A year ago something spectacular happened in the real estate world. A property in Beverly Hills hit the market with an asking price of (Dr. Evil voice) one miiiiilllllion dollars. What? Not impressed? Oh. Excuse me. I meant to say a property in Beverly Hills hit the market with an asking price of (Dr. Evil voice) one billlllllllion dollars. Had the property sold for $1 billion, it would have been by far the most-expensive private real estate purchase of all time. Buying it for $1 billion would come with an annual California property tax bill of $10 million. So you'd have to make $20 million every year pre-tax just to cover your taxes. Want to be even more impressed? This magnificent one-of-a-kind $1 billion property just sold for…. one hundred THOUSAND dollars. That's not a mistake or a typo. This sale touches on one of my favorite CelebrityNetWorth stories of all time, the story of Herbalife founder Mark Hughes.
Located just 10 minutes up the street from world-famous Rodeo drive, the property that today is known as "The Mountain of Beverly Hills" (and was previously known as "The Vineyard of Beverly Hills"), is 157-acres of undeveloped prime Beverly Hills dirt. We're talking about a truly incredible piece of land that has been the object of desire for royalty and movie stars for decades. Tom Cruise wanted to buy the land. So did Brad Pitt. Both failed. Suitors were likely scared off by the asking price, which over the decades ballooned from $8.5 million to $24 million to $300 million… all the way up to $1 billion then back down to $650 million, finally settling at today's $100,000 pittance.
For some perspective on the sheer size of this property, keep in mind that Disneyland is 85 acres. If you added neighboring park California Adventure, you'd be at almost exactly 160-acres. Soak up this video to understand fully the magnitude of what we're talking about:
How did 160-acres of literally the most desirable and rare dirt in the world go untouched for decades? Let's go back to the 1970s.
Back in the 1977, an Iranian princess named Shams Pahlavi bought the property from movie producer Jack Bean and his wife, actress Mitzi Gaynor. Shams was the older sister of the last shah of Iran. In 1979, the shah was overthrown and basically every wealthy person in Iran fled the country. Iranian students in Los Angeles actually stormed one of Shams' other properties in Beverly Hills and nearly burned it to the ground with Molotov cocktails.
After that incident, Shams had lost interest in owning real estate in Southern California. She retired to a friend's estate in Santa Barbara (where she lived til her death in 1996). She sold her 157-acres of Beverly Hills paradise to Jeopardy creator Merv Griffin in 1987 for an undisclosed amount.
Merv wanted to build the largest house in LA on the property. He asked around and discovered that the largest house at the time was Aaron Spelling's (mid-construction) nearby Holmby Hills, which would later be known as Spelling Manor. Upon completion, Spelling's house was set to be 56,000 square feet. So Merv made plans to build a 58,000 square foot mansion on his new property. Griffin dubbed his property "The Vineyard".
Merv struggled to get his plans approved. Around this time he also bought the Beverly Hilton hotel and became a little stretched for cash. So, in 1997, Merv sold the property to Herbalife founder Mark Hughes for $8.5 million. Roughly the same as $13.5 million in today's dollars. Believe it or not, that was the most-expensive real estate transaction in Southern California history up to that point.
Mark Hughes is a very interesting character. He launched Herbalife from the trunk of his car in 1980 when he was just 24 years old. Two years later he was generating $2 million in revenue. Thanks to its highly successful "multi-level-marketing" (some would say pyramid) strategy, by the early 1990s Herbalife was generating $1 billion per year in revenue. When the company went public on the NASDAQ in 1996, Mark's 26% stake was worth $250 million.
After buying The Vineyard for $8.5 million, Hughes intended to spend $100 million developing a dream home. His dream home would include a wildlife sanctuary and a one million gallon pond.
Unfortunately Mark Hughes died in 2000 at the age of 44 from a bad mix of alcohol and anti-depressants. At the time of his death, in addition to "The Vineyard", Mark also owned a $25 million oceanfront house in Malibu, a $30 million Beverly Hills mansion and a pristine plot of land in Malibu that he dubbed "Tower Grove".
According to the terms of his will, Mark's entire estate was left to his 8-year-old son Alex. Alex would not be able to access the assets from his trust until he turned 35 in 2027.
Selling The Vineyard
In 2004, for reasons that seem batshit crazy in retrospect, Alex's trustees agreed to sell The Vineyard to a man named Charles Dickens who had zero money and zero real estate experience. The agreed upon price was $23.75 million and the buyer was supposed to put $2 million down for the purchase. But since he had no money, he couldn't come up with the $2 million. Somehow, Dickens convinced the trust to LEND him the $2 million to finance the purchase. So a man with no real estate experience or licenses bought the land for no money down. Oh, and according to a court records, the trust accepted this deal while rejecting a higher-dollar more qualified offers that topped $40 million.
Over the years through a series of even more insane twists and turns, Charles Dickens ended up borrowing a full $200 million (including interest and fees) from Alex Hughes' trust fund.
Last year Charles Dickens transferred ownership in the property to a partner named Victor Franco Noval. Victor's father is a convicted fraudster and tax evader. Some seriously sketchy stuff was happening that isn't worth getting into… but Victor is the one who listed the newly-named "The Mountain of Beverly Hills" for sale for $1 billion.
It was actually a brilliant move. Had they somehow sold the property for $1 billion, they would have paid off the $200 million debt and kept the profits of $800 million. Not a bad return for a couple of guys with no real estate experience who paid no money down for the property.
And the crazy thing is they actually got offers! Not for $1 billion, but at some point in the last year someone offered $400 million for the property. Victor and Charles countered with $600 million and ultimately scared the buyer away.
In the meantime they were wracking up an enormous outstanding tax bill with the state of California.
Selling for $100,000
The tax bill got so huge that Alex Hughes' trust moved to foreclose on Victor and Charles. This was a strategy to force them out once and for all.
This week "The Mountain of Beverly Hills" hit the auction block. The winning bid was $100,000.
How is that possible? Well, whoever won the auction was also agreeing to clear the $200 million debt owed to Alex Hughes, via the Mark Hughes Trust.
In the end, the winning bidder was actually… Alex Hughes, via the Mark Hughes Trust.
Through his lawyers, Alex Hughes essentially bought the property from himself for $100,000, using a credit against the $200 million owed to himself. By buying the property and "clearing" the debt, Alex Hughes officially ends nearly two decades of lawsuits related to the property and officially takes ownership himself without anymore shady partners. Keep in mind that this is a property he was supposed to inherit back in 2000 for free when he was 8 years old. Today he's 27.
So as of this writing, 27 year old Alex Hughes owns 157 acres of undeveloped pristine land in Beverly Hills. I wonder what he'll do with it?!
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