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May. 17, 2008 - door or dollars? cost v. benefits for attended lobby


a reader writes
I have had an off-line email dialogue with a condo board member about the pros and cons of having an attended lobby in a Manhattan loft building downtown, in her case, part-time. On the one hand, some owners "just don't want a doorman.  Even the best doorman possible, which [she reports] we do not have, cannot really do much for us in our building, which has a small lobby.  Many of us find it more pleasant to come home to a quiet, clean and empty lobby than to someone there that we have to be pleasant to." On the other hand, there are "the typical arguments about safety and property value, etc.".

She wonders, "if there were some sort of formula about the value a doorman adds and the value that is lost for every dollar spent on common charges." What follows is the core of my response plus some additional thoughts since we corresponded.

money costs money
The easiest thing to do is to compute what the expense of having a door person in common charges is equivalent to in borrowing costs (roughly, representing the impact on purchasing power). Some parameters: assuming current mortgage rates around 7%, $665/mo as interest will carry $100k in principal; so if the attended lobby increased per-unit-common-charges by $665/mo, that represents a reduction in purchasing power for a buyer of $100k; if the common charge increase were $332/mo, that's $50k in borrowing power absorbed by the common charges.


real numbers! (dated, but real)

As luck would have it, I used a NY Sun article in September 2006 in my post How much is that doorman in the doorway? What owners pay for staff , which found that full-time door shifts would cost a 20 unit building $665/mo in per-unit-common-charges. Less than full-time coverage costs less; larger buildings share the costs over more unit owners ... you get the idea. (And, yes, labor costs have increased since Fall 2006, but this gives you an idea of the ballpark.) 

So do the math to determine "cost" in purely dollar terms, and its impact on the buying power of a potential buyer.

whose value is it anyway?
One point I made to the reader who asked, is that having an attended lobby has a use value to current residents that is different from the re-sale value when an owner seeks a buyer for the unit. Both values depend on personal opinions about whether the dollar cost in increased common charges justifies whatever net benefits flow from having a door person, but use value for current owners depends only on the current owner's opinion whereas the re-sale value depends on whether potential buyers want an attended lobby at all, and then (if they do) on whether the dollars work.

Any idiosyncratic use value calculation will consider (1) deliveries, (2) convenience, and (3) safety issues, tempered by (4) privacy. In many loft buildings, there are various alternatives to having to have a door person to receive apackage, FedEx, dry cleaning, or even furniture -- from a regularly scheduled super being on premises to a corner store with a friendly staff to a neighbor who is home during the day. As I told the reader who asked, " [a]s for convenience (getting out of a cab with packages; residents juggling strollers or packages and keys from the sidewalk), your present door person may or may not help in that setting, depending on how well they see and whether they get off their butts". In other words, if the lobby attendant won't or can't see to open the door when it is raining or your hands are full or you have a baby in a stroller, there may not be much 'convenience' here. For many people concerned about convenience, having part-time door coverage during the day (when packages are being delivered, when children are coming home from school) can be worthwhile.

safety or nosy?
I find that it is pointless to 'argue' with people about safety. They either 'feel' that a given location is 'safe enough' for them, or they don't. But having an attended lobby might make the difference for some people. As I presented to the reader who asked, "‘Security’ is a vague and idiosyncratic ‘value’: (1) if your present door person cannot see much of the sidewalk, that’s not much help; (2) if your block is ‘desolate’ (as [parts of 'downtown'] can be at night), that may be more of a concern; (3) if your block has other ‘active’ buildings at night, the added safety from your door person is more limited. First time buyers and people not familiar with loft neighborhoods tend to value each these things more highly (i.e., want a door person) than others; but [larger] lofts don’t attract many first-time buyers, and people who don’t like downtown tend to not buy (d’oh!) in your area." For many people, an attended lobby contributes to feeling secure more at night (when people are coming home, in the dark) than in the daytime, which is probably why some buildings have part-time coverage only at night.

Of course, the downside to having someone who can watch you and your guests come and go is that you have someone who can watch you and your guests come and go. There is certainly a market segment of people who so value their privacy that they view having an attended lobby as a negative at any price. My sense is that this segment is much larger among people who prefer, all in all, to live downtown than to live on either the Upper East or Upper West Sides.

what is a buyer to think?
The answer about re-sale value used to be easier and simpler: there was a large segment of downtown loft buyers for whom not having an attended lobby was not a deal-breaker and there was a large enough segment of downtown loft properties without door folk that there was little or nocompetitive disadvantage of re-selling in a no-door building. In other words, there'd be 'enough' buyer interest in a (say) $3mm no-door loft that a seller would get a true market price, without a big discount.

tastes change, markets change
While I still believe that is true, the proliferation of uber-loft developments (including small 'boutique' buildings with amenities such as concierges) changes the property mix a bit, and attracts more of an uptown crowd with tastes that include an attended lobby. I still believe that there are 'enough' loft buyers to have a healthy market for no-door lofts.

appraisers know what they know
I don't know the formula or framework for analysis that appraisal firms use when the value lofts for mortgage purposes, but I know they assign added value for an attended lobby. Whether they have data specific to the loft markets that controls for door vs no-door, I don't know. Giventhe relatively small sample size, I suspect it is very hard to get straight comps that isolate the door vs. no-door additional value.

Your thoughts?

© Sandy Mattingly 2008

 

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Nov. 7, 2006 - another illustration from Sundays Times / the pitfalls of paying to impress someone else

 
make improvements that make your life better, not that might increase ‘value’
Front page Real Estate Section article in Sunday’ NY Times was entitled “Which Building Improvements Really Pay Off?” This article illustrates how misguided it is to pay money for fashion rather than utility or pleasure.
 
The thrust of the article is that a building should pay for things that increase resale value. The top value is assigned to a doorman, but (for some reason) the ‘big three’ are identified as gyms, roof decks and children’s playrooms. I am not sure exactly what these amenities can add to resale value (the article reports that Jonathan Miller provided data for a study about the value added by doormen that won’t be published until next Summer), but I think it is wrong to chase Other People’s Value – whether for a building or an individual owner.
 
why spend money to please other people?
The Real Estate Industrial Complex is full of advice about what kind of kitchens to have because they enhance resale value, or how to remodel a bathroom to increase resale value. I just don’t get that.
 
It is OK to think about resale value when you contemplate a capital improvement, the driver for any decision should be whether it makes your loft a more pleasant place to live. Period. (Except if the property is an investment/rental property.)
 
If a funky color makes you happy – go for it! If your tastes are very idiosyncratic about appliances or built-ins or lighting, go for it!
 
pay for more smiles
The highest value is for things that make you live more comfortably and make you smile more when you come home. Everything else is secondary.
 
Then there is the problem that if you make decisions based on anticipated resale value, the tastes in the market may change before you sell. The stainless steel beauties that you put in because everyone has them (even though you preferred a calm white) may be out of fashion when you try to sell. The children’s playroom that a building spent $50k to build because someone on the board read the NY Times on Sunday may never get used, or may get turned into a humidor in five years to chase the next trend.
 
playroom math gets dicey
Don’t get me wrong. If the families in the building will get value out of a play room (or the grandparents who live there will more often get their grandchildren to visit), that might be a sensible decision. (I would think very hard about the age range of kids who would use such a facility; especially in a small building, there may be only two or three families who might use a playroom in any three year period.)
 
Same thing with the roof deck issue. That 120 unit prewar on West 81st St that built a beautiful roof deck for $259k might find that it enhances the living experience of shareholders enough to be “worth it” (as they anticipated when they went ahead with the project, no doubt), but it may never be proven to increase resale value. If I am a shareholder there, that is not a bad thing.
 
I know from personal experience that the availability of a roof deck (even if not used frequently) can provide a relief from life in ‘the city’. Whether one goes up once in a while on a Sunday with the newspaper or a cup of coffee or a glass of wine at sunset, or just feels better because you know you can, there will be added value if the shareholders find value in that.
 
hubris is thinking you can predict future tastes
Especially on loft buildings of 50 units or fewer it can be a big mistake to try to guess what the future market will value.
 
another hot topic: generational differences in spending common funds
The issue of differences of view about how to spend building money is another very pertinent point for loft buildings that was addressed in the Times article, but that is for another post.
 
© Sandy Mattingly 2006
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Nov. 6, 2006 - a very fruitful article / NY Times gets into generational conflict in lofts

 
the third angle: when ‘old’ people like it ‘as is’ and ‘new’ people want to upgrade
The front page Real Estate Section article in Sunday’s NY Times entitled “Which Building Improvements Really Pay Off?” has been a very fruitful source for discussion about lofts (although it did not focus on lofts).
 
My two earlier posts were about how this article illustrates how loft-buyers are different from apartment buyers and about the mistakes to be made when making improvements to increase Other People’s Value.
 
Actually, I thought this was the most interesting point in the article, and one that is very relevant for lofts:
 
On one side of the deepening schism are boom-era buyers seeking to spruce up their buildings to protect resale values and surround themselves with a level of grandeur commensurate with the size of their investment.
But some of their more tenured neighbors (a portion of whom continue to be branded themselves as “yuppie scum” or worse by the renters they displaced) resist fixing what doesn’t seem broken. Some also shrink from anteing up for what they consider frivolous plastic surgery on top of maintenance charges already swollen by the spiking costs of fuel, taxes and insurance.
 
I think this has the potential to be a much bigger problem for many loft buildings – more so than for apartment buildings, for entirely impressionistic reasons.
 
It is my sense that there are a good number of smaller loft buildings (under 30 units) in which there are a significant number of owners who have been there more than 10 years, and even some owners who are there 20+ years. For lack of a better term, we will call them Old Owners.
 
loft building demographics
Compared to people who have bought into these buildings in the last three years (“New Owners”), the Old Owners likely paid 30% or less of what the New Owners paid, and less than 20% of the current market value. Clearly, the Old Owners bought when the street life was different in many loft neighborhoods, and when the notion of “amenities” in lofts had more to do with working street lamps and regular trash pick-ups than with concierges and Fresh Direct lockers. Let's just say that their attitude about what is ‘necessary’ may be different from that of recent purchasers.
 
In terms of income and working lives, rather more of the New Owners are monied professionals, while rather more of the Old Owners are retired or in the arts. The capacity of Old Owners to pay continuous maintenance increases may be strained, and their ability to pay an assessment for a capital improvement may be difficult.
 
I won’t identify the building (so as not to air laundry) but I am aware of a loft building of 15 – 25 units in which about one-third of the units are owned by old-timers. Every other year there are fights over efforts by relative new-comers to upgrade the lobby and hallways (last renovated at least 10 years ago) and to create a roof deck.
 
I love you, you’re perfect, now change!
New-comers who paid $1.5mm to live in an ‘authentic’ loft building, would like to see some upgrades, commensurate, they believe, with the investment they have in their living space. For old-timers this is frivolous at best, if not financially ruinous.
 
I see this as being more and more common in future years.
 
© Sandy Mattingly 2006
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Nov. 5, 2006 - NY Times on what building improvements pay off / lofts are different

 
Loft amenities are not like other amenities / and “value” does not equal resale
Front page Real Estate Section article in Sunday’ NY Times was entitled “Which Building Improvements Really Pay Off?” This article illustrates how lofts (and loft buyers) are different from “apartments” and apartment-buyers.
 
The clear thrust of the article was that the most valuable amenities are (1) a 24 hour-doorman, (2) a gym or health club, and (3) “the lobby, the lobby, the lobby”. Reporter Teri Karush Rogers lined up lots of people supported this trinity of value-enhancers.
 
no doorman? no problem – for many lofts
I have previously posted about how loft buildings tend not to have doormen (other than very new or rather large buildings). It is probably difficult to sell an apartment on the Upper East or Upper West Sides above $1.5m if there is no doorman, but this is not an impediment n downtown lofts.
 
I will grant that many loft owners may see value in having a gym on-site, but except for large and new buildings, few loft buildings have that amount of common space that can be converted to gyms – which were not the fashion ten or more years ago. (Let’s not even discuss children’s play rooms.)
 
is a ‘done’ lobby mandatory? not so much…
“Apartment” owners prefer nice lobbies (and nice lobbies with door folk). Loft entrances end to be much more utilitarian, and loft hallways been more spare. That is part of the ‘charm’ of the ‘grit’ in buildings such as 718 Broadway, 1200 Broadway, 38 West 26 St, 4 West 16 St, or many SoHo lofts.
 
There is a little bit of a “trust me on this” to this discussion, as agents do not brag about the lobbies or hallways n these buildings and never take pictures. So, trust me on this.
 
loft-y roof decks
Curiously, the one enmity that the Times article debunks is one that – for lofts – adds significant value if done well – a common roof deck. In many small oft buildings (15 – 30 units), neighbors rarely see each other in the elevator or in their (small, utilitarian) lobbies. They are much more often to ‘hang’ with each other in common space when there is a planted or beautiful roof deck.
 
I am thinking of loft buildings in the greater- Chelsea area in particular, such as 40 W 24 St and 22 W 26 St.
 
Whether that benefit translates into greater resale value is for a different post, but I think it interesting how different loft owners and apartment owners approach the question of amenities.
 
© Sandy Mattingly 2006
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Sep. 16, 2006 - loft owners open their own doors

 
Now that I covered what it costs for full-time doorman coverage (yesterday), I tested my generalization that many loft owners and buyers do not want a doorman (or don’t want to pay to have one, or don’t have the space to fit one).
 
Chances are that most apartment buildings on the Upper West or Upper East Sides that have sales in the $2mm range have doormen. That is absolutely not the case downtown, at least in lofts (other than new ones).
 
A sample of loft buildings having Sunday open houses
I looked at the list of open houses for Sunday between $3mm and $2.4mm in loft buildings.
 
 
Even at this price range, there were many open houses (15), not so many buildings with doormen (5). In fact, all five doorman buildings were recent conversions (since 2004) and two of those have ‘only’ part-time doormen. I have noted the asking price, size (of the building and the loft) and the monthly maintenance (for a coop) or  common charges (for a condo; real estate taxes will be additional), to see if there is anything interesting about what people pay per month, with and without a doorman.
 
The most interesting buiding on that score was 476 Broadway, in which condop shareholders pay no maintenance (due to the very high rent paid by their commercial tenant). Even paying no maintenance, those residents will not (more likely, cannot) have a doorman.
 
In this sample of 15 buildings, the smallest building with a doorman is Altair 20, with 17 units. The largest building without a doorman is the Capitol Building with 45 units.
 
no doorfolk at
The buildings without doormen in this range having open houses on Sunday are:
 
new 4 unit loft condo conversion, asking $2.995mm for 3500 sq ft; common charges $498/mo
 
current 15 units asking $2.85mm for 2056 sq ft common charges $1065
 
11 story condop (15 units??) asking $2.995mm for 2250 sq ft  maintenance = zero (big tenant), still no doorman!
 
1980 coop conversion 9 units asking $2.8mm for 2850 sq ft  maintenance = $2375
 
2004 new construction condo (The Paradigm) 9 units asking $2.775mm for 2544 sq ft common charges $1400
 
5 unit condo asking $2.7mm for 2457 sq ft common charges $704
 
7 unit 2000 condo conversion asking $2.675mm for 2500 sq ft common charges $313
 
45 unit coop (Capitol Bldg) asking $2.56mm for 2560 sq ft  maintenance = $2680
 
22 unit condo conversion in 1999 asking $2.475mm for 2700 sq ft  common charges $1182
 
10 unit condo asking $2.475mm for 2264 sq ft   common charges $779
 
 
The five buildings with doormen are:
 
2000 condo 43 unit loft conversion asking $2.995mm  common charges $1037/mo
 
current condo loft conversion of 65 units asking $2.85mm for 1751 sq ft common charges $1077
 
2004 condo conversion 20 units asking $2.8mm for 2202 sq ft common charges $1931 p-t door
 
current condo conversion (Altair 20) 17 units asking $2.75mm (down from $2.875mm) for 2322 sq ft common charges $2060 part-time doorman
 
2004 condo conversion of 110 units asking $2.49mm for 1819 sq ft common charges $1846
 
loft owners are different
It is difficult for me to imagine that uptown buyers in this price range would not all prefer a doorman (except for small townhouse units). At these prices, the owners can afford door coverage if they want it.
 
I suspect that there are even fewer doormen in loft buildings that don’t have units selling in the $3mm to $2.4mm range that I used here….
 
© Sandy Mattingly 2006
 
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Sandy Mattingly is Manhattan Loft Guy; now with The Corcoran Group (http://corcoran.com/ ; but see the disclaimer at the bottom of the page), he can be reached most easily at Sandy@ManhattanLoftGuy.com or 917.902.2491, and followed on Twitter @ManhattnLoftGuy (note "mis-spelling"). After 7+ years, the blog has moved. Links here on RealTown will work for the foreseeable future, but new posts (and all the old content) has migrated to ManhattanLoftGuy.com.

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