Just hold on, Drake is going to a… new home. But will he find a buyer???
A little over a year after paying $75 million for a sprawling 20-acre estate in Beverly Hills, Drake has already left the building and listed the property for $88 million. Before we get into it, first a little history of Drake's soon-to-be-former Beverly Hills estate…
Guess? jeans was created in 1981 by the four Marciano brothers: Georges, Maurice, Paul and Armand. Georges was the designer. Maurice did product development. Paul did the advertising. Armand Marciano was in charge of distribution.
Guess? quickly became a huge success thanks largely to Paul's advertising campaigns, which, still to this day, largely consist of very-nearly nude and typically very busty women like Anna Nicole Smith plastered onto massive billboards.
Unfortunately, over the next few years a rift formed between the brothers. Georges Marciano wanted to bring their products to stores like J.C. Penny. His brothers thought they should focus exclusively on the high-end outlets like Bloomingdale's. The rift got so bad that in 1993 Georges sold his stake to his brothers for $214 million. To come up with $214 million, the remaining brothers decided to take Guess? public. The IPO took place in 1996.
A year or so after the IPO, Armand Marciano paid an undisclosed amount for the 20-acre property that would eventually belong to British popstar Robbie Williams, then Drake.
After buying the property, Armand began construction on what became 24,000 square-foot, 10-bedroom, 22-bathroom palace. The estate, which was completed in 2001, features:
- Gym
- Tennis court
- Swimming pool + large pool house
- 11-car garage
- Wine cellar
- Game room
- Screening room
- Separate staff quarters
Via Bing Maps
The peak of Guess? came in late 2007. In October of that year the company's stock price hit an all-time high of $57 per share. At that level, Maurice and Paul Marciano were each worth $1 billion on paper.Armand, who for whatever reason had a slightly smaller stake, was worth $700 million.
Waning popularity and the global recession caused Guess?'s stock price to fall from $57 in October 2007 to $13 one year later. The stock rose back up to the $40 range by early 2011 but then it slipped again.
Guess? is still a public company today. The stock price as I type this article is $18, which gives the company a market cap of $1 billion.
Armand left the company years ago. Maurice soon followed. Paul, the last of the original four founding brothers, remains the company's Chairman and COO.
Drake's Estate
Armand first tried to sell his custom-built Beverly Hills estate in 2011 for $63 million. Two years later he lowered the price to $47 million. A year later $43 million. In late 2014 he made it available for rent for the low-low price of $195,000 per month.
Armand finally sold the estate in October 2015 to Robbie Williams for $32.7 million. Robbie and wife Ayda Field enjoyed the mansion until March 2022 when they offloaded it in a never-listed deal to Drake for $75 million.
A few months after the sale, Universal Music Group confirmed in an earnings call that it had recently signed Drake to a new "overall deal." The deal paid an estimated $300 – $400 million and pushed Drake's net worth to the quarter-billion-dollar mark. In other words, the timing of Drake's $75 million home purchase in March 2022 was not a coincidence.
A Bad Time To Sell
For whatever reason, Drake wants to move on from his barely-lived-in Beverly Hills estate, and is hoping someone will pay him a $13 million profit on the way out.
I see a few problems with Drake's plan.
First off, this is an absolutely terrible seller's market, even – and perhaps especially – for ultra-high-end properties.
Here are just a few ways in which the world has dramatically shifted since March 2022:
Back in March 2022 the world was still drunk on historically rock-bottom interest rates. Fearful that the housing market only goes up, buyers were making crazy over-asking-price offers for homes they never even toured. An average person could get a 30-year mortgage locked at 3%. Today that same mortgage would come with a rate of roughly 6.5%.
In March 2022, an ultra-rich person like Drake could get an even lower special rate from First Republic Bank and Silicon Valley Bank to buy mansions with essentially free money. Those two banks have collapsed, with potentially more on the way.
Once high-flying public companies like Snapchat, Buzzfeed, Allbirds and a hundred others have seen their stock prices drop 70-90%.
Hundreds of thousands of very high earners have been been laid off from companies like Google, Amazon and Facebook.
Many of the hundred-millionaires and billionaires who would have historically been Drake's prime buyers, have fled California to low-tax states like Texas and Florida.
That's not the end of the bad news for Drake. On April 1, 2023, LA County enacted what is called the "mansion tax." According to the mansion tax, when a home sells for more than $5 million the seller must pay a 4% tax. If the property sells for more than $10 million, the seller must pay a 5.5% tax. That means, if Drake sells his mansion for $88 million he will have to pay an ADDITIONAL $4.8 MILLION in taxes that did not exist roughly a month ago. That's on top of the standard real estate transaction fees.
And let's not forget about property taxes (which hasn't changed since March 2022 but is still worth noting): If someone does pay $88 million for Drake's mansion, even without a mortgage they will be on the hook for $900,000 per year in property taxes. That will require around $1.8 million in pre-tax income every year just for property taxes. We haven't talked about whatever it costs to maintain this type of estate.
In my opinion, this house will be very difficult to sell. We will keep you posted whatever happens!
Read more: Drake Seeks $88 Million For Beverly Hills Mansion He Bought A Year Ago For $75 Million
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