"The opportunity to sell the land, though, was too attractive to pass up."
-W.L. Yiu of Joint Treasure
In 2010, Joint Treasure International bought the former Robinsons-May department store site on Wilshire Boulevard in Beverly Hills for $148 million. Joint Treasure intended to construct a mixed-use development comprised of 21,000 square feet of shops and restaurants, underground parking for 876 vehicles, and 235 condos designed by Getty Center architect, Richard Meier. Demolition of the Robinsons-May structure was completed in July 2014 in preparation for the new community of luxury condos.
On September 10, 2014, Wanda Group, China’s largest property developer, stepped in and purchased the eight acres of land for $420 million.
“Things have changed in the past two years [in California]”, said Thomas W.L. Yiu, senior adviser at Joint Treasure. Demand for condos has recovered from a plunge after the economic downturn. “We still believe very much in the opportunity to sell the property on a condominium basis.”
The evidence is clear when you look at a property tax bill. Every property tax bill in the U.S. has the property’s value broken down into two values: improvement and land. Improvement is the structure, or the end item. Few people know that for a luxury home or properties in an affluent neighborhood, the land value significantly outweighs the improvement value. For example, I recently looked at an estate in Beverly Hills, valued at over $4 million, where the land was $3.3 million and the massive home only worth $800,000 of the total value. Don’t think this only applies to Beverly Hills, in Hawaii I once looked at a modest $850,000 home that had a land value of $650,000!
Successful developers unlock land values. Successful land owners understand how to work with the right developer that will make such a large return that it becomes negligible to pay the land owner hundreds if not thousands of percent more than what the land owner paid. Putting aside hundreds of millions of dollars in profit, in the Robinson’s-May deal, the land owner made a 300% return in 4 years. Many of our clients have done better than a 300% return in 4 years. Investing in land the right way becomes consistent and predictable. Learn how to properly invest in the world’s most profitable real estate…land.