An over-the-top modern mansion in Bel Air was listed for $87.8 million at auction this week. But the highest bid was just under $45.8 million, according to the seller of the house, dermatologist-turned-developer Alex Khadavi.
“Awful, Awful, Awful!” This was how Khadavi characterized the results of the auction to CNBC. She filed for Chapter 11 bankruptcy protection two weeks after putting the house on the market last year.
Despite flashy amenities like a stealthy DJ booth that rises from the living room floor via hydraulics, a black marble-clad car gallery, and a glass and marble bridge suspended over the lobby , the auction of the property in the luxurious neighborhood of Los Angeles failed. to meet the $50 million reserve, the lowest amount Khadavi would accept.
“No one told me this is going to go down, below this level,” he said.
Dr. Khadavi sitting on top of the DJ booth that rises from below the floor at his spec home in Bel Air.
Khadavi, who owes tens of millions of dollars to various creditors, according to court documents, hoped the auction would precipitate a sale price high enough to cover his debt. But the doctor told CNBC that he was not happy that the auction, which concluded Monday night, coincided with big falls in both stocks and cryptocurrencies.
Khadavi also said he believed his agreement with the auctioneer, Concierge Auctions, prevented the company from starting bidding below the reserve price. So when the five-day auction opened, he was surprised to see that the auction house began bidding $10 million below the lowest price he had agreed to consider. The seller believes that the lower than expected starting point set the stage for what happened next.
Bids came in slowly, and on the last day of the auction the highest bid was accepted, falling short of the reserve by about $4.2 million. The last bid of $46.8 million before the auction closed failed.
A screenshot of the auction results for Khadavi’s mobile phone.
Concierge Auctions would not comment on Khadavi’s confusion as to why the bids started below his reserve. The auctioneer did not disclose how many bidders actually bid at auction. But company president Chad Roffers offered this statement via email:
“After a spirited auction, the bidding is closed and the highest bid is in the hands of the Trustee. With over 80 qualifying exhibits in the last 60 days, we are confident that market value was delivered.”
A glass and marble bridge overlooks the living room and leads to the owner’s wing.
Marc & Tiffany Angeles / Aaron Kirman Group
Generally, a seller is not required to accept a bid below the reserve price, but the auction of Khadavi’s property, located at 777 Sarbonne Road, is a bit more complicated because it is part of a bankruptcy proceeding. Khadavi told CNBC that in early June the court will consider the highest existing offer on the house and, if approved, the sale will go ahead whether he likes it or not.
Khadavi is now in a race to find a bid that exceeds the highest bid delivered at the auction and said he is considering taking legal action against the auctioneer for what he called a “flawed” auction.
“Honestly, I’m not happy,” said co-listing agent Aaron Kirman of Compass. “We wanted more.”
But Kirman said he doesn’t think the auction failed. “At the end of the day, the highest bidder is the highest bidder,” said the agent, who has been involved in several luxury real estate auctions.
A price cut of nearly 50% is not unusual for high-end properties sitting on the market for an extended period of time before finally going up for auction. According to CNBC’s review of recent ultra-luxury auctions, the top four mansions to ever sell at auction saw their original selling prices slashed by 68% or more.
The Bel Air deal will include a court-approved 5% auction fee, to be paid by the buyer, according to the auctioneer’s website. That would bring the property’s current offer to just over $48 million. If the sale wins court approval, the mansion would be the fourth most expensive home to sell at auction.