Jul. 31, 2009 - why isn't a Tribeca premium renovation worth at least 250/ft?

a distraction?
You'd think that a stem-to-stern high quality renovation of a Manhattan loft would both (a) cost and (b) be worth at least $250/ft, wouldn't you? There is a loft in prime Tribeca that was gutted after being purchased in April 2007 right around $1,000/ft and is now being offered for sale around $1,250/ft. The renovation is pretty spectacular (more on that below). The asking price has not worked (yet) after a couple of months, but seems a reasonable beginning to a negotiation that should sell this thing around (maybe a little less than) the 2007 value, adjusting for the value of the renovation. Which makes me wonder if The Market is -- in this case -- unwilling to pay for the renovation because it is distracted. (I believe there is a market for quality.)

verbiage of value
I am a big fan of detailed bragging -- when there is something worth bragging about. This loft is being marketed with very detailed bragging (proper proper names, materials, custom features), all of which seems worthy. The description is much more detailed than this experienced and professional listing agent usually provides, which is by itself an impressive feature to close readers of broker-babble. Given the proper proper names, materials, and evident craftsmanship in the work, I would be shocked if this renovation cost less than $250/ft and could well have been much more. (For my post about ball-parking a renovation at $200/ft, see especially the comments from December 10, 2007 need renovation stories / a reader writes for help.) To repeat (again) (he said redundantly) this is not a "basic" gut job.

not buying it (yet)
A couple of months on the market does not mean that the current asking price won't work, but it clearly has not worked yet. Why not? The 2007 clearing price was $1,000/ft; the 2009 asking price is $1,250/ft. Buyers are undoubtedly using their own standards to assess whether the April 2007 value should be adjusted down, and by how much, but I wonder if they are getting hung up on how to value the work that has been done since. Even if you estimate a 10% reduction in value from April 2007 to now, I suspect that one could prove that the renovation cost enough to justify the current ask (i.e., $350/ft, or more). Certainly you'd be in the ballpark to attract an offer from the $1,250 asking price on any reasonable (to me) assumptions about the change in market values 2007-to-2009 and the worth of the renovation.

show the cost?
There may well be a difference between what an owner paid to renovate and what The Market thinks the renovation is worth on resale. But this one has not moved yet and any reasonable (to me) spread between Cost and Value should not preclude a bid from this asking price. Let me make something explicit about my read of the renovation: sometimes people over-improve a space, adding features, finishes or materials that no one else would possibly see as "worth it". This is not that loft. I see value in what has been added, not vanity.

I wonder if they have thought about showing interested buyers the cost of the renovation. I sold an apartment once that we priced about 20% higher than a very recent sale of the very same floor plan one floor above. We priced it there because the seller wanted to get her money back from a rather (to be generous) idiosyncratic renovation. (She actually wanted to price it much higher, because she had spent a ton of money, but was prevailed upon to moderate -- a bit.) We faced up to the obvious challenge directly, telling people the price was justified by the (Low) Comp Plus The Renovation and providing details about materials and costs. We sold at a slight discount from ask to a buyer who (obviously) agreed that the renovation added sufficient value to justify the price. (For what it is worth, it also appraised appropriately.)

Maybe this loft should be marketed with a folder of drawings, specs and receipts. Or maybe they should just be patient, as some buyer out there is likely to appreciate what they have done and may have the scratch to pay appropriate value for it. FAS-cin-ating.


© Sandy Mattingly 2009

Jul. 29, 2009 - attack of the Killer Comp (when 2005 pricing does not help)

tough to price, if even 2005 is too high
There's a pretty big Manhattan loft in a Chelsea corner that has been patient at an asking price around $1,100/ft for 3 months, which is just slightly less than the loft sold for in 2005. Ouch. It is a lovely loft, full of mints and proper proper names, with sunlight and tin, plus columns and huge windows. Priced by these sellers under what they paid 4 years ago, you'd think that it is priced where it should generate an offer. (Well, I would think so. And these sellers and at least one experienced agent would think so.)

modesty, not rewarded (if 2005 = modesty)
Indeed, I would generally have said that pricing a loft at or below 2005 prices was a sign of modesty, an effort that should be rewarded. When I first noted the listing (with all the breathless mint discussion) and the 2005 prior sale, I assumed that the renovation had been done after 2005 but it turns out they are not that modest. But still....

My attitude about 2005 is evident from my post on July 22 about two lofts at 29 East 22 Street, one of which sold recently and the other in 2005, 29 East 22 Street closes but is the calendar off?, where I yelped
 

back to 2005

Turns out that my memory is not that good, as I have hit on on a significant number of recent Manhattan loft sales around 2005 prices (though only one of which took more than the 16% hit at 29 East 22 Street):

• 14% off, July 11, in 50 Warren Street closes, off 45% from original ask + 14% off 2005 price
• July 3, 2005 pricing at The Printing House, 421 Hudson Street
• 7% below a 2005 sale, June 26, 73 Worth Street closes by biting a very large bullet in one bite
• $35,000 off 2005, June 3, 4 months to close, 4 years to zero out at 260 West Broadway
• plus (only) $15,000 compared to 2005, May 27,  4 years = $15,000 at 477 Broome Street
• 20% hit in the "C" line at The Bullmoose, May 15,  into the way-back machine to close at 42 East 20 Street, down seven figures
• an asking price within 7% of the 2005 sale of the same loft, March 27, more angst at $1,000/ft / feels like 2005 in Tribeca as contract (finally) signed
• when I riffed on the changing market on March 4, the post was titled worse than bandages? painful for sellers to rip the calendar, but the first headline was: "2009 as the new 2005, without the optimism"
• and (finally) my February 27 title pretty much says it all, as far as 2009 vs. 2005 goes: 2005 wasn't bad, was it?

Note to self: stop being surprised by 2005 comps.

hate the neighbors?

But I want to make a different point than modesty about the loft that launched me on the trip back to 2005. The most painful thing for these sellers is probably the dread of the impact on their value done by a very recent sale of a loft of the same size that needed a complete make-over. That loft was in contract when this one started to market, after having been on for very long, with large price drops. That buy-and-gut loft closed $500/ft less than the current ask for this oh-so-minty loft in the same building. Granted, there are relatively few buyers for a very large total renovation project in the current (thin) market, but that spread has to be awfully worrisome to the minty sellers. One could probably do a $300/ft renovation in the recent sale, and still have a loft that is comparable at less of an investment than the current minty sellers are asking a buyer to make.

That makes marketing this loft very difficult, despite their pre-2005 pricing. What can you do?

If you believe that the $622/ft buy-and-gut clearing price was the aberration, you make that argument to buyers (if anyone shows up to view) directly and hold your price. (After all, you are still priced below 2005.) If you can afford to sit for a while, you might take it off the market (3 months? more??) to see if The Market re-sets in a way that you can more easily distinguish a May 2009 (possible distress) comp. If you can't afford to sit, and you can't attract a bid, maybe you wait until Labor Day (blaming the traditional lack of high-end buyers in summer) but you have to drop your price. Pain ensues, yes, but also (perhaps) a sale. As I said in the March 4 title, it is "painful for sellers to rip the calendar", perhaps "worse than bandages?"

Lovely loft, though. Very minty. And large.

Jul. 28, 2009 - didn't build it, but they came to 21 Bond Street at $692/ft

seek and ye shall find
Yesterday's post, if you don't build it will they come? buy + build opportunity, posited that $830/ft was not likely to get a deal done for a Manhattan loft that needed a build-out because other 'finished' lofts had sold (or not) at or around the current offering price. I closed that post with "I will have to find another buy-and-build to track to really test this limitation...." and did not have to look hard or long for another loft that better tests the degree to which selling a loft that needs a lot of work cuts into The Market enough to be a problem.

The Manhattan loft #3 at 21 Bond Street was sold this month (July 17, deed filed last Friday) as an artists's live/work loft in "bring your imagination" condition (no interior pix), and suggests that the limitation of a buyer needing 'extra' cash to fund a renovation -- like many -- can be "solved" by fans of Bill Cullen. For you folks too young to get that reference, that solution is The Price Is Right. At "2,400 sq ft", the clearing price of $1.66mm is (only) $692/ft and a mild 5% off the asking price of $1.75mm. The campaign was quick, as well as efficient, as this unit was first shown on April 8 and found a contract as of May 13. PDQ, indeed.

if greed is good, prudence is better
In the mental math Olympics that sellers have to play, figuring your buyer will have to shell out $200/ft to fill out your shell of a loft is a prudent way to assess value. If these sellers were at those Olympics, they were estimating a post-build value of around $900/ft for their not-yet-built-out loft.

The neighbors next door at 19 Bond Street found out -- much to their dismay, no doubt -- that The Market for a loft sold with the come-on of "potential" in this micro-nabe ("open square layout is very functional and has tremendous potential ") had dropped 14% in a year, in their case to about $1,000/ft. I hit that loft and its May 2009 and April 2008 clearing prices, #2 at 19 Bond Street, on May 22 in perfectly bad timing for 19 Bond Street to flip. (We show that loft as "1,400 sq ft", though it has been listed at different sizes, as you will see, but "1,400 sq ft" yields just over $1,000/ft for the April 1 clearing price of $1.457mm.)

The neighbors just down the street at 1 Bond Street #2D also found a clearing price around $1,000/ft, but their smaller loft ("1,205 sq ft") was "impeccably designed" and nine-times published when it sold in April at $1.195mm after what must have been a frustrating marketing campaign. That small-but-impeccable loft had been offered in September at $1.75mm (just after the Lehman hit the fan) and suffered 3 price drops and a 14% discount from the last price.

the ambiguity of $1,000/ft on this block
The two April 2009 sales at 1 Bond Street and at 19 Bond Street at around $1,000/ft posed a bit of a challenge to the sellers of 21 Bond Street #3 when they came to market. As noted above, one infers that their mental math Olympic calculations back out to an implied market value for their buy-and-build loft of around $900/ft if renovation costs were $200/ft. The disappointed neighbors at 19 Bond Street #2 did better than that for a loft sold with an appeal to imagination, while the disappointed neighbors at 1 Bond Street #2D did better than that, but they sold a magazine-worthy loft. It may be that the corner-of-Broadway location of 1 Bond Street deserves a market discount that the mid-block buildings at 19 Bond and 21 Bond don't get (a careful reader of StreetEasy might get that impression about 1 Bond Street). Presumably, the 21 Bond Street #3 sellers had these considerations in mind when they started selling in April.

Prudence, meet Bill
With 21 Bond Street #3 clearing quickly off an asking price of $730/ft, it is clear that these sellers made the right call. Asking $1.75mm for "2,400 sq ft" allowed room for renovation costs and generated a very quick contract and closing at $692/ft.

In other words, the 21 Bond Street #3 sellers were prudent, Bill Cullen is a useful icon for Manhattan real estate even in this market, and the need to renovate a loft is a limitation in the current market -- but a limitation that is manageable through prudence. (At least, it was in this instance.) I will keep an eye out for other examples of how this need-to-renovate plays out, though I don't expect to find another one tomorrow.

Jul. 27, 2009 - if you don't build it will they come? buy + build opportunity

how does $830/ft sound if you have to build?
There's a Manhattan loft (fairly) newly for sale that caught my eye as a potential test of one of the limits that is more limiting in the current market than in prior markets: selling a space that will need substantial (if not gut) renovation. With mortgage money much tighter and down payments needing to be much larger, the funds needed to renovate typically come out of liquid assets, instead of being financed. Fewer buyers have the scratch to buy and to build.

Jul. 26, 2009 - big loft, big roof / 43 East 19 Street penthouse closes under $4mm for (maybe) 4,100 sq ft + 2,050 sq ft terrace

condition is a question, size a smaller question
The Manhattan loft #8 at 43 East 19 Street is a lot of loft: "4,100 gross SF per floor" plus a huge terrace (half the size of a full floor, at "2,050 sq ft"). The listing description emphasizes volume over finishes, while noting "wonderful original detail". It is hard to see whether and to what degree it may benefit from upgrading, but the closing price is a relatively modest 15% off the original ask. It is also a possible bargain for the amount of interior and exterior space -- especially compared to a 2007 sale without exterior space.

pretty quick, all told
The listing history is actually relatively rapid for a listing in this price neighborhood: it came to market November 4 at $4.595mm and had two price drops totalling only $200k in January and March before hitting contract in June and closing July 9 at $3.905mm.

2007 was a long time ago, but a difficult adjustment
The 7th floor sold in June 2007 for $4.395mm. On the one hand, it had three mints; on the other hand it had no outdoor space. While the condition of the 7th floor seems to be an upgrade over the 8th floor penthouse, does the $490k spread between the clearing prices account for (a) change in The Market since 2007, (b) triple-mint vs. probable upgrade in condition, and (c) "2,050 sq ft" private roof space??. (Note also that this listing used "3,650 sq ft" as the size.) I think not.

Playing with some numbers here .... If you assign the roof deck a(n arbitrary) value of $250/ft, that accounts for just over $500k in the July 2009 purchase price for the penthouse. Using the more credible "3,650 sq ft" size from the 2007 listing for the 7th floor rather than the "gross SF per floor" of the recent listing, the $3.4mm remainder of the penthouse purchase comes out to $931/ft for the interior penthouse space, compared to the minty $1,200/ft for the 7th floor (roughly a million bucks). That is not a very big spread, since it has to account for both the renovation of the penthouse and the two years elapsed since the 7th floor sale.

I am not seeing evidence of a major market decline from these two sales. Although my rough analysis here is premised on an arbitrary value for the roof deck of $250/ft, any lower valuation of the roof space adds to the disparity in favor of the penthouse interior space valuation. I can't see how big a mortgage the July buyer put on this loft, but I have to believe it was very difficult to get good comps for space this big with private exterior this big. As you will see, the buyer had enough cash to put a substantial percentage down, so perhaps the appraisal issue was not vexing, after all. Nonetheless, I'd be curious about how The Pros comp this one out....

(Note that StreetEasy provides the careful reader a pretty clean way to assess current value for this much space in need of an an upgrade in this building, without the distraction of outdoor space. Let's just say that the jury is still out.)

h/t to the Observer's Max Abelson for the penthouse closing history (via The Real Deal), which has not yet hit StreetEasy but is available on Property Shark. By the way, do you think the buyer got a car-and-driver, or a 'whole new life'??

another fun fact
This loft sold in March 1994 for $715,000; it looks as though the 1994 buyers were the 2009 sellers.

And another: the coop benefits from ownership of ground floor space now occupied by the restaurant Craft. Nice Craft-work indeed: the current maintenance is lower than the maintenance for the the penthouse in 1994! (There is an assessment in place to replenish the reserve fund, but still ....)

Jul. 24, 2009 - whose renovation is it anyway? the resale question

CW vs. MLG
I had an off-line dialog with a Manhattan Loft Guy reader about his renovation plans. His question was whether using privacy glass that can be shaded at the push of a button (as used in the Manhattan loft at 315 West 36 Street that recently sold) instead of conventional walls in the 2d bedroom and 3rd bedroom / office might negatively impact resale value if they look to sell in four or five years. The general question is a common one, particularly for loft owners who want to upgrade and who have particular taste.

I told him that my personal view goes against the Conventional Wisdom. CW is that renovations should be done with re-sale in mind, and in a way that will appeal to the broadest category of Future Potential Buyers. The MLG view is that you should live in a space that gives YOU the most pleasure.

Obviously, there are various questions of degree. The longer you will be there the more idiosyncratic you can be; and idiosyncrasy that can quickly / easily / cheaply reversed is different from love-it-or-gut-it space.

who would not like Magic Walls?
In his case, replacing sheet-rocked walls with privacy glass would open up a loft that gets a lot of light in the the bedrooms that otherwise does not reach the main living area -- a huge improvement to their enjoyment of the space. Is there a significant downside to making this change?

I don't know about the engineering in these walls, but the loft owner does not feel that the glass walls will make noise in the lofty more of an issue for his family. I assume that this might be an issue for some families, but I really don't know if these walls are more porous for sound than sheet-rocked walls. If they are, there are probably low-cost work-around for that problem that don't interfere with the benefits (drapes should absorb sound, be portable, and cost relatively little, for example; there are probably other solutions).

Are his hypothetical-2014 buyers going to be turned off by these sometimes-clear-sometimes-opaque walls? Darned if I know ... but my guess is that enough people will appreciate both the light and the aesthetic of these walls for resale issues not to be a serious impediment. If I am wrong, and these walls dramatically increase the difficulty of a sale in 2014, the cost of replacing them with conventional walls should not be large.

how reversible are the idiosyncratic renovations?
Projects that are more expensive or more difficult to un-do might present a more difficult quandary. For example, the matched set of lofts that I discussed in a July 1 post ((too rich, too thin) too stylish to sell (well)?) probably include an example of a very cool renovation (to the owners, and to me) that appears to have impacted market value rather dramatically. Whether it is 'worth it' or not for the still-owners-but-want-to-be-sellers, I have no idea. (When that does sell I will talk about that renovation specifically, so you can see what I am talking about.)

I described those two lofts in ice cream terms, one being an expensive vanilla, the other a very exotic spicy flavor:

 No disrespect intended to the loft that sold (to the contrary, it sold), but that one has a conventional layout to carve 3 bedrooms (plus additional space) out of a Long-and-Narrow with good light at each end, and is done in entirely neutral tones (white walls, white kitchen, light finish on the hardwood floors, light stone in the bathrooms). It is something of a poster child for being in "sale-able" condition -- using a palette that all buyers could easily envision to base their own lifestyle on if they bought that space. The degree to which this one is neutral is perhaps best appreciated by reference to the other one (The One That Has Not Sold [yet]).

The One That Has Not Sold (yet) gives one entire end of the loft to the master suite and squeezes a (proportionately) tiny guest room into the other end. Like the one that sold, this one has a white ceiling -- but otherwise is a (comparative) riot of color and texture, with many vertical surfaces in dark shades, a dark finish on the floor, and rather dramatic design elements (oh that bathroom!). Plus, there are curves and arcs where the other one had straight lines and right angles. The color, layout and 'design' differences between the two are so dramatic that there are probably few people who would be conflicted in choosing one or the other, assuming rough dollar parity.

I'd say that the most 'dangerous' style choice that those sellers made in their renovation was creating a very dramatic bathroom. I hope they still love it, but there will certainly be many people who will not bid because they don't want to take on a complete bathroom renovation after buying a perfectly usable bathroom; other people will use that 'defect' to chip, chip, chip away at the value of an offer.

My point is that loft owners should not be cowed by the Conventional Wisdom into using only neutral colors and materials. They should consider the joy and utility for them as owners for however many years they will be in the space, instead of simply predicting what future fashion will be (as if that were simple!). After all, there are still lofts that sell with glass brick walls, which was 'fashionable' from about June 1982 though October 1986.

You are, of course, free to disagree, especially if you are a loft owner contemplating renovation.

[update July 25: Tomorrow's New York Times Real Estate section feature 'On The Market' includes a pretty awesome modern loft, noting as a "con" that "the customized design might not suit some buyers".  While I think that is true, it is about the same as saying about a "classic" loft, "the classic features might not appeal to some buyers". From the perspective of this post, the more interesting design choice -- and one that really limits the resale market -- was converting to a 1 bedroom.

To me, it is a spectacular 1 bedroom, but it seems to have some trouble finding a buyer. And the 1 BR decision is not so easily reversed. My quick glance suggests that anyone wanting to make a 'real' 2 bedroom out of this space would have to make such radical changes in the layout as to make it impractical. You'd be changing some of essential items that make this loft as cool as it is.

As always, YMMV. But I could not resist the urge to use this very timely NYT example of the issue in this post: whose renovation is it anyway? / the resale question.]

© Sandy Mattingly 2009

Jul. 22, 2009 - 29 East 22 Street closes but is the calendar off?

Jul. 21, 2009 - courage is rewarded / 161 West 15 Street sells in the sweet spot of a cold market

Jul. 20, 2009 - down a million bucks, now pitching at a pre-2005 $625/ftaa

a little limbo action?
There's a rather large Manhattan loft for sale at a new price that is $1mm less than the original asking price. When it came to market last Summer (happy birthday wishes are now in order) a smaller loft in the building had just cleared at about $850/ft. That one had been completely re-done; the market survivor has some restored classic loft features and (the obligatory) chef's kitchen, but may not be quite up to the level of finishes of the one that sold 15 months ago.

The survivor has now had 4 price drops, the last (and smallest) coming after it took a few months off the market. Consistent with the overall size, the master suite is massive, while the 2d bedroom is equal to many "apartment" masters. The layout strikes me as a bit odd, as if adapted over time to changing needs. (The "dining room" is curiously remote from the kitchen, for example.)

I have a hunch that many potential buyers see a need to remodel, hence the market resistance leading to four price drops totalling seven figures, and a current ask of $625/ft. That $625/ft is lower than the price-per-foot of the only two lofts in this building that sold in 2005.

blame it on the neighbors (wrong, but feels good?)
Sellers must be frustrated. In the cold light of retrospect, they wasted a Summer, then a Fall, then a Winter at a series of wrong prices. (Perhaps they were distracted by the neighbors getting out at $850/ft just before they started their marketing journey ....) There may be more activity in the current market than during the First Quarter, but I don't see the latest 4% price drop materially changing anyone's approach to this listing. Tick, tick, tick ...

© Sandy Mattingly 2009

Jul. 19, 2009 - 100 Reade Street sale is straight out of 2005 while wishing for 2008

Jul. 18, 2009 - another big drop that worked / 69 Wooster Street closes under $1,000/ft after $850k drop

but only 15% off
A Manhattan loft on the 5th floor at 69 Wooster Street closed in April under $1,000/ft, despite the fact that it was "newly renovated in a classic but modern style" and a ridiculously low maintenance ($0.42/ft). These sellers also bit a pretty big bullet in facing up to the beast that is The Market: they cut the asking price by $850k before negotiating another $275k off the price two months later.

size matters
I suspect that this loft, like the museum quality loft at 644 Broadway discussed April 27 (price of 'museum quality' in Noho = $1,000/ft / 644 Broadway closes quickly) was penalized for selling in a very thin slice of a pretty thin market. At "5,000 sq ft", even selling at $980/ft was a $4.625mm clearing price. As the marketing said, this space "defines living large"; with only 3 bedrooms in "5,000 sq ft", that is a very modest statement indeed. (In addition to the bedrooms, there is a very large media room and the master suite includes a dressing room equal in size to many Manhattan loft bedrooms; the combined living / dining / kitchen area takes up well over half the loft.)

Even in prime Soho, this scale commanded less than $1,000/ft.

why talk about an old closing?
This closing has been sitting in my Ideas / Draft pile for about 10 weeks, which would customarily exceed a freshness date for blog posting purposes. But this loft transaction intrigues me. There are just not that many lofts on this scale, and I have certainly been attuned to looking for Big Price Drops. Inabsolute terms, a price drop of $850,000 is large, though less than some I have hit (only most recently, I hit a $2mm drop for a sale at 175 Sullivan Street on July 16 and a 45% original-ask-to-close discount at 50 Warren Street on July 11), while negotiating from $4.9mm to $4.625mm is hardly a major (additional) cut.

slice, then slice again
But the scale! This loft was probably penalized, as I said above, for seeking "a very thin slice of a pretty thin market", but it is probably more than that. It probably suffered for taking two very thin slices of a very thin market: first, the thin-oxygen market around $5mm; second, the (thinner?) market of people for whom 5,000 sq ft is appealing.

I have found in Soho in the last five months only two sales above this one at $4.625mm. One was never publicly marketed and was bought by an LLC, so I am not sure what it may mean (285 Lafayette Street #7A, recorded at $6mm for an unknown amount of space in a 1999 uber-condo conversion). The other was in a brand new development, #7B at 151 Wooster Street, "3,007 sq ft" that cleared at $5.35mm with monthly charges and taxes of $5,732 (pretty uber, that condo). So not much changed hands in these rarefied price levels, and neither was more than 60% the size of the loft at 69 Wooster.

© Sandy Mattingly 2009

Jul. 16, 2009 - dropping $2mm to make an un-lofty sale at 175 Sullivan Street

Jul. 15, 2009 - 107 West 25 Street buyer discerns deal 15% off list, sits in lap of luxury

Jul. 14, 2009 - more computation challenges: asking $1,100+/ft after next door sells under $900/ft

metaphysics 101: possible, yes (isn't everything?) but likely, not so much
There's a Manhattan loft new to market in an up-and-coming loft nabe (at least Manhattan Loft Guy thinks so). Lovely space; lovely views. Problem is that it features been-there-done-that (didn't work) pricing, implying that there was a ... discussion ... between agent and seller that included the we-can-always-reduce-the-price card being played by the seller.

Like the neighbor next door, this loft has a roomy 2 bedroom layout. I can't tell (yet) if the build-out is quite to the level of the one next door, but let's assume it is equivalent in quality. The one next door had a lot of trouble selling, needing 12 months, 2 firms and 5 prices to sell under $900/ft. You'd think that rather current experience would set The Market; at least I would think that. One faces north, one south, so maybe there's a smidge of premium for a better view in one.

is that a limb I climbed out on?
Maybe they don't have to sell. Maybe they really want to sell but want to give it a shot.

I will be shocked if the new one clears anywhere near $1,000/ft.

Jul. 13, 2009 - does not compute / 2007 + 10% = no sale?

will aggression be rewarded? (you can guess)
A not-quite-recent new listing of a Manhattan loft caught my eye because it is in a building in which i have recently looked at a recent sale compared to past sales, and found a 2009 clearing price that approximated an old clearing price. Based on the opening ask, the seller of the new one must not be a Manhattan Loft Guy fan....

The almost-new-to-market loft was bought brand spanking new three years ago at $800k (it is not a large loft, obviously). That first buyer immediately tried to flip, without success, looking for 30% more than s/he had paid. It took about a year, and asking prices bouncing up and down, before it sold for just under a million -- a 23% return before expenses.

flipping The Market a bird (or trying to)
It is that Spring 2007 buyer who is now trying to sell, originally at a 10% premium. More precisely, that Spring 2007 is offering the loft for sale. Maybe the spread is not so great that it will prevent an offer (emphasis on maybe), but asking 10% more than the 2007 price is a tad ... aggressive.

Jul. 11, 2009 - 50 Warren Street closes, off 45% from original ask + 14% off 2005 price

• $5.5mm February 2008
• $4.9mm November (new firm)
• $4.75mm December
• $4mm January
• $3.75mm February

Jul. 10, 2009 - comparing 2Q Manhattan loft data + overall market / the case of the missing lofts

Jul. 9, 2009 - 40 West 17 St sells, but it's beginning to look a lot like Christmas ... 2004

June 2004 price + 6% = July 2009
The Manhattan loft #9A at 40 West 17 Street sold in June 2004 for $1.435mm and last week for $1.525mm. Let that sink in for a second....

I know you can't really do this reverse-extrapolation, but if you make a rough estimate that 7 months after the June 2004 sale the loft might have appreciated by 6%, you get to the Christmas season 4.5 years ago. And you get to last week's clearing price of $1.525mm. Which has me humming seasonally-inapporpriate diddies.

not that they didn't try
They tried for a more exciting, a more modern price, asking $1.895mm when they came to market in late October. They dropped to $1.695mm after New Year's, and held there until negotiating a 10% discount to get the deal in March that just closed at $1.525mm.

fits to a "T"
The loft has a somewhat unusual footprint, with windows along the top of a "T" shape that is wide enough to have split bedrooms and a living area wider than 20 feet. The kitchen and baths are along the narrower long axis, away from the windows. In a clever turn-of-phrase, the broker-babble describes this as a "strikingly logical floor plan" (paging Leonard Nimoy ...). The finishes look pretty good (the kitchen is "superbly appointed"), but the price history suggests they are essentially unchanged since the prior sale in 2004.

There's no overall measurement given with this listing (though the floor plan has room sizes), but the last "A" line to be marketed was listed as "1,500 sq ft". That makes for an interesting comparison with the last "B" line unit to sell, a loft that only technically overlapped the marketing of #9A.

were the neighbors a distraction?
#8B traded on December 8, after starting on October 1 -- a rocket marketing success. The contract for #8B was signed October 29, two days before #9A came to market. I wonder if the rapid success of #8B caused #9A to over-shoot The Market....

#8B is said to be "2,200 sq ft" and looks to be at least the equal of #9A in finishes (I will see your "superbly appointed" kitchen and raise you a Viking double oven plus 6 burner Viking cooktop plus Viking hood ...). #8B started modestly at $1.8mm, but the contract signed 4 weeks later was at $2.035mm. Very shrewd, no?

Note that two days after #8B signed a $2.035mm contract off an asking price of $1.8mm, #9A came to market at $1.895mm. Assuming that the "measurements" of the two lofts are at least proportionate at "2,200 sq ft" and "1,500 sq ft", you'd expect #9A to come in under about $1.5mm (assuming condition, light and view are roughly equivalent). From that perspective, #9A did more than OK at $1.525mm, the false start at $1.895mm notwithstanding. Indeed, if anything, #9A out-performed #8B on a nominal price-per-foot basis. It just took a while longer.

© Sandy Mattingly 2009

Jul. 8, 2009 - will pricing 25% below 2007 hit The Market in a sweet spot?

will a modest asking price be rewarded?
There's a lovely Manhattan loft newly offered for sale at about 15% above where it was bought brand new 4+ years ago. Why do I think this is a modest asking price? Neighbors downstairs sold their (identical) loft in 2007 about 25% above the new asking price. Those downstairs neighbors generated a gross gain of 50% over their 2005 purchase price. At 2007-less-25% pricing, the new listing seems modest, indeed.

Whether it works or not is a different story, of course. But they are helped by the fact that an upstairs neighbor has been stubborn, and offering another (essentially identical) loft at more than 20% above the new asking price, without generating a contract in the 8 months that has been offered. They may also be helped by the fact that other upstairs neighbors dipped their toes in the market waters for a few months, and pulled off when a price about 15% above the new asking price did not work.

the roller coaster of brand name loft conversions in nabes that are tres fasconable
This loft was newly converted at pretty much exactly the right time, from a developer's point of view. Closings started in early 2005. The very first buyer flipped after 7 months -- at a 60% premium over the original price. Another early buyer was quicker (flipped within 10 weeks) and not quite as successful ('only' a 50% premium). Weren't those exciting times??

There was an active after-market in this building, with widely variable results. Sales in 2006 and 2007 by original purchasers garnered premiums as low as 20% and as high as 70% above the sponsor prices. But evidence of a change in The Market occurred here as early as January 2008, when a loft that had been flipped by the original buyer within that first year (2005) at a 40% premium traded again in January 2008 at about 6% above the purchase price 26 months earlier.

All said and done, it will be "interesting" indeed, to see where the new one ends up -- and whether the current modesty matches the current market. At a minimum, they are ignoring much of the background noise of the intervening roller coaster years. Props to them for that.

 

Jul. 7, 2009 - shorn but sold at 109 Greene Street

doing what you have to do
The Manhattan loft #2B at 109 Greene Street has sold three times since it was brand spanking new in 2005. This is going to get bumpy, but let's get out some facts (closing dates and clearing prices), then chew:

facts, just facts, Ma'am
More factual material: from the most recent listing, the "1,808 sq ft" loft has a classic Long-and-Narrow floor plan, with windows only front and back, but with the proportions for the rooms you are only ever far from a window in the bathrooms (the floor plan is easier to see from the StreetEasy listing page, here). The list of kitchen appliances is one proper proper name after another, with one jaw-dropping kitchen amenity: a sushi bar. The large windows and 13-and-a-half foot ceilings provide serious loft cred.

I did not know that (or I forgot)
[update 7.8.09: I am scratching my head this morning as the building info that follows seems to be for the WRONG condo. I have crossed it out as I don't have time now to figure out how I got to the development website for Lofts on Greene for this address, as there is (still) a (different) condo at 103 Greene Street, The Milan. The info about the individual loft sales seems to be good, but my building info is .... garbled. I will try to figure out later ...]
(If I knew this back in 2005, I have forgotten that I knew it....) According to the development's website (still active!), this condo is a hybrid of conversion of one commercial loft building from 1879 (f/k/a 103 Greene St) and the combination with a new building to replace the twin of 103 (101 was destroyed in a 1950 fire) by, among other things, using a mold of the 103 facade to cast (in iron!) the facade of 101's replacement. That is so cool that I am pretty sure I would remember it today if I had been aware of it then.

The website says 12 units were to be offered, including penthouses, but I count 13 units sold in quick order, 11 in May 2005 and 2 penthouses in June 2005 (StreetEasy is my friend, and yours). How well-received were The Lofts on Greene? They were so well received (and thanks for asking) that #5B was flipped on September 14, 2005 for $525k more than the original price of $2mm paid on May 16, 2005.

not messing around
This recent sale of #2B was quick, if painful: new to market on February 6 at $2.8mm (note the price these sellers paid in July 2006) with one trivial price drop (to $2.75mm, a mere 2% at this level) on April 12 that must have lead immediately (somehow) to a negotiation, as they were in contract as of April 28 -- $435k from where they'd started in February (a healthy 15.5% off). They assuredly did not like it (note again the price these sellers paid in July 2006), but they did what they had to do in this environment to actually sell.

other flips worked better
You'd guess that the three-part price history of #2B is a simple function of The Market (at any given time) being The Market (at any given time). But the experience of the upstairs neighbors in #4B has been quite different: that unit was bought in the initial offering in May 2005 at $2.5mm (it is "2,448 sq ft" -- fully one-third bigger than #2B) and then flipped almost exactly four years later for $3.695mm. That sale overlapped substantially with #2B; it even took a bit longer. #4B was offered on December 18 at $4.25mm, dropped (ever so slightly) into the 3s on March 31 ($3.995mm) and entered contract just days before #2B did, at only an 8% discount from last ask and a 48% premium over the 2005 purchase.

victors, meet spoils
All that gain went to the #4B sellers, as they had been the original buyers; in contrast the recent #2B sellers sold at a loss compared to their 2006 purchase (they were down $345k, before expenses). The still puzzling comparison between #2B and #4B is from May 2005 to 2009: #4B gained 48% when it sold in May 2009; #2B gained only 25% from May 2005 to June 2009. Weird.

#5A has a flipping history (so to speak) that ends just before Lehman hit the fan. #5A sold on August 25, 2008 for $2.875mm, after being bought in the initial offering in May 2005 at $1.81mm -- a flipping gain of 59% in 39 months. Also weird, compared to #2B, but less weird than the #4B comparison to #2B because the #4B sale in May 2009 was well into The Changing Market. Other flips were earlier, and showed smaller gains than #5A and #4B.

#3B has also flipped once. #3B is "2,469 sq ft" (almost-but-not-quite the same size as #4B) and sold in May 2005 for $2.9mm and then in December 2007 (near The Peak, no?) for $3.65mm. That's only a gain of 26%, before expenses.

One more flip: PHB was originally $3mm in June 2005 and sold for $3.835mm in February 2007 -- a 28% gain, before expenses.

using closing dates, not contract dates can be confusing
I can't see contract dates for the initial offering sales, but it is possible that there is a significant spread between the dates the first initial contracts were signed, and that some of the gain for #4B is the result of an early (pre-price-raising amendments?) contract, compared to other units that have since flipped at lesser gains. That's just speculation, of course, but that #4B gain of 48% in May 2009 sticks out even more than the gain of 59% for #5A cashed in in August 2008.

another "explanation"?
Or this history and set of comparisons (terribly convoluted, I know, but it just grew on me like Topsy) can be "explained" by a not-so-simple aphorism: The Market is not always efficient. Certainly, I can't find any efficiency in this messy set of data.