133 West 28 Street loft sale shows the squeeze in 2-bedroom buyers

an enthusiastic result

I am as much a fan of broker babble as the next guy (or Guy) and I appreciate enthusiastic attempts to make linguistic lemonade out of limited assets. The babble for the recently sold and hotly contested Manhattan loft #5C at 133 West 28 Street (probably “1,300 sq ft”, like its neighbors, as we’ll see) is enthusiastic, but only about limited things, including “high(9ft)ceilings”, “original hardwood floors in great condition”, “new Bosch washer and dryer” and “the very best neighbourhood in the city for restaurants”. Other than that Bosch drop and a mention of tin ceilings, there’s no bragging about finishes, materials or proper proper names. I’ve highlighted here what is probably the key word in the description: “Two bedroom, two bathroom plus home office”. You don’t need me to tell you what the key numbers are in the history:

But you may find it useful to have this context: the loft on the same footprint just upstairs sold for $1.105mm on March 15, 2012.

The babble for loft #6C is only a little more enthusiastic about finishes than that of #5C, dropping the “chef’s” modifier onto kitchen “in the truest sense” (a 6-burner Wolfe range, helps, but whatever else that means, it is enthusiastic!), and claiming a “spa-like whirlpool bath” for the master bath. The floor plan upstairs uses the entire rear wall for the master, while allocating some of the windowed space near the entry for a (tiny!) “bedroom”. In contrast, the #5C floor plan splits the rear wall into 2 bedrooms and has that odd “gallery” up front (in listing pic #5; note that this floor has only 2 west windows; the 6th has 4).

In short, neither #5C nor #6C babbles as having wonderful finishes, each more move-in than done-up. The higher floor has a more flexible footprint because of the additional windows on the long west wall, while the lower floor has tin ceilings (if the 6th floor has them, they are covered by that dropped ceiling).

The early 2012 market was certainly a seller’s market, but not as frenetic a market as the current market. Hence, #6C cleared the market at $1.105mm.

My guess is that the #5C asking price was set in specific response to the $1.105mm at which #6C closed, further support for the supposition that the two lofts are similar in condition. Yet, 16 months later, #5C sold for $220,000 more than #6C, a rather energetic 20% premium to the neighbor and $175,000 more than the ask. That’s not all accounted for by passage of time, and I doubt that any significant part of it is accounted for by a preference for #5C’s tin ceiling but fewer windows. Having worked with a number of buyers in the 2-bedroom (“1,300 sq ft”) segment of the downtown Manhattan loft market in the last year and half, my guess is that this premium for #5C is a function of those buyers having fewer choices. Worse, I have the feeling that there are more of those buyers; or, at least, more of those buyers willing to ‘do what it takes’ to own one of these suddenly rare birds.

To repeat: there is no apparent fundamental market valuation difference in favor of #5C over #6C, other than the passage of time.

digressing on a riff (caution: twists and turns ahead)

Let’s make this worse by adding some more context. The loft above #6C sold a year earlier, in better condition than either of the neighbors, with the significant bonus of an “800 sq ft” private roof deck, at a (no surprise) much higher price. The “1,300 sq ft” loft #7C sits in the same footprint as the others (floor plan, here), with 2 bedrooms in back and only 3 west windows. I read the listing photos as showing a higher level of finishes than in the other 2 lofts, though the decor is … unusual; certainly, there is no reason to think that #7C is in any worse condition than the others. That loft sold for $1.58mm on April 28, 2011, 28 months before #5C sold for $1.325mm without 800 sq ft of private garden.

So in the same interior footprint on consecutive floors we have #5C in July 2013 at $1,019/ft, #6C in March 2012 at $850/ft, and #7C in April 2011 needing adjustment for the outdoor space. Taking a big haircut to value the rooftop garden at 50% of the value of the interior of #7C (as a ballpark way to riff with The Miller about such things), we also have #7C at an adjusted $929/ft two+ years ago; if we ballparked that garden as only worth 25% of the interior, the adjusted value for #7C goes up to $1,053/ft. I strongly suspect the 50% value is more reflective of the value I believe The Market assigned, if perhaps still conservative.

That (still future) #6C comp at $850/ft for decent interior space in this building on this footprint would imply someone paid at least $475,000 for the 800 sq ft garden in early 2011, or $594/ft, or 70% of the value of the interior. While this value range is well outside The Miller’s principle that outdoor space is generally worth 25% to 50% of the interior on a dollar-per-foot basis, I continue to believe that outdoor space is something that some people will value much more highly than other people, and will pay beyond what a unicorn Rational Market would.

the importance of counting bedrooms

This coop has 2 buildings, 131 West 28 Street and 133 West 28 Street. I hit the #131 side in my August 15, Flower District mini-loft sells above ask but flat to 2007 at 131 West 28 Street, which considered the “900 sq ft” loft #3A. With an April 17 contract and July 15 closing, let’s say that that mini-loft was in the same market as the larger #5C (May 17 contract, July 31 closing). See that post for details about #3A but the key for present purposes is that it was in better condition than #6C yet sold at $939/ft (8% lower than #6C at $1,019/ft).

I have to believe that this 8% spread (understated as it is due to differences in condition) is entirely allocable to scale: #6C easily accommodates 2-bedrooms (plus a work space in that odd gallery), while #3A does not.

I noted a much larger premium for larger space in my September 3, jaw-dropping views provoke jaw-dropping price for 261 Broadway loft, which featured next door lofts with almost exactly the same light and views, both in well renovated condition, that closed with a 34% premium to the larger space on a dollar-per-foot basis. If you visit the Twitterverse, you may have seen my dialogue with the estimable Tribeca Citizen (@TribecaCitizen, of course) that afternoon. He’s not wrong (“Premium in Tribeca for a room for the kid(s)”) but the scale in that case is excessive. In this case, something north of 8% seems a more reasonable premium for having that extra room for kids, drums, crafts, whatever.

Presumably, the overall Manhattan residential real estate market is experiencing this preference for 2-bedrooms over 1-bedroom units. That will have to be a Note to self … rather than a further digression, as this has gone on (and on) enough.

© Sandy Mattingly 2013