Out of Money, Hugh Hefner to Sell Playboy Mansion for $200 Million With One Exception

Move comes as Playboy runs out of gas with plenty of free adult content online. Mansion to be sold giving Hef the place to stay until he dies.

Hugh Hefner turned his personal lifestyle into one of the world’s most valuable aspirational brands, but after six decades the myth is now a lot bigger than the man.

That’s why the people who follow in his suede slippers have finally decided to put the iconic Playboy Mansion up for sale.

Maintaining a physical 20,000-square-foot clubhouse in the heart of one of the most elite property markets on the planet just doesn’t jibe with their efforts to shift the business online.

A virtual “grotto” is cheaper to keep up and easier to control. But the challenge, of course, is what happens to Hefner when his protégés finally decide to let the mansion go.

Not your typical nursing home

The company’s solution is ingenious, although it requires a little background to really appreciate.

While the mansion has been managed as a personal perk for Hefner over the last 45 years, Playboy Entertainment technically owns the real estate.

When he took the company private in 2011, one of the conditions for his participation guaranteed him residence in the mansion for life.

For most of his life, that’s never even been a question. He kept an iron grip on the voting shares and so he could dictate his own use of corporate property.

Even now, if he quits or somehow forces his partners to fire him, he’ll simply need to start paying more than a symbolic amount of rent. Either scenario looks extremely remote at this point.

Hefner passed the traditional retirement age back in the early 1990s. He’s probably going to die with his smoking jacket on, a tribute to Viagra and something like clean living.

However, he’s not going to live forever, so when Playboy listed the property for sale they made sure to insist that the boss and his lifestyle go with the title.

In theory the new owner can share the premises with Hefner in his final years — with 29 rooms in the main house and a guest cottage on the property, there should be plenty of room.

Besides, while it’s not fair to hold a media legend to cold statistics, Hefner is admittedly living on borrowed time from a life expectancy perspective.

Only half the men of his generation lived to see their 83rd birthday. Hefner turns 90 in a month and the clock is ticking fast.

All that’s required to replace him — or simply redevelop the acreage — is $200 million and a little patience.

Depreciating prestige property

That asking price is a lot of money to ask for an address that has gone from the crown jewel of the Playboy empire to a millstone around the company’s neck.

Most rich guys who imprinted on the mansion as the epicenter of swinging masculinity are probably in their 50s and 60s now: old enough to have grown up with the magazine but not too old to give up boyhood hopes of actually living the dream.

The mandate to keep Hefner in place seems counterintuitive. Not a lot of 50-year-olds are eager to pay that much cash in order to share a house, even if the roommate is a lifestyle icon.

Odds are good that the mansion will sell to someone who loves the Playboy ethos but would never want to live there, or else it goes to a developer looking to flip the acreage.

Star Los Angeles realtor Jesse Weinbergacknowledges that depreciation is a problem here as the mystique around the property fades.

“Playboy is smart to put the mansion up for sale now as their brand will be worth much less in 10–15 years when Hefner is likely to pass away,” he explains.

That means that the company is unlikely to get a better offer after Hefner dies. The time to move is now.

The property listing agent did not specifically say why the company had the decided to sell the property.

It is lsited by Drew Fenton and Gary Gold of Hilton & Hyland and The Agency’s Mauricio Umansky, the husband of actress Kyle Richards of reality television show “The Real Housewives of Beverly Hills”.

Playboy doesn’t necessarily need the cash –loungewear and other licensed products still rake in billions in places like China — but it definitely doesn’t need the overhead.

The mansion is a massive cost center. Unlike the magazine, it doesn’t even qualify as a marketing expense. At best, it’s an elaborate form of executive compensation.

And it’s immensely undervalued on the company’s balance sheet.

Playboy still carries the mansion at roughly the $1 million it paid to acquire it back in 1971. If it can sell it for anywhere near asking price, unloading it will liberate a huge windfall profit.

The entire company was only worth $200 million five years ago. At this point, the mansion is probably its biggest single underexploited asset.

Turning that asset into cash will go a long way toward smoothing the company’s evolution from delivery system for nude photography to an online lifestyle brand.

They’ve already pulled the plug on the nudes and are now officially “safe for work” in the social media universe. The once-aging audience is finally getting younger and more affluent again.

With the mansion converted into cash, Playboy’s odds of surviving and even thriving as the Hefner era recedes get a whole lot better.

Of course, it needs to find a buyer in order to make scenario happen. And $200 million may already be ambitious.

Minority shareholders upset over Hefner’s buyout back in 2011 only claimed that the property was worth $54 million. They probably didn’t lowball the number.

Five years probably didn’t quadruple the mansion’s value. I can’t help but remember how Hefner rival Bob Guccione tried to unload his Manhattan townhouse for $99 million a decade ago.

The house was huge by New York standards, probably measuring 14,000 square feet across as many rooms as the Playboy mansion.

You didn’t even have to share with the old owner, but the final offer still came in at barely $49 million.

Maybe five acres next to the Los Angeles Country Club is worth a lot more than a double townhouse on the Upper East Side.

Everything else considered equal, I’m not sure it’s worth a 300% premium though. Either way, the clock is ticking.