a record price for the Los Angeles area.

In a manner befitting such a luxury deal, Bezos and Geffen worked through final negotiations on Geffen’s yacht, the Rising Sun, according to the Real Deal. No real estate agents were involved in this transaction; Geffen had been quietly shopping the property on his own over the past two years.

“These houses simply do not get listed,” says California-based real estate developer Tyler Drew. “The clientele who purchase them are the richest of the rich. If you want one, you somehow have to get on Geffen’s yacht and on his good side.

“Oh, and you need at least $100,000,000 to spare. Cash,” he adds.

Inside Jeff Bezos’ latest real estate purchase

Designed in the 1930s for Jack Warner, the late former president of Warner Bros., the 13,600-square-foot, Georgian-style mansion boasts massive terraces, numerous guesthouses, a tennis court, and a nine-hole golf course.

“This isn’t so much a house as it is a museum dedicated to Hollywood excess,” says Drew. “The wood floors are imported, and the rumor is they are the ones used by Napoleon to propose to Josephine Bonaparte. The only closest comparable house that you can see and visit in L.A. would be the Getty Villa, which is an art museum.”

Geffen had purchased the property in 1990 for $47.5 million, so by selling to Bezos for $165 million, he’s more than tripled his money.

“Given Geffen paid $47.5 million for it in 1990, he made a killing off Bezos,” says Drew.

Did Bezos, who has cannily guided Amazon to supreme retail dominance, really get played by Geffen?

Indeed, some real estate experts think that Bezos’ latest real estate purchase could be a risky one, at least from an investment perspective.

“Bezos bought at a questionable time in general,” says Tommy O’Shaughnessy with Clever Real Estate. “It’s likely Bezos is buying at the peak of the market. We also did a study of how home prices have changed since 1960, and we’re seeing historically high home prices comparable to 2008. So we’re likely due for some market correction, even if it’s a relatively mild recession. If Bezos buys and holds, he’ll likely weather the storm, but I doubt the property will appreciate in value over the next few years.”

However, given Bezos is the world’s richest man, worth nearly $132 billion, getting a deal may not be that important to him.

“Let’s look at the $165 million purchase price in comparison to Bezos’ wealth of $132 billion: That is .00125% of his wealth,” points out Bruce Ailion, a real estate agent and attorney in Atlanta. “That would be like someone with a $100 million net worth buying a $125,000 home. Relative to Bezos’ wealth, this is a pittance. When people have a lot of money, it distorts values. The only reason this home costs $165 million is that people have the money to pay that price.”

“Bezos was likely more concerned with finding the right property and fit for him, versus focusing on getting a deal,” says California-based real estate agent Cara Ameer. “Given all that property has, I would say he paid within range of what these properties are going for. He is a business titan, and I think, to him, this property represented the epitome of being king of the castle.”

And odds are, this was no impulse purchase—Bezos had reportedly shopped around in the area.

“There could have been discussions over a long period of time,” Ameer says. “I think Bezos may have been looking at the other listings in the $100 million-plus range to comparison shop to ensure he was getting something truly on the level of a $100 million-plus property.”

“A purchase on this level is very much like a corporate merger or acquisition versus a typical real estate purchase,” she adds. “Putting together a transaction like this takes time.”

Some would even wager that even at $165 million, this home’s value will rise further.

“If you want a comparison, imagine if Bezos bought the Metropolitan Museum of Art in New York City—paintings and all—and ask yourself if it’s a good investment,” says Drew. “This much prime real estate in the heart of L.A., with such a storied, rich tradition, is only bound to increase in price. I wouldn’t be surprised if you hear Bezos selling this thing 20 years from now for a cool $500 million. Not that he needs the cash.”

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