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The Wall Street Journal

 

July 12, 2005

 

By PUI-WING TAM and MYLENE MANGALINDAN

 

 

Searching for a Home In Atherton, Calif.? Look Out for Googlers

 

 

ATHERTON, Calif. -- Manuel Henriquez wanted a house in Atherton, Calif., last fall, but he knew time was running out: The Google money was coming.

 

Atherton, which is located between San Francisco and San Jose, is one of Silicon Valley's most elite addresses. People like financier Charles Schwab and eBay Chief Executive Meg Whitman own houses here. Google Inc.'s stock offering had made millionaires of many employees of the Internet search firm, and Mr. Henriquez knew securities regulations would soon let some Googlers cash in stock. Some of them, he figured, would be home-shopping in Atherton, which is just a few minutes' drive from the company's headquarters in Mountain View.

 

So late last year, Mr. Henriquez, a private-equity executive, bid more than $7.95 million on a 10,000-square-foot Atherton house then under construction. Too late: David Cowan, a venture capitalist, had the same idea and won the house for $8.2 million. "I wanted to buy before the Google lockups expired in February," says Mr. Cowan.

 

Mr. Henriquez later visited the developer of that house to put dibs on a yet-to-be-built Atherton house. Too late again: The builder, Jeffrey Wise, says he had already agreed to sell to a Google employee. Early this year, Mr. Henriquez offered $12 million for an Atherton mansion with a marble-walled media room; the agent told him a Googler got it. "I started aggressively looking because I didn't want to get caught in the Google wave," says Mr. Henriquez, "but I got caught anyway."

 

More than half a dozen Google employees have bought Atherton houses for between $3.5 million and $17.8 million since September, say local brokers, and another dozen Googlers are still looking to buy in the town. "There's been an obvious Google effect," says Tom Dallas, a local broker who specializes in homes in Atherton and neighboring towns. "I estimate 25% to 35% of recent upper-end home sales, meaning sales over $7 million, are from Google people."

 

Across the country, new tales of real-estate froth are bubbling up every day. But Atherton is in a particular lather. The 4.6-square-mile enclave in the heart of Silicon Valley has the most expensive ZIP Code, 94027, in the nation, with a median home price of nearly $2.5 million in 2004, according to a recent survey by Forbes.com. Among the newly arrived Googlers' neighbors is the boss: Google CEO Eric Schmidt is an Atherton homeowner.

 

Googlers aren't the only newcomers buying in Atherton. Financiers and tech titans continue to be regular buyers. Hewlett-Packard Co.'s new CEO, Mark Hurd, recently purchased an Atherton house for $7.15 million, according to the San Mateo County assessor's public records. Mr. Hurd moved West from a Dayton, Ohio, house that was last valued at $799,520, according to property records from the Montgomery County auditor's office. (An H-P spokesman in Palo Alto says Mr. Hurd has no comment.) And Googlers are buying in other nearby towns, too, including Woodside, Palo Alto and Menlo Park.

 

But the Google effect stands out in Atherton, agents say. "There's a lot of Google money out there," says Mary Gullixson, a Silicon Valley real-estate broker who says she has sold nearly $130 million in residences this year, the bulk of them in Atherton. "It's turning out to be the best year ever."

 

Once filled with the summer homes of wealthy San Franciscans, this bucolic town of 7,194 boasts land parcels typically an acre or larger -- unusual in space-starved Silicon Valley. Many Atherton homes have sprawling lawns, swimming pools, guest houses, large media rooms and security fences. Some are stunningly unusual: Oracle Corp. chief Larry Ellison, whose office is in Redwood City, has put his Atherton home, a 2.8-acre estate in the style of a Japanese villa, on the market for $25 million.

 

The town's allure is enhanced by its exclusivity. Atherton has 2,500 homes and no more than 160 home sales a year, says Tom LeMieux, a real-estate agent here. Houses are often snapped up without going on the market at all. Bidding wars quickly escalate. Older homes can sell for $3.5 million, often as "tear-downs" to be razed to make room for new construction.

 

So it was with great anticipation that local agents began waiting for dates Googlers could legally start selling stock. Google went public in August. Most employees, under Securities and Exchange Commission rules, couldn't sell their shares until "lockup" periods ended. The first of several lockup periods ended in September, with the last in February. Google's shares, which went public at $85, closed yesterday at $293.35, down $2.88, on the Nasdaq Stock Market.

 

In November, Omid Kordestani, a senior vice president of Google, paid $17.8 million for a 16,000-square-foot Atherton house, according to the assessor's records. Mr. Kordestani, who owned 1.79 million Google shares valued at $537 million as of late June, has sold 1.4 million Google shares, for approximately $259 million, since late last year, according to SEC filings and Thomson Financial.

 

In December, Google business-development manager Aydin Senkut paid $5.7 million for an Atherton property, according to the assessor's records. Messrs. Kordestani and Senkut didn't return calls seeking comment.

 

Some Googlers are buying properties through trusts in an effort to remain anonymous, real-estate agents say. In February, a 12,400-square-foot Atherton estate sold for $10 million to a trust, according to the assessor's records. Behind the trust, says a person familiar with the matter, is Salar Kamangar, a 28-year-old Google product-management director. The property is now back on the market for $11.65 million. Reached by phone, Mr. Kamangar referred questions to a Google spokesman, who said Google declines to comment on his behalf.

 

Other Googlers say they tried to get a jump on the Google effect. In November, 54-year-old Bart Woytowicz had just retired as a Google advertising and sales executive when he paid $3.6 million for an Atherton house, according to the assessor's records. He says he bought it for his ex-wife. Mr. Woytowicz then spent another $5.85 million on a house across the street, according to the records. He says this one was for himself.

 

Mr. Woytowicz says he "went house hunting before the Google masses arrived." He could buy earlier than some Googlers, he adds, because after he left the company he wasn't subject to the same lockups. "I was first to market," he says. He is remodeling his 6,000-square-foot house, knocking down a wall to accommodate a pool table, creating a wine room and adding a basketball court. He isn't worried that the market may have peaked. "Atherton has a certain cachet" that should keep prices higher than they are elsewhere, he says.

 

Some real-estate agents are now targeting Googlers through the search engine itself. Local agent Catherine Marcus says she spends as much as $6,000 a month buying Google keyword advertisements for terms such as Google's "GOOG" ticker symbol and "Atherton real estate," so her name will pop up if people search for those terms. One Google client hired her after spotting her search ads, Ms. Marcus says.

 

Meanwhile, Mr. Henriquez finally broke his losing streak last month when he bought a 7,400-square-foot Atherton house for $7.4 million, according to the assessor's records. The 41-year-old says he is relieved the "ordeal" of buying in Atherton is over. "I know another 15 to 20 Google families who are still looking to buy here," he says.

 

Write to Pui-Wing Tam at pui-wing.tam@wsj.com1 and Mylene Mangalindan at mylene.mangalindan@wsj.com2