Introduction

Carrizo Capital Partners (CCP) intends to acquire the 23 acre Gucci Estate property for $4.5 million, reposition it and resell it for $7 million. During the sell-cycle, CCP intends to rent the estate to cover all carry and operating costs and distribute a profit to the partners. The sell-cycle is anticipated to be 3-5 years. In its current condition, the estate currently rents for $4,700 to $10,100 per night (in season).

The Property

4,500 ft high in the Santa Rosa Mountains with sweeping views of the Coachella Valley below, sits the extraordinary Gucci Estate on 23 secluded acres. Custom built by the world-renowned Gucci family, the compound features almost 11,000 square feet of living space, divided between the main house and two magnificent guest homes. The house offers 10 bedrooms, 10 bathrooms, and fantastic indoor/outdoor living space. A pool, tennis court, and home theater make this the ultimate entertainer’s compound. The private and secure setting, nestled up against a national park, offers privacy rarely found anywhere—let alone just a 20-minute drive from the shopping and restaurants of El Paseo—the Rodeo Drive of the desert in Palm Springs/Palm Desert, CA.

A breathtaking drive up the mountain leads to the high desert retreat. Sitting behind multiple private gates in the mountains above Palm Springs and boasting panoramic views of the Coachella Valley, Gucci House is the grand dame of the high desert. The home features grand-scale interiors with a beautiful indoor-outdoor flow. All formal rooms overlook the scenic view of the valley and cities below. A large chef’s kitchen and numerous patios are ideal for dining and entertaining, with a private sundeck off every bedroom. There are two super deluxe guest houses with full kitchens in each, a pool, spa, tennis court, and spacious home theater.

The Partnership

Carrizo Capital Partners desires to raise $5.8M to acquire the Gucci estate, reposition it, establish a reserve fund and cover the initial operating expense.

At closing, the deed of the property will be conveyed to Carrizo Capital Partners LLC.

The founding General Partner will contribute $800,000 to the partnership. The preferred unit size is $1M with a minimum unit investment of $500,000. Ownership will be proportional. A right of first refusal is a component of the partnership. The partners may sell/convey his/her interest to any party at any time. However, that interest must first be offered to the other existing CCP partners. The partners will be allowed to resell the property at any time by a majority vote.

The Managing General Partner will be elected by, and from, the partners—once the total contribution has been committed. The partners have the option to hire an outside manager.

The CCP General Account and Operating Funds will be distributed by the Partner’s elected accounting firm for all expenditures, including renovation expenses and on-going operating overhead.

Sources and Uses

Initial Capital – $5,800,000
Purchase – $4,500,000
Account Balance – $1,200,000
Up Front Fees & Expenses – $110,000
Reposition Expense – $800,000
6 month Operating Expenses – $90,000
Account Balance Reserve – $300,000

Valuation Assignment

PRE-REHAB:
Structures: 10,886 @ $385 sqft – $4.2M
Land: 23 acres @ $65K ac = $1.6M

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Executive Summary

Carrizo Capital Partners’ (CCP) objective is to purchase this property for $4.5 million and resell It for $7.0 million plus, on a later date. In the interim, the partnership intends to operate it as a luxury rental income property catering to select individuals and celebrities as a secluded escape and to corporate clients as a business retreat.

Rental income is anticipated to cover operating and overhead costs and provide a profit during the sell-cycle. The compound has a successful rental history at $4,700 per night up to $10,100 per night in season. The first six months of 2017, rental income revenues were $175,000 with high-season (October, November, December – 2017) remaining. CCP has projected 50 rental days with annual revenue of $315,000 and all operating cost, including taxes and insurance, at $180,000.

The facility would be operated as a five-star villa property, offering seclusion and security. The property is within 120 miles of Los Angeles and San Diego and a day drive from Silicon Valley. The property would be marketed on a national and international basis using booking agents who specialize in international clients looking for super luxury rentals.

The target audience and the bulk of rentals or buyers are anticipated to be select clients as a family getaway, as a romantic escape and for entertainment celebrities and corporate clients looking for a well-appointed private compound, executive sanctuary or company retreat.

There is also a ready market for clients who want secluded, exotic luxury while visiting local, annual, Super events, such as the BNP Tennis Championships (3 weeks), the Coachella and Stage Coach music festivals (2 weeks each) and the Palm Springs film festival (2 weeks). According to the Coachella Valley Economic Authority, these festivals bring in over $700 Million to the area. Luxury/Exotic Rentals are in high demand during these events.

CCP believes that the Gucci history adds a caché to the property but this value-add has not been monetized in the projections.

Guests can request management to stock the pantry with a personalized list and other desired items or they are free to bring their own. For a fee, management will also provide cooks, maids, bartenders, valets, entertainment—or even a song stylist. Management would also, for an additional fee, arrange for various types of vehicles, including guides) to explore the local mountain terrain, desert attractions, the San Andreas fault or the mountain village of Idyllwild. Rental cars can also be delivered to the Villa for local driving as well.

Every effort will be made to make the Villa Carrizo experience easy, comfortable, memorable and 5-Star.

The Gucci Villa is NOT intended to be “by the night” lodging. This is intended to be a destination, a specialty offering for those individuals and companies who can afford and require a unique, one-of-a-kind private resort lodging experience.

Repositioning The Estate:

The intent is to reposition the estate by updating some of the physical aspects and overall look of the compound using landscaping and outstanding interior design improvements. The architectural bones are excellent but the interior design is dated and worn as revealed in the pictures. The hardscape of the landscaping is very good, but there is great opportunity to put it over the top at a minimal cost to benefit. Currently, the tennis court is also used as a heliport. An actual helipad would be located next to the main house. Additional features are intended to include the installation of a premier security system, and the incorporation of a music studio. Repositioning includes landscaping, lighting, minor construction, kitchen update, furnishings, art, security, new equipment, and helipad. Estimates total eight hundred thousand dollars.

Rental:

Subject to change; current rental fees range from $4,700 per night low season to $10,125 per night high season -$10,000 security deposit. Four-night minimum stay requirement.

Distribution:

Upon closing of the sale of the property, distribution of the net proceeds will be made on a pro rata basis. All remaining funds in the partnership will be distributed at closing. Revenue surplus will be distributed annually the first week of June.

Additional Partner Benefit:

Each Partner will be allowed to use the estate every year for 1 day per one hundred thousand dollars invested. During the “OFF Season”, the partners are allowed a bonus day on the same basis.

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Pro Forma Financial

Rental Income

Jan – May (30 rental days) @$5,500 average per day – $165,000

Oct – Dec (20 rentals days) @ $7,500 average per day – $150,000

Total $315,000


Operating Expense

Overhead:  $180K Annual, $15K per month

  • Taxes 19K
  • Insurance 18K
  • Maintenance, Landscape, pool man – full time 55K
  • Cleaning – full time 25K
  • Utilities 20K
  • Misc 10K
  • Maintenance Reserve 15K
  • Legal & Accounting 18K

Up Front Equipment Expense

Equipment Purchase: $25K
Truck (used) 10K
Tractor w front loader (used) 5K
Blade & Box (used) 2K
Utility Trailer (used) 1K
Gardening Tools 1K
Shop Supplies 4K
Generator 2K

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