January 20, 2011

Google Salaries And Shares Up While 2207 Scott Street Returns Down

2207 Scott Street

As we first wrote this past October:

Purchased for $3,425,000 in May 2006 with what would appear to have been "Google money," in 2008 the rear foundation at 2207 Scott Street was replaced, a three-quarter bath added, and a bit of garage space reclaimed for living.
At a permit estimated cost of $200,000, let's call it $3,625,000+ invested in the property.
Back on the market today and listed for $3,600,000, a sale at asking would appear as "appreciation" of 5% over the past four years in MLS based reports, newsletters and statistics but wouldn’t exactly be so.
Closing the day at $543.30, shares of Google are up 47% over the same timeframe.

Since then Google announced across the board 10 percent raises and their shares have traded up 16 percent (currently at $627.90). And 2207 Scott Street has returned to the market asking 4 percent less ($3,450,000) since being withdrawn from the market in November.

∙ Listing: 2207 Scott Street (4/4.5) 3,035 sqft - $3,450,000 [2207scott.com] [MLS]
2207 Scott Versus The Underlying Shares [SocketSite]

First Published: January 20, 2011 7:45 AM

Comments from "Plugged In" Readers

beautiful house, so they overpaid with some "free" Google money, who cares. This is such a "Monday morning quarterback" posting by Socketsite

Posted by: Mike at January 20, 2011 8:51 AM

yeah, they lived for free for 4-5 years and now they are gonna walk away with $25,000 of free money. What's not to like? Like the flipper said, good seats always do well.

Posted by: your equity will be assimilated at January 20, 2011 9:12 AM

holding costs (property taxes = 200K)
repairs (200K if permit numbers can ever be trusted)
opportunity cost (16% Google stock * 3.4M)

total is a bit shy of 1M

The nice thing is this money went to fund businesses (contractors) and the general public (government).

I love Google. We will never thank them enough for what they give to this community...

Posted by: lol at January 20, 2011 9:24 AM

As always, I forgot a salesperson/structure got his cut.

Make that another 170K into the SF economy.

Posted by: lol at January 20, 2011 9:26 AM

If the money was kept in Google stock, sure that would have been a better investment, but who exactly does simple price appreciation on a set of stock help (that is, before it's sold and someone realizes a capital gain)?

This way at least the needed rear foundation was repaired and a beautiful period-type home was spared an ignominious descent into disrepair like that place on Florida so that someone can come along in the future and "rebuild" it into "Dwell"-ified postmodern dreck.

Posted by: Brahma (incensed renter) at January 20, 2011 9:45 AM

Something I think is interesting .. companies like Google and Facebook that have a global reach but a local headquarters funnel a huge amount of money into the Bay Area, via salaries, taxes, purchases of local goods and services ... even the vast numbers of unsuccessful startups are running on VC funding, which although the money is usually from residents here, would otherwise be in a financial instrument somewhere else.

The long and the short of it is, there is just a ridiculous sum of money coming from all over the world and landing in the Bay Area. Companies in Europe are buying advertising on Google, and that money is paying out the salaries and stock options of people right here in SF.

This influx of money might explain propped up housing prices relative to other parts of the country, but without numbers it's hard to say. It would be interesting to look at something like interstate/international revenue per capita and see if there are trends that relate to local economic health.

Posted by: Gee Ess at January 20, 2011 9:55 AM

Google isn't paying all that money out, they are saving it. Their cash hoard grows every day. One way or the other, it gets invested and flows right back out.

Recall they tried to pump $6B right into Chicago's Groupon.

And the local economy is more than just 5 tech companies du jour. I can tell you that the vast number of companies in the area are not doing nearly as well as the five hot companies of the week and companies like HP and Applied Materials are not paying anything like they were.

http://www.employmentspectator.com/2010/07/applied-materials-to-cut-400-jobs-from-solar-power-branch/

When these companies DO hire, it's anywhere but here.

http://www.statesman.com/blogs/content/shared-gen/blogs/austin/theticker/entries/2010/07/26/applied_materials_hires_in_aus.html

Posted by: tipster at January 20, 2011 10:09 AM

a few things

1) many/most Googleaires have cashed out a lot of their winnings and/or left. Many of the best/brightest went to Facebook and elsewhere long ago.
thus, Google stock price doesn't mean what it once did (in terms of employee compensation), since stock options make up less of a % of compensation to the majority who remain

2) for those who really have a lot of GOOG, sure it may be up 16% since 2006, but it is still DOWN from 2008. (when it was $714 or so). it is just barely above where it was at end 2009. GOOG did revalue many of the options after it plummeted in 2009, but the parabolic rise of GOOG has halted. It now goes up and down like other stocks. Thus, it's not a "sure thing" like it once was. This makes Googleaires feel less rich. (just last year it went from $618 to $436 as example)

3) recognizing this, Google increased salaries by 10%. But this was partly because they understand that they are a maturing company and thus they are moving more towards a microsoft/intel sort of compensation structure as opposed to what they did long ago.

4. the next boost will be if/when Facebook goes public.

but alas, although Google/Facebook are Titans of the industry, the IPOs and immediate riches in tech are spaced out further than they were with the .com era or with tech 2.0 era. also problematic are the number of Facebook winners who were already GOOG winners... thus not sure they'll change their purchasing as much.

it's not enough to have money gushing into SF. It must continue to gush AT LEAST as fast and furious as it did in the past to continue the lofty prices of everything.

who knows if they can do it.
===

as for the house:
I absolutely love it.
Love love love love love.

love it.

===
yeah, they lived for free for 4-5 years and now they are gonna walk away with $25,000 of free money. What's not to like? Like the flipper said, good seats always do well.

you've got to be kidding me.
1) first they have to sell.
2) then they have to pay commission. (what's 5-7% of $3.4M again?)
3) then you add up all their holding costs over the years.

"free" money indeed.

Posted by: ex SF-er at January 20, 2011 10:44 AM

yes, some win and some lose and many more still do rather OK. Overall it's still not a zero-sum game. We're much better off than areas that are still stuck in old economical models. Go in Michigan and tell them that California is down the toilet and they'll laugh at your Tesla-driving iPad-connected organic fair trade rich boy ;)

We're fine, believe me. And Real Estate is getting cheaper! What's not to enjoy?

Posted by: lol at January 20, 2011 10:46 AM

I'm just saying, the tech industry still looms large. Google may have tapered off but the MV office is still paying 5,000 people between 100-200k/year each with money that largely comes from elsewhere. That's a billion dollars going straight into locals' pockets. From one company.

Facebook has around 1000 employees, all here, and they'll soon be able to cash out big time. There is serious money in that company's future.

Twitter is a wild card, but if they actually figure out how to make money, expect more big things from its employees.

This doesn't count the myriad other startups, many of which will fail, but some of which will go on to be the next Google and Facebook. This area is a bit unique in that respect. I'd run the numbers before discounting it.

Posted by: Gee Ess at January 20, 2011 12:31 PM

I do love this place.

Posted by: Michael E at January 20, 2011 1:53 PM

The front door looks out of place.

Posted by: EH at January 20, 2011 1:59 PM

Hunh? Did someone say something about the local economy and tech firms? I was too busy mentally painting the walls, swapping out the window treatments and buying furniture. Love this house.

Posted by: kthnxybe at January 20, 2011 3:12 PM

MV office is still paying 5,000 people between 100-200k/year each with money that largely comes from elsewhere

1)
but 100-200k/year won't buy you the house in this thread.
just sayin...

even at 10x income, $100k/year only buys you a $1M home, and $200k/year only a $2M home.

and that's 10x income. I think people have learned how dumb it is to buy a house at 10x income.

if two $200k/year people bought, that's still 8.75x salary.

so in other words, 2 senior product managers at GOOGLE could not afford this house, unless they still had stock options or some other independent form of savings/investments.
hmmm.....

2)
Regardless, most of the Googlers are making the lower amount of your range anyway: about $80-120k/year

the $200k/year people are the higher end positions like product managers and directors. A lot of the designers and many of the software developers make more around $80-120k/year, even with the increase in salary.

go here if you'd like more info:
http://www.glassdoor.com/Salary/Google-Salaries-E9079.htm

you can sort by # of reports, or by salary, or whatever.

======
in the end, nobody ever made big bucks at google due to salary. they made it by options.
those days left years and years ago.

Google is maturing into a Microsoft or Intel.

the new game in town is Facebook.

again: the issue isn't that there is no money in tech.
it's that the money has to keep coming in to support pricing.

Kind of like a coke addict.
Sure, you might be going through $5k/month in blow.

but if you're used to going through $10k/month then you'll be in withdrawal at $5k/mo... even though you're still hittin the blow hard.

sort of like me... blow hard. get it? :)

Posted by: ex SF-er at January 20, 2011 3:36 PM

Maybe I'm missing something but this place looks like it's straight out of a Pottery Barn catalog. Very waspy indeed!

Posted by: Willow at January 20, 2011 3:36 PM

"the new game in town is Facebook"

Very true. But word on the street is that Facebook has not handed out options to nearly the numbers that GOOG did. There are a small number of early employees who are big options holders but Facebook had lots of funding early on and was able to pay well and attract talent with less emphasis on options grants. It has given restricted stock, but not to that many employees and at a valuation that was already pretty high so there is not the huge upside (but also little risk of going to $0). Facebook will make a few people many millions/billions but it likely won't make the hundreds of millionaires that GOOG did.

Twitter, I hear, is handing out options like candy.

Posted by: A.T. at January 20, 2011 4:07 PM

"you might be going through $5k/month in blow."

Wow, you real estate people sure know how to party!

Posted by: Wow at January 20, 2011 5:38 PM

"MV office is still paying 5,000 people between 100-200k/year each with money that largely comes from elsewhere. That's a billion dollars going straight into locals' pockets. From one company."

But that's really not a lot of money or a lot of people. It doesn't even make the Bay Area unique. What does make the Bay Area unique is the vast amount of land we have here and how little of it the 7.4M people in the greater Bay Area are allowed to use.

ex SF-er already covered some of the real facts and figures already. Even at a $200K salary, the maximum house value is about $700K, if you have a $140K down payment, under the traditional 28% rule. That's a common price range on the Peninsula, but that's not the average salary on the Peninsula.

We could go into details of Google stock options and restricted stock grants, but it's not a worthwhile endeavor. Google definitely paid some people's down payments, but that only gets you so far.

Posted by: sfrenegade at January 20, 2011 6:02 PM

Interesting that no one is talking about price/sq foot. For approx $1,140/sq foot, dont you want a view or a yard? Thoughts?

Posted by: Info at January 20, 2011 10:28 PM

here's the linkedin data for the owner (some redacted), can't really put it together to add up to a $3.5M house except to suppose there must have been a lot of google options there along the way:

Current:
Director of Communications at S********
Past:
Communications at Google Inc., Marketing Communications at E*****, Inc, Director of Public Relations at En****, Inc

Posted by: fancy rental at January 21, 2011 5:32 AM

In Escrow...

I was going to post in the Washington St. thread that this would be the next house to go...

Posted by: Denis at February 8, 2011 4:18 PM

Mentioned on the other thread that 2781 Clay is in escrow as well. These will be very good comps to test the market strength.

Posted by: eddy at February 8, 2011 6:31 PM

For the record, GOOG closed at $618.38 today with the Nasdaq / Dow @ 2797/12233 respectively. Should be fun to see where the markets are when (if) this closes. I suspect that it will close.

Posted by: eddy at February 8, 2011 6:40 PM

2240 Broderick, 3600 SqFt goes into contract after 12 days listed @ $2.5M. I cannot wait for all of these properties to close. I'm not all that interested, or surprised, in the Gough, Franklin or California Steet Apples that are going to show massive losses. As a watcher of prime d7 properties I really think that we're going to get a great set of information on where normal D7 SFHs are trading. I would think that 2240 Broderick could go a little over asking. Maybe $715/psf. And even though 2207 Scott is going to show an Apple loss; let's not kid ourselves that it will not still likely be a strong comp for D7 SFHs. Fun times.

Posted by: eddy at February 9, 2011 11:29 AM

There's clearly a pent-up demand for decent homes in Pac Heights. There are really only two homes north of Californa for sale between 2 and 5 million currently listed on the mls. Pretty much everything in that range has gone into contract over the last couple of weeks thanks in part to a (temporarily) healthy stock market and nice weather.

It'll be interesting to see what happens March-May... How many homes are going to show up on the market this spring? Last year I knew of several truly prime homes where the owners needed to sell. I'm really not hearing about much this year.

Posted by: Denis at February 9, 2011 11:43 AM

There is a flight to quality. But even fixer homes are selling like the one on Filbert that is in escrow. I like 2705 Buchanan to go next but it might be priced a little high.

Posted by: eddy at February 9, 2011 1:14 PM

2240 broaderick closes +6% over asking at @$2.6550 738/psf. Outstanding outcome yet again for these prime location homes.

Posted by: eddy at March 3, 2011 10:11 PM

Available. Goog @ 600 even.

Posted by: eddy at March 6, 2011 2:53 PM

uh-oh... I wonder what happened?

Posted by: Denis at March 6, 2011 4:46 PM

My guess is that its a negotiating tactic. Probly goes from Avail to In Escrow Firm later this week. Seen it a million times.

Posted by: eddy at March 6, 2011 6:48 PM

I have no inside info here, but I think this house failed its inspection. They've had to tear out the entire floor of the garage and some of the sidewalk. Faulty foundation? Gas tanks?

Posted by: Denis at March 22, 2011 4:21 PM

Reduced to $3.3mm

Posted by: A.T. at March 30, 2011 2:17 PM

GOOG @ $581

Posted by: eddy at March 30, 2011 3:39 PM

In Escrow Firm. GOOG = $530

Posted by: eddy at April 15, 2011 2:40 PM

Sold: $3,310,000

Posted by: Denis at April 27, 2011 4:54 PM

In 2009, Google repriced options at $309. That means you get to buy shares at $309 and sell them at the current price. (Actually, Google doesn't grant options but simply pays you the difference in cash on whichever day you choose) Three months ago, those "options" were worth 581-309= $272 per share.

Today, those "options" are worth $477-309=$168 per share.

So in three months, googlers have lost 39% of their worth. Someone who could afford 20% down on this home at 3.31 would be able to afford 20% down on this home at 2.31.

Cisco and HP are even worse.

And therein lies our problem. Things were pretty good up until a few months ago. And now, based on the numbers above, they sink.

Posted by: tipster at June 23, 2011 9:59 AM

Yup, I remember you saying how good things were a few months ago.

Posted by: sparky-b at June 23, 2011 10:37 AM

^^^tru that.

We probably missed Tipster's shift from uber-bear from a few months back to ultra-bear today. He should loosen up a little, smoke pot or something.

I think tipster was right on a national level and he might still be so for a few more quarters, even a couple of years. I used to enjoy this kind of talk as a way to beat the drums for a much needed correction (at least needed by me to afford the place I wanted).

But SF proves to be one complex ecosystem. Things are simpler in Modesto or Vegas.

Posted by: lol at June 23, 2011 11:47 AM

"I think tipster was right on a national level "

When you go from a block, to a neighborhood, to a city, state and then national, the amount of money needed to move the needle goes up dramatically.

National household net worth is down about $8 Trillion from 2007. Even one millionth of that amount could produce a change in a block or two in noe.

Posted by: tc_sf at June 23, 2011 12:03 PM

Ha ha, it's different here. Or tipster went from uber to ultra.

But you can't argue with Goog/HP/Cisco stock. They were up. Now they are down. Hard. Goog options have lost 39% of their value in 3 months. That doesn't hit Ma and Pa Kettle in Nebraska as much as it hits here.

Posted by: tipster at June 23, 2011 12:07 PM

"Ha ha, it's different here. "

I do think the bay area is better positioned then a great deal of the country, but some boosters vastly overstate this point.

Even at 1/6th it's current value, Linked in would be a billion dollar company. Not a great outcome for someone who bought in at a 8 billion valuation, but on an absolute scale it's not too shabby to be creating billion dollar businesses during a significant recession.

I doubt that everyone with a pulse and some HTML ability will become a multi-millionare, but even sprinkling six figure sums around liberally is much better then being in a area with a structurally declining industry and a mass of abandoned homes.

Both for housing and stocks if you pay a price based on perfection, then even an above average outcome may be personally disastrous, but this is far different from a disaster on an absolute scale.

Posted by: tc_sf at June 23, 2011 12:27 PM

Well, in a perfect world prices would adjust. But supply constraint (side effect of social engineering) cause the number of homes available to be lower than the actual demand. Sure 1.5M for a basic SFR sounds awfully overpriced in NV, but if 20 (poorer) Googlionaires of Linkedinionnaires jump on it right away, that's what the market will be.

It might not be obvious at first glance, but as soon as prices fall 5 or 10% in SF people come out and jump on them, stopping the fall. Many people do not have the patience to wait 20 years to see if they were right or not. If they can afford it, they'll act.

Posted by: lol at June 23, 2011 12:30 PM

And prices have adjusted and continue to fall (i.e. supply continues to outstrip demand) -- even in places where soon to be twitteraires can walk to work:

http://www.redfin.com/CA/San-Francisco/776-Tehama-St-94103/unit-6/home/12302838

480k in 2006
Foreclosed
280k in 2011

OK, so Modesto is down 60% while this is only down 42% So it is way different here.

Posted by: A.T. at June 23, 2011 1:03 PM

Per Zillow home price index:

Modesto is down 65% on the median from the 2006 top
SF is down 21% from the 2007 top
94114 is down 20% from the 2008 top

Heck yeah SF is different

Posted by: lol at June 23, 2011 1:40 PM

Just as a hypothetical, consider what the quality of life would be in Noe after a 60% drop vs Modesto after a 60% drop.

Posted by: tc_sf at June 23, 2011 1:51 PM

That's very hypothetical. Low prices are a good thing because they allow people to spend more on education, retirement, health care, day to day quality of life.

I wish we could all buy NV row houses for 600K. But I am afraid that 100s of prop-13-protected grannies will not go without a fight.

Posted by: lol at June 23, 2011 2:03 PM

My point wasn't that the hypothetical would be likely, but rather that some places would still be very nice places to live following a large price drop, while other could be decidedly unpleasant with the same percent drop. Vacant houses tend to breed crime and there is some amount of money needed in an absolute sense to provide basic civic services.

Posted by: tc_sf at June 23, 2011 2:15 PM

Yeah, would you spend money to fix up a roof or upgrade the electrical if the house is worth 30K and you cannot get tenants at more than 400/m? This why this unique palatial mansion on the water has been for sale for more than a year while the same $$$ would buy you this "bargain" in SF.

Maintenance costs do not even begin to compare...

Posted by: lol at June 23, 2011 2:30 PM

"Per Zillow home price index:
Modesto is down 65% on the median from the 2006 top
SF is down 21% from the 2007 top"

OK, I accept that there is a difference between really sh**ty and really, truly sh**ty!

Posted by: A.T. at June 23, 2011 2:31 PM

That Detroit palace may have a large lot and a great water view but it is next to a sewage treatment plant and a tall apartment building looms over it.

Posted by: The Milkshake of Despair at June 23, 2011 3:01 PM

I am not sure about the sewage treatment. Care to Google Map it? Street views show a lot of well maintained greenery. This is still prime property right in Detroit's "Gold Coast". I don't think there's anything with that much land and space in SF that can compare. Even 40M+ places here are land-starved.

Posted by: lol at June 23, 2011 3:18 PM

I was wrong, it isn't a sewage treatment plant but rather a freshwater treatment plant. Big difference! It is located 1800' northeast from the mansion. http://maps.google.com/maps?q=Detroit,+MI&hl=en&ll=42.358354,-82.977569&spn=0.011733,0.015578&sll=37.0625,-95.677068&sspn=51.04407,63.808594&t=h&z=16

Hey, you can get a 2br condo a few blocks inland for $18K!

Posted by: The Milkshake of Despair at June 23, 2011 4:18 PM

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