Malibu’s Star Realtor and the $15M Flip Gone “Fishy”

A man is weeping in a Malibu condo on the inland side of Pacific Coast Highway. “When my son found out that the house was sold for $15 million,” he says, tears streaming down his face as his wife rubs his back at his dining room table, “he goes, ‘Dad, one day I’m gonna make my own money and buy that house back. I promise you that!’ It was his childhood. It was our heaven. It was stolen.”

Whether the beachfront home was, in some sense, stolen now is a matter for a judge to decide. But no one would deny that its location along ultra-exclusive, paradisiacal Watkins Cove a few miles away is heavenly. Not this couple, Iranian immigrants Zare and Seda Baghdasarian, and not Chris Cortazzo, their former listing agent — and current defendant in a $3.3 million lawsuit they’ve filed alleging fraud. Cortazzo, a Malibu native turned Coldwell Banker real estate powerhouse known for his Hollywood profile, purchased the property from the Baghdasarians in 2012 after failing to find them another buyer, then sold it four years later — after a renovation — for $15 million, well over twice what he paid his clients.

The outcome of the lawsuit, which is scheduled to go to trial at the Santa Monica Courthouse in September 2017, may hinge on the value of the home, a figure that varies widely with the vagaries of the real estate market and in any case ultimately is a subjective matter (as appraisers always are careful to note). But a larger issue raised by the case is the degree of a real estate agent’s fiduciary duty to a client and the ethics of “dual agency” (an agent acting on behalf of both seller and buyer) — a question that the California Supreme Court will take up in the fall in a precedent-setting case that also, as it happens, involves a lawsuit against Cortazzo and Coldwell.

These images show the Baghdasarians’ three-bedroom home in 2011 when they first listed it with Cortazzo. “We’d never get feedback [on showings]. But people were coming through. Some were famous names,” says Zare. “If you look at it mathematically — I’m a data scientist — with all these showings, something’s gotta happen. When I would express, ‘Why is it not happening? What’s wrong? Shall we do anything?’ He would go, ‘No, no, no. The offer will come, but reduce the price. The price is too high.’

Still, some of the perks of a location like Watkins Cove are priceless. The area also is known as Cypress Sea Cove for the now-towering Monterey Cypress trees planted along the bluffs long ago by California modernist architecture master Harry Gesner, who lives a few doors away from the Baghdasarians‘ former home (which he designed) in a property he bought for $30,000 in the late 1950s. It’s been a Hollywood escape since the 1940s, when original settler George “Cap” Watkins, a county lifeguard, entertained friends like Marilyn Monroe and Johnny Weissmuller among his paddle boards. These days, residents include Michael Eisner and former Warner Bros. Records head Mo Ostin (who, fittingly, signed The Beach Boys). George Harrison lived on Watkins Cove the year before he died, and Neil Diamond has rented there. J. Paul Getty’s final wife and widow, 102-year-old Teddy Getty Gaston, for years has kept an undeveloped lot at Watkins Cove as a lookout point, her chauffeur periodically piloting her Rolls-Royce in for a sandwich-and-champagne picnic. When approached, she’ll say, “I just like to sit here sometimes and look at the view.”

The picturesque cove, which features only six beachside residences — with notably wide ocean frontages — and another six along the tall bluffs, is perennially popular for film and fashion shoots: Baywatch episodes, Brad Pitt hawking Tag Heuer watches, Heidi Klum riding a horse bareback for a calendar — herself fully bare. “You can do something like that on a truly private beach,” explains longtime resident Richard Mark, who rents his property for weddings. “Even on July 4th, it’s unusual to see footprints on the sand.” While the beach is technically public, there’s no access from PCH. Interlopers only can enter by navigating the perilously slippery rocks at low tide from Nicholas Canyon County Beach to the west or El Pescador State Beach to the east (hips and legs have been broken in the attempt). Observes nonagenarian Gesner, whose own abode, a lighthouse-recalling farrago of Arts and Crafts movement references, still is bedecked in Bernie Sanders campaign paraphernalia, “Most of the people who buy a very expensive home want to enjoy their wealth with the public not included.”

Madison Hildebrand, a Malibu agent and Cortazzo protege who’s been a castmember on Bravo’s Million Dollar Listing, knows Watkins Cove well. (He has two pocket listings in the area.) “It’s for the buyer who likely has a spotlight so will go the extra mile — literally — for peace of mind,” says Hildebrand. “This person doesn’t want to be in the middle of everything, and be among everyone, on Carbon Beach or Broad Beach or in the Colony.” (You’re in rarefied territory when you’re pooh-poohing nearby Carbon, also known as Billionaire’s Beach.)The Baghdasarians, who’ve been married for more than three decades and bought the Watkins Cove home 13 years ago for $4.7 million, were born in Iran and met in San Francisco. Zare, 56, was an engineer (early on at Hewlett-Packard) who became a prominent tech executive, making his fortune pioneering a wavelength router that sold to Cisco Systems before he turned to consulting and investing. He co-founded his current company, Armorway, a security analytics firm, in 2013. Seda, 54, worked for years in themed entertainment design, first creating retail spaces for Disney Stores, then amusement park tableaux for Universal Studios. (Her projects ranged from Marvel Super Hero Island in Orlando to WaterWorld in Japan.)

Cortazzo with fellow top Coldwell Banker agents Joyce Rey (left) and Jade Mills in 2015.

Battered by the recession (Zare: “The 2008 disaster was unfriendly to my portfolio”), they contend they hired Cortazzo in January 2011 on the basis of his sales reputation and, more importantly, the recommendation of Beverley Higgins, a fellow Coldwell Banker realtor who’d sold them the property in 2003. (While she had a minimal co-listing role in the events that followed, she is not a defendant in the suit as she was semiretired at the time and died of cancer in December 2013.)

According to court documents, in 2011 the couple wanted to list their Gesner-designed house, with its 100 feet of beach frontage and 2,450 square feet of living space, at $10 million, based on what they claim was a 2008 appraisal of $12 million, yet they acceded to Cortazzo’s recommended $8.995 million valuation. Over the next 14 months, after numerous showings but no solid bids (“It was like a slow death, emotionally draining,” says Seda), they allowed the agent to repeatedly drop the price, eventually bottoming out at $6.45 million.

At that point, Cortazzo — who to Seda’s dismay had been kept acutely aware of the couple’s devolving financial situation by Zare in the hope of encouraging their agent to be more aggressive — offered to purchase the property himself. (The Baghdasarians contend he said he wanted to buy it for his mother.) Escrow closed on the transaction in spring 2012: $5.795 million (the accepted offer of $6.1 million was reduced by inspection credits and Cortazzo waiving his commission). This past winter, after Cortazzo had completed an extensive renovation, he flipped the home for $15 million. (A few months later, in late May, he was the listing agent on a three-bedroom bungalow next door, which boasts 257 feet of beach frontage and sold for $14.25 million.)

The Baghdasarians contend in their complaint that Cortazzo neglected to properly peddle their property because he saw a unique opportunity to get in on the Watkins Cove action himself. They say he didn’t personally attend many of their showings and open houses, leaving them to less-able Coldwell agents, and didn’t take their imploring advice to play up the unique critical prestige of Gesner’s modernist architecture as well as the matchless seclusion of the cove — only to turn around and lean hard on both when he really had skin in the game. (After renovating the property, Cortazzo commissioned a high-gloss, drone-enabled video to market it and its site-specific context, complete with dreamy synth soundtrack.)

Cortazzo declined to talk to THR about the case. His attorney, Neil Gunny, said in a statement that Cortazzo “adamantly denies any allegation of wrongdoing.” He notes that his client invested heavily in a remodel and repair of the property before selling it and argues that Cortazzo purchased the home from the Baghdasarians for a price above its April 2012 appraised value — $5.8 million, according to a document prepared at the time for Wells Fargo Bank and provided to THR by Gunny that soon will enter the court record. Since then, the Malibu market has shot up, with home values jumping more than 15 percent in 2014 alone.

Cortazzo shopped the flea markets outside Paris in 2015 with Shannen Doherty. He’s also pictured in a July 25 Instagram post from the star thanking him for his support during her cancer treatment.

Keith Gregory, the Baghdasarians’ counsel, counters that the average listing price of beach houses in Malibu on sand in 2011-12, according to the Multiple Listing Service, was $8.5 million, while the average sold price was $7.4 million — and that, furthermore, based on the location of the house, its wide ocean-frontage and its Gesner pedigree, “it is clear that this was not the average beach home in Malibu.” In addition, Gregory says his clients were willing and able to make their own improvements — even suggesting work on their deck and their carpets — but that Cortazzo advised it wasn’t necessary.

What’s more, asserts Gregory, “The price [Cortazzo] paid and the alleged appraised value of the property is the secondary part of the case. The key part of the case is [his] self-dealing and his breach of his fiduciary duty by having his interest in mind rather than [his] clients’… demonstrated with the profit he gained and how he did not explore all of the available options for his clients.”

Cortazzo, a 50-year-old Malibu native, grew up and still lives at Point Dume, a few minutes’ drive east of Watkins Cove along PCH. When he was young, his neighborhood, like the rest of town, was remote, scrappy and affordable — the type of place where someone like his late father, a devoted surfer who spent his career as a Los Angeles County firefighter, could settle. Now it’s exclusively for the rich, and Cortazzo is the ultimate insider ruling the local real estate scene, totaling $1.5 billion in closings since 2000 for such clients as Barry Diller, Ellen DeGeneres, Jerry Weintraub, Ron Meyer, Pamela Anderson, Patrick Dempsey, Cindy Crawford, Josh Groban and Kid Rock. In 2015, he was the top Coldwell salesman in the country by volume, at $362 million. Among that year’s sales: David and Yolanda Foster’s Mediterranean mansion, for $19.45 million, where Gigi and Bella Hadid came of age on The Real Housewives of Beverly Hills.

The longtime vegan, a University of California at Santa Barbara graduate, always has gone big: His first sale was a $5 million residence to Richard Gere. He met the star while assisting on a photo shoot for Herb Ritts. (Cortazzo, a onetime model, once dated the famed photographer.) Last year, he closed on another Gere pad, atop the Paradise Cove bluffs, for $60 million to Jimmy Iovine. Cortazzo doesn’t just sell to A-list stars; he’s friends with them, jetting off to, say, Africa with Elton John. “The only celebrity I haven’t met is Princess Diana,” he told Details in 2005. “But I’m not starstruck — I look at people’s spirit.”

This isn’t Cortazzo’s first brush with legal drama. In a case that’s now before the California Supreme Court, he has spent several years battling Hong Kong businessman Hiroshi Horiike, who claims to have been duped over the square footage of the $12.25 million Tuscan-style Malibu manor he purchased through Cortazzo in 2007. What was advertised as 15,000 square feet turned out, according to property records, to be less than two-thirds that space. Because both Cortazzo and Horiike’s agent were with Coldwell, the case — like the Baghdasarians’ — hinges partly on the fiduciary duty of a dual agent. A hearing is expected in the fall, with a possible decision by December.

None of Cortazzo’s colleagues in Malibu’s tight-knit eight-figure real estate community would talk on the record about the Baghdasarian lawsuit. Partly they had no interest in being associated with active litigation — kryptonite to a real estate agent’s personal brand — but mostly they didn’t want to cross the biggest kahuna on their scene, who frequently is representing the buyer or seller opposite their own transactions or working in tandem with them as their co-lister.

Still, while several agents spoke highly, often enviably, of Cortazzo’s sales chops, they have mixed thoughts about the imbroglio with the Baghdasarians. Some believe it was an honest play with a genuine upside: “The market was shit when he bought it, and then it got better,” says one. “There’s nothing malicious about recognizing an opportunity and taking a risk.” But most were far more sympathetic to the couple and queasy about the problematic professional ethics at the heart of the situation.

“It’s true that the market may always be changing, so it’s hard to prove valuation, but that’s a huge amount he made — it’s fishy,” says another top agent. “I can see why those people are upset.” Adds another: “I just knew he was going to get sued when he closed the deal for that price. It didn’t smell right. It’s a tricky situation for realtors to buy from their clients. You have a separate fiduciary duty to them as their agent. That’s why I always tell people who flip houses: Don’t get a [real estate] license.”

For his part, legalities aside, Cortazzo — who’s got another newly remodeled Watkins Cove property (this time again not his own) on the market for $22 million — may simply not realize quite how he transgressed in the eyes of his former clients. Zare recalls that the agent called him after the remodeling was finished with an offer to come see the transformed house. “That really hurt me,” he says on a gray morning during his first trip back to the cove since the sale. Feet in the sand, he’s gazing back at the home, now owned by its $15 million buyer. “I said, ‘You enjoy it.’ He goes, ‘I do.’ And then he told me, ‘I still remember that you told me you walk on the cove and you dream big, and that’s what I do every day.’ “

Zare’s eyes well, and Seda wraps her arms around him again. But she doesn’t look back at the place where both her boys, now grown, learned to boogie board, where the family watched sunsets while roasting marshmallows by the fire, where these two immigrants celebrated their very own American success story. “He used to dream about all the things he was going to do,” she says. “This is a place to dream. You walk on this beach, you dream.”

This story first appeared in the Aug. 19 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.