McMonigle’s McMansion auctioned for $18.5 million

John McMonigle fully embraced the California housing Ponzi scheme. He claims to have represented $2.1 billion in real estate transactions during the housing bubble. If he made 3% of that figure, that’s $63,000,000 in real estate commissions. In a game of financial football, that is a powerful offense. Unfortunately, his defense wasn’t quite as good.

Falling from housing peak: John McMonigle’s ride

According to bankruptcy court papers, McMonigle, 46, has amassed some $50 million in debts. His assets – even after selling his Newport Beach condo, his cars and personal effects – total $2.4 million – plus the value of the properties he owns that are facing foreclosure.

Critics say McMonigle let his ego get the best of him, that he got reckless, spent excessively and failed to see the housing market’s looming day of reckoning.

He gambled on a lavish – and perhaps impractical – lakeside palace in Newport Coast, once valued as high as $87 million. He borrowed $13.4 million to build a shiny, new office for himself near Fashion Island.

Now both properties are on the verge of foreclosure.

Making matters worse, McMonigle’s wife of 16 years filed for divorce. A week later, he filed for bankruptcy.

That is a crushing defeat. In losing his entitlements, he got to discover what he really needs.

McMonigle and his supporters maintain that the charming, soft-spoken salesman is just the latest victim of the housing slump.

McMonigle, they say, will bounce back.

I hope he does. He did a lot of thing right to get to where he was. With his ability to make money selling real estate, if he sticks to that and learns to control his spending, he could be successful again.

The Rise

John McMonigle arrived in Orange County with just $73 in his pocket in 1989.

Within four years the Oklahoma native was grossing $100,000 a year as a Newport Beach real estate agent. In 15 years, he was the top U.S. salesman in dollar terms in the Coldwell Banker chain.

That is an amazing rise. Of course, Daniel Sadek was a salesman who rose quickly too with an unsustainable business model and uncontrolled spending. He was later robbed in his Newport Beach home, then he lost it in foreclosure. I don’t see him making a big comeback, but anything is possible.

McMonigle also had branched out into high-end spec homes, and in 2003, he bought an odd-shaped, inland parcel in Newport Coast.

Soon a plan emerged for a luxury estate fit for an oil baron: The Villa del Lago property would include a three-story, 17,000-square-foot mansion, private lake, vineyard and horse stables. At one point, McMonigle’s asking price rose to $87 million.

The initial asking price was $87M, and the final sale price was $18.5M. That’s a 79% reduction in the asking price to consummate a sale. Do you think it was a bit overpriced?

… Speculation about McMonigle’s finances surfaced after he sold his home in Shady Canyon in October 2008 and became a renter.

At the time, McMonigle said he and his wife wanted to build a bigger home. Now, McMonigle concedes he sold his home because he was nervous about the market.

LOL! I wonder if he was reading the old IHB. His instincts were correct. He market was due to fall, and the high end will continue to struggle for many more years to come.

Cote, who’s seen numerous real estate downturns in his 40 years, wondered if McMonigle failed to foresee this latest slump.

“I think he overreached,” Cote said. “I think he didn’t think it would come to an end.”

Pride and arrogance often precede a fall.

Another critic, luxury home salesman Mark Whitehead, maintains that McMonigle consistently overpriced his homes.

Portabello and Villa del Lago were prime examples, Whitehead said.

Portabello took 4 ½ years to sell and fetched less than half its original $75 million price tag.

Villa del Lago remains unsold even after the price fell to $37 million – a $50 million price chop.

The price would cut in half again before it finally sold.

Newport Beach Mansion, Once Listed for $57 Million, Sells at Auction

May 14, 2012, 10:07 AM

An unfinished, 16,600-square-foot mansion in Southern California once listed for $57 million has sold at auction for just $18.5 million, according to the property owners’ lawyer.

It was actually listed at $87 million, not $57 million. Could it be any more overpriced?

Located in the upscale city of Newport Beach, Calif., the mansion was last listed for $37 million before being brought to auction in the last week of April. If the deal is accepted by all parties, including the lender and a list of subcontractors, the sale will draw to a close one of the most ambitious homes to break ground in Orange County during the housing boom. The buyer has not yet been revealed.

This project illustrates just how foolish our real estate market had become. Nobody speculates on $87M mansions. The buyer pool for such a property is very, very thin. People with that kind of money are not tract home buyers. Sales of such expensive homes are generally between other very rich people who paid cash and held the property for a number of years. A speculator using financing is likely to get eaten alive by interest payments waiting for a sale — which is what happened here. Any buyer who wanted this property would be wiser to just wait until McMonigle imploded and negotiate with the bank. A buyer at this price point can afford to be patient. A financed seller cannot. This was a dumb idea at its inception.

The property includes a private lake, a horse stable and riding area, a 17-car garage, a private vineyard and a “wine cave,” among other amenities.

In 2003, well-known real-estate agent John McMonigle formed a limited partnership to buy the 12.5-acre parcel of land for $3.42 million, according to attorney Sean O’Keefe, who represents the current owners. Mr. McMonigle did not return calls for comment, and he is no longer represented by Mr. O’Keefe. Mr. McMonigle’s current attorney, Michael Nicastro, declined to comment on the sale.

To build the colossal eight-bedroom, 17-bathroom estate, the partnership took out several loans against the property, including a $21.6 million loan in 2007 from La Jolla Bank, according to court records. The Wall Street Journal has reported that La Jolla Bank, which had a large concentration of residential real-estate loans, was shuttered by regulators in 2010 as the housing crisis reverberated.

That was a really, really stupid loan. It’s bank managers like these who should be shut out of banking for life.

By early 2011, One West Bank, which had acquired the loans, filed for foreclosure on the property, according to court records. The owners then filed for Chapter 11 bankruptcy protection; Mr. McMonigle left the partnership shortly before the filing, according to Mr. O’Keefe. Corey Gulbranson, a current managing member of the partnership selling the property, said Mr. McMonigle resigned, but would not comment on his reasons.

Abandon ship! Abandon ship!

The auction was held with an undisclosed reserve price, which represented a settlement among the property owners, the lender, and a committee that represents the property’s more than 200 creditors, Mr. O’Keefe said. In addition to the $18.5 million sales price, the buyer will pay a 5% premium to the auction company, Auction.com.

A $925,000 commission? I’m in the wrong business.

After the sale, Mr. Gulbranson said “everyone seemed satisfied with the outcome.” Mr. Gulbranson would not name the other members of the partnership.

Still, the deal must still be finalized in court. The property is still unfinished, and listing agent Rob Giem, of HOM Sotheby’s International Realty, estimates that the buyer will have to put in another $3 million to complete the original plans for the property. He said the home is about “90% to 95%” complete.

$18.5M and it’s not even done. Realistically, any buyer would probably tear out much of McMonigle’s handiwork and renovate the property to their taste. I used to work for a real estate developer who sold his Laguna Beach estate for $35M in 2008. The first thing the new buyer did was gut the flawless interior and redo the whole house.

What can we learn from McMonigle’s wild ride?

John McMonigle had it all, or so he thought. He made large sums of money, but he kept speculating on real estate rather than diversifying his holdings and picking up cashflowing investments. He financed his investments and his lifestyle with ever-increasing debt. If he had made other decisions. If he had bought cashflow properties and invested in dividend paying stocks and bonds, he would have weathered the downfall in much better shape. He may have still lost some wealth, but he would have avoided bankruptcy and a dramatic fall from entitlement from the utter collapse of his real estate empire.

Ponzis who rivaled McMonigle

The former owners of today’s featured property graduated from the John McMonigle school of Ponzi borrowing. The property records are a bit unclear, but the former owners had $1,817,323 in property debt on 11/30/2004. By 11/14/2006, just two years later, they managed to extract $699,077 in HELOC booty. That’s nearly $350,000 per year in tax-free income. That’s livin’ large.

Their $2,166,400 Option ARM blew up — yes, that’s a $2,166,400 Option ARM — and they were allowed to squat for over four years.

Four years squatting in a plush Newport Beach estate.

For their two years of ownership, these people were given $700,000 and allowed to stay rent and payment free for over four years.

I want one of those houses.

Newport Beach Overview

Median home price is $1,084,000. Based on a rental parity value of $783,000, this market is over valued.

Monthly payment affordability has been worsening over the last 2 month(s). Momentum suggests unchanging affordability.

Resale prices on a $/SF basis increased to $505/SF to $538/SF.

Resale prices have been weak for 12 month(s). Price momentum suggests weak prices over the next three months.

Median rental rates increased $175 last month from $$3,108 to $$3,283.

Rents have been slowly rising for 12 month(s). Price momentum suggests slowly rising rents over the next three months.

Market rating = 1

Proprietary OC Housing News home purchase analysis

3 WINGED FOOT Ln Newport Beach, CA 92660

$1,724,900 …….. Asking Price
$1,450,000 ………. Purchase Price
3/28/2002 ………. Purchase Date

$274,900 ………. Gross Gain (Loss)
($116,000) ………… Commissions and Costs at 8%
============================================
$158,900 ………. Net Gain (Loss)
============================================
19.0% ………. Gross Percent Change
11.0% ………. Net Percent Change
1.7% ………… Annual Appreciation

Cost of Home Ownership
——————————————————————————
$1,724,900 …….. Asking Price
$344,980 ………… 20% Down Conventional
4.28% …………. Mortgage Interest Rate
30 ……………… Number of Years
$1,379,920 …….. Mortgage
$346,675 ………. Income Requirement

$6,813 ………… Monthly Mortgage Payment
$1,495 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$431 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$217 ………… Homeowners Association Fees
============================================
$8,956 ………. Monthly Cash Outlays

($1,417) ………. Tax Savings
($1,891) ………. Equity Hidden in Payment
$533 ………….. Lost Income to Down Payment
$236 ………….. Maintenance and Replacement Reserves
============================================
$6,416 ………. Monthly Cost of Ownership

Cash Acquisition Demands
——————————————————————————
$18,749 ………… Furnishing and Move In at 1% + $1,500
$18,749 ………… Closing Costs at 1% + $1,500
$13,799 ………… Interest Points
$344,980 ………… Down Payment
============================================
$396,277 ………. Total Cash Costs
$98,300 ………. Emergency Cash Reserves
============================================
$494,577 ………. Total Savings Needed
——————————————————————————————————————————————-
This property is available for sale via the MLS.
Please contact Shevy Akason, #01836707
949.769.1599……
sales@ochousingnews.com…..

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We're sorry, but we couldn't find MLS # P821473 in our database. This property may be a new listing or possibly taken off the market. Please check back again.

	$2,395,000 19 BURNING TREE Rd		0.09 miles 4 bd / 2.5 ba 4,000 Sq. Ft.
	$1,799,000 3 RUE BIARRITZ		0.15 miles 3 bd / 2.5 ba 3,011 Sq. Ft.
	$2,189,000 20 TURNBERRY Dr		0.32 miles 5 bd / 5 ba 3,796 Sq. Ft.
	$1,749,000 11 CROOKED STICK Dr		0.52 miles 4 bd / 4 ba 3,150 Sq. Ft.
	$1,799,000 28 RUE GRAND VALLEE		0.57 miles 3 bd / 3 ba 3,819 Sq. Ft.
	$1,895,000 1706 PORT SHEFFIELD Pl		0.61 miles 6 bd / 4 ba 4,000 Sq. Ft.
	$1,749,000 2201 ALTA VISTA Dr		0.61 miles 5 bd / 3 ba 3,447 Sq. Ft.
	$1,374,500 23 EDGEWOOD		0.73 miles 4 bd / 3.5 ba 3,100 Sq. Ft.
	$2,049,900 1806 PORT STANHOPE Pl		0.73 miles 5 bd / 4 ba 3,867 Sq. Ft.
	$1,549,000 9 SINGLETREE Dr		0.76 miles 3 bd / 2.5 ba 2,800 Sq. Ft.

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