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House Next Door? They’ ll Buy It, Too It’s a land rush out there as stars and moguls pay ‘top dollar’ for residences that adjoin their properties: ‘The bigger the lot, the more valuable it becomes’ By Hadley Meares n Los Angeles, relationships between neighbors can be complicated. “I always tell people, when you move into a house … invite your neighbors to a party and hope they don’t show up,” says realtor William Baker, architecture director at The Agency. But even halfhearted neighborly friendliness has its advantages — particularly when someone is moving out. Sellers in some of L.A.’s best neighborhoods increasingly have found that the perfect buyer is right next door. “My mentor once told me, ‘Always go to the neighbor before you put a house on the market,’ because the neighbor is always going to pay more than anyone else — especially if they are a billionaire,” says Million Dollar Listing star Josh Flagg of Rihanna Douglas Elliman. The trend of buying up properties surrounding one’s mansion, sometimes known as “land banking,” has skyrocketed. Celebrities Hart including Adele, Rihanna, Annie Lennox, Anthony Hopkins, Travis Scott, Kevin Hart, Elton John and Rob Zombie have bought neighboring properties, adding to their already luxurious spreads. Moguls and execs also have been snapping up adjoining residences, among them Jeff Bezos, Ari Emanuel, Chuck Lorre, George Lucas, Matt Groening, Facebook’s Jason Rubin, producer Doug Robinson and power couple Barry Diller and Diane von Furstenberg. After buying a $19 million house in Brentwood in 2020, NBA star Blake Griffin proceeded to snap up two neighboring houses, one for $5.9 million and the other for $7.4 million. Two of the most expensive deals in 2021 — Snapchat CEO Evan Spiegel and model Miranda Kerr’s $100 millionplus purchase of two lots in Holmby Hills and WhatsApp co-founder Jan Koum’s purchase of Malibu neighbor

Diana Jenkins’ estate for $87 million — are

classic examples of the practice. Some think the trend was kick-started in 2017 when L.A. revised its baseline Mansionization Ordinance, reducing the size of single-family homes that can be built on a lot to 45 percent of its size, down from 50 percent. “When you can buy the property next door, all of a sudden your 30,000-square-foot lot — you can turn it into a 60,000-[foot] lot,” says Santiago Arana of The Agency. “Therefore, one day when you want to sell your property, developers or builders are going to be interested since they make money based on the square footage that they build on. So the bigger the lot, the more valuable it becomes.” The finite nature of land in L.A. and relatively small lots in expensive areas such as Beverly Hills, Brentwood and Pacific Palisades also is a factor. Says Arana, “They’re not making more land.” Often then, the best option is to buy adjacent properties with homes already on them that the new owner can tear down or refurbish. Next-door purchases also are a way to establish legacy trophy properties to pass down to family members. “It’s a really, really safe play from an investment standpoint,” says Cooper Mount of The Agency. Tomer Fridman of Compass agrees. “When they combine, it raises the value. If you look at something that I had listed last year — Owlwood — that was 10 acres. It was the largest property in all of Holmby Hills, but it was three different parcels that were amassed over 70 years,” he says. The historic estate, once the home of Tony Curtis and later Cher, was sold in December 2020 for $88 million. The trend has accelerated during the pandemic, as wealthy homeowners rethink what home means to them. Notes Mount: “People want more space. They want

to have family and friends close. They want to have staff quarters. They want to be able to really insulate their world and create a safe space for either their loved ones or their friends or their team. And I think that people just realize in these A-plus-plus marketplaces that this kind of land is priceless.” According to Baker, recent high-profile crimes in traditionally safe areas like Beverly Hills have made the uber-wealthy even more focused on security — and they see having more land as a buffer. “People are really … wigged out. And I think because of social media and TMZ and whatnot, people don’t feel safe,” says Baker. “I think people want to surround themselves with privacy.” The nature of these sales is often private and conducted offmarket, with the property never hitting the MLS. “Chances are you Kerr know your neighbor or at least you said hello to them before. Usually, the conversation starts there,” says Nick Sandler of The Agency. Adds Arana: “People come to me and say, ‘Hey, I have a pocket listing next door to your client so-and-so. Do you think he’ll be interested?’ So then I reach out. I’m like, ‘Hey, this is going to come on the market.’ ” While chatter about next-door deals in L.A. has increased in recent years, it’s nothing new in Malibu, according to Hilton & Hyland’s Chad Rogers. “In the case of high-end real estate, especially in Malibu and in the Malibu Colony, more is more,” says Rogers. Explains Mount: “In the Malibu marketplace, this has been a trend for quite some time, because if you live on the beach and you’re able to secure contiguous homes on contiguous lots, the value compounds. I had a house for sale on Carbon Beach where right when I put it on the market, the neighbor

Illustrations by Audrey Malo

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RIHANNA: KEVIN MAZUR/GETTY IMAGES FOR RIHANNA’S SAVAGE X FENTY SHOW VOL. 3 PRESENTED BY AMAZON PRIME VIDEO. HART: TASOS KATOPODIS/GETTY IMAGES FOR FANATICS. KERR: STEVE GRANITZ/FILMMAGIC. SCHMIDT: DONATO SARDELLA/GETTY IMAGES FOR LACMA. HOUSE: COURTESY OF THE AGENCY.

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Rising Use of Real Estate NDAs, Escalation Clauses

walked over and purchased it. It was about a two-week escrow and closed immediately. It’s a no-brainer for the people who can afford it.” These sales are relatively effortless because buyers generally are willing to pay top dollar. “The only two words that come to mind is literally ‘funny money,’ ” Rogers says. “These sellers are laughing all the way to the bank.” Some buyers purchase neighboring lots simply so that their view won’t ever be obstructed or so they won’t ever have to deal with new construction. “I have a homeowner that bought the lot next door, but they rent it out and use it as an income property,” Rogers says. An increasing obsession with self-contained compounds with multiple structures also has encouraged the trend. “ADUs [accessory dwelling units] have become so popular here in Los Angeles,” says Baker. Buyers use the extra land for offices, studios, gyms, gardens, spas and houses for guests or for a family member. Sometimes, they tear down both existing main homes and build a new, larger one on their expanded acreage. “One of our clients, a well-known CEO from the East Coast, is looking for a property to

purchase in L.A. for up to $35 million; she is open to purchasing adjacent properties. Not only will it be used for her team’s office, but it will be a place for them to stay and use for product launches,” says Million Dollar Listing’s Tracy Tutor of Douglas Elliman. “Lately, the trend seems to be to buy homes as mixed-use spaces. Business owners with a small team use their homes for work and have been enjoying the out-of-office life.” L.A. regulations place some limits on home-based businesses; for instance, commercial activity must not be visible from outside, and only one employee is allowed to live there. While the establishment of more valuable, larger estates brings up the median value of surrounding homes, neighbors’ reactions can vary. “If someone who is liked in the neighborhood is buying another piece of land and [that] doesn’t give the opportunity for someone new to move in, great,” says The Agency’s Bennett Hirsch. “[But] if that person’s buying the neighboring property to Schmidt tear down both their houses and for the next two years the neighbors are dealing with construction, that’s probably a little bit of a different deal.” Most agents believe the trend is here to stay. In September, billionaire Nicolas Berggruen purchased the historic $63.1 million Hearst Estate; now he’s added an adjacent Mediterranean-style villa (for $12.3 million), creating a 4.5-acre compound. And former Google CEO Eric Schmidt, who recently bought the historic Barron Hilton estate for $61.5 million, has just purchased a dated 1970s home next door for $300,000 above the $4.9 million asking price. Sometimes, the best next-door neighbor is you.

A celebrity who wanted to acquire the house next door bought this Hollywood Hills residence in 2018 (listed with The Agency’s William Baker), paying $4.5 million for the threebedroom, 3,335-squarefoot home in an off-market deal.

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n a hot market — with no shortage of high-profile clients — real estate deals are increasingly including provisions designed to make offers extra-competitive and secretive.

NDAS In L.A., nondisclosure agreements are on the rise — with an increase in recent years from the buyer’s side. That’s because sellers typically own the listing photos, and new owners not only want to keep home addresses private but keep pictures offline as well. “Everyone is on high alert over the recent home-robbery invasions,” says Hollywood business manager Elizabeth Campos. “Nerves get rattled when they think of someone being able to recognize something in the home that directly ties them to it.” It’s not just the buyers and sellers who are bound to silence, either. Says top Re/Max agent Jordan Cohen, “In order to truly protect their privacy ... I have seen it where inspectors, designers and even real estate assistants are required to sign.” ESCALATION CLAUSES Another emerging trend doesn’t have the same broad support, even if it sounds foolproof. Some buyers are including escalation clauses in offers, essentially promising to outbid whoever comes in with the highest initial offer. “You better have an escalation clause or you’re not going to get it,” says Emma Hernan of Oppenheim Group. “It incentivizes the seller to pick you as opposed to the next person, even if it’s the same offer, because you will go [for example] 20 grand over.” But other agents tell THR that the novelty can backfire. F. Ron Smith of the Smith & Berg Partners team at Compass says adding an escalation clause can be a creative way to stand out in a multiple-offer situation, but only if the listing agent is familiar with the clause. He adds, “It is important as a buyer’s agent to craft a narrative that accompanies the use of the escalation clause within your client’s offer and to convey the power of this strategy to the listing agent and the seller.” And Cohen says he actively advises sellers against trusting them, especially because of contingency laws regarding inspections, loans and disclosures, which give buyers ways to cancel contracts. “With open contingency laws in place, it is too easy to throw up an escalation clause where a buyer can lock up a house at a price they truly will not pay and try to renegotiate later,” he says. “I am sure this is not always the case, but this is what I have recently seen happen.” — ASHLEY CULLINS

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