L.A.'s most extravagant mansion sells for less than half its list price

The mega-mansion known as "The One" sold Thursday for $126 million at a bankruptcy auction. That's a huge discount from its $295-million listing price, even with a 12% auction fee bringing the total to about $141 million.

The Bel-Air property set a record for the costliest house sold at auction, but it fell well short of the California sales record set by venture capitalist Marc Andreessen, who purchased a Malibu estate for $177 million in October. The most ever spent on a U.S. residence was $238 million by hedge fund mogul Ken Griffin for a New York City penthouse in 2019. Several international sales have surpassed $300 million.

The buyer will be disclosed by March 8, when paperwork must be submitted to U.S. Bankruptcy Court Judge Deborah Saltzman, who will hold a hearing later this month on whether to approve the sale. It is possible that the winning bidder will be a limited liability company, a legal entity often used by the wealthy to hide their real estate purchases.

More than three dozen prospective buyers toured the 944 Airole Way property over the last couple of months, including billionaires from the Middle East, Asia and California, The One's listing agents have said.

Concierge Auctions, which handled the sale, said its auction site drew views from 170 countries, including Australia, the United Kingdom, Germany, France and Italy — and generated some 2,800 prospects.

However, after the online auction opened Monday, only five bidders from the United States and New Zealand participated. Most of the action occurred in the last few minutes.

Agent Brent Chang of Compass said the results were a cautionary tale and might prompt builders to think smaller, given that multiple huge mansions have gone into bankruptcy in the last few years. He also wondered if the timing was off given Russia's invasion of Ukraine.

“The buyer pool for this is very small, and with everything happening in Russia, all of a sudden those Russian billionaires who may have been your best bet to buy it are pulling out,” he said.

The amount of debt attached to the property originally totaled about $180 million but has since grown to $256 million as more creditors have made claims, according to a March 2 court filing. That means many creditors will take losses — even though most of the auction house's 12% fee will be returned to the bankrupt estate, which is not a typical arrangement.

The largest single creditor is Los Angeles billionaire Don Hankey, who lent $106 million to the dream project of developer Nile Niami. The lender is owed more than $130 million in secured debt, including money he provided in bankruptcy to repair and spiff up the property for sale.

Hankey, who previously said he might bid for the property if it was severely underpriced at the auction, said he did not make an offer. He said the sale should allow him to recover the cash he put into the project, but added that he was surprised at how low the final price was.

"The guy who bought it just got a great deal. He's got people willing to pay $50,000 a day just to do commercials and films," Hankey said.

The hilltop home, said to be 105,000 square feet, was marketed for $500 million several years ago while under construction but didn't find a buyer. It was placed into bankruptcy in October after Hankey foreclosed on the $106 million in debt defaulted on by Crestlloyd, the limited liability company established by Niami that legally owns the project.

Turnaround specialist Lawrence Perkins, who was put in charge of Crestlloyd when the home was placed into bankruptcy, said the "market spoke" at the auction. However, he also said it was his responsibility to continue fielding late offers that might top the auction price.

"I've got an obligation if someone comes in, and there's a better offer. We're not soliciting them but it's not closed until it's closed," he said. "Some people don't want to participate in auctions."

Broker Stephen Shapiro, the founding partner of Westside Estate Agency, said the low price reflected the "out-of-control ego" of Niami, who built a huge house that wasn't really a home.

"Most builders build a house that people can live in," he said. "He built one thinking there was going to be demand for this outrageous over-the-top house."

Niami has been attempting to regain control of the property. In December, he proposed creating a cryptocurrency called The One Coin that would be backed by the mansion and pay off all the home’s debts.

Prior to the auction, a Niami spokesperson said the developer would not be commenting on the auction. He could not be reached for immediate comment Thursday.

The One is just the latest L.A. trophy home to end up in bankruptcy after a blitz of costly development in the region's glitzy hillside and coastal communities.

Concierge Auctions last year set an auction record when it sold a Beverly Park home for $51 million — but that was still more than $100 million off its original asking price. Concierge said The One was the largest home ever sold at auction.

How much The One would go for had been something of a parlor game in the luxury real estate community, with some thinking it is the ultimate trophy home and others declaring it a white elephant.

The property includes a 4,000-square-foot guesthouse, a sky deck with cabanas, a private theater, a full-service spa, a nightclub and even an outdoor running track and moat. It has 21 bedrooms and 42 full bathrooms.

However, the mansion could end up being a project for the buyer.

The house isn’t 100% complete and lacks a certificate of occupancy, pending a sign-off from city inspectors on crucial permits for grading, electrical and other work. Also, it could have construction defects and zoning code violations, according to allegations in court documents.

The mansion was described on the Concierge website as the “largest in the urban world,” but by many accounts, a 27-story home said to be 400,000 square feet owned by a billionaire in Mumbai, India, is considered the world’s largest, outside of royal palaces. However, it may be the largest in the country.

Under the terms of the auction agreement, the winning bidder is under legal obligation to close the sale by the end of the month or lose a $250,000 deposit.

In making her determination whether to approve the deal, the judge will consider whether she believes the high bidder has the financial wherewithal to close the sale, its impact on creditors and other issues.

Other big creditors include Inferno Investment, a company run by Julien Remillard, a longtime Canadian investor of Niami’s. Inferno says it is owed $24 million. Yogi Securities, the investment vehicle of Joseph Englanoff, an L.A. doctor and another longtime Niami investor, says it is owed $14 million.

Compass agent Bret Parsons said that he thought the price more reflected the value of the hilltop property, with its commanding views across the city, than the house itself.

"It's unfortunate that Mother Nature's valuable resources can be plundered for ridiculous trophies," he said.

— Times staff writer Jack Flemming contributed to this report.

This story originally appeared in Los Angeles Times.