a tale of 2 neighbors at 150 West 26 Street, with 1 hard bargain

‘tis a puzzlement
Manhattan Loft Guy loves a puzzle, and a deed filed last Saturday provides one (not counting: they file deeds on Saturday??) … why did the Manhattan loft #901 at 150 West 26 Street sell on November 12 for $2mm without being publicly offered for sale? After all, when it last sold (February 26, 2007) this “1,623 sq ft” condo got only $1.63mm.

In fact, that 2007 (pre-Peak) sale at $1,004/ft compares very well to the June 2008 (very close to The Peak) sales of #802 at $998/ft and #803 at $1,096/ft, so you would not think there was much upside for #901 this year. Especially because the #x01 layout at 150 West 26 Street is both smaller and less open than the #x02 and #x03 layouts (it has only one exposure, at a narrow end, compared to nearly wall-to-wall windows on both a long exposure and a narrow exposure in the other [larger] lofts).

the importance of having friends in high places
Sometimes the standard real estate mantra location, location, location has extremely local application. In this case, it appears that #901 sold three weeks ago at about a 20% premium over Peak-pricing on the 8th floor because it is the top floor of this 9-story residential conversion in 2001. More specifically, because when the recent sellers bought #901 in 2007, a newly built penthouse above them was nearing completion (it sold for $3,283,586 on December 12, 2007). Even more specifically, because the 2007 penthouse buyer apparently wanted more room, but did not want to give up the penthouse.

is there a typo involved?
The recent #901 buyer is listed as an LLC (“Bejeph”) with a Ridgefield, Connecticut address, but seems to have a much more local presence: the owner of the 10th floor is an LLC with a very similar name (“Jeph”) and the exact same Ridgefield, Connecticut address. Looks to me as though the 10th floor penthouse empire has established a beachhead on the floor below.

That penthouse has “3,200 sq ft” of outdoor space on two levels but ‘only’ "2,070 sq ft” and 2 bedrooms of interior space. It is a good bet that at least part of that interior space of the penthouse sits in top of at least part of the “1,623 sq ft” in #901.

trend, coincidence or am I just starting to notice?
Astute Manhattan Loft Guy readers will now expect me to wonder how good friends the #901 and 10th floor owners were from 2007 into 2010, and to use the word “extortion” to describe how the #901 sellers were persuaded to give up their contiguous space to an acquisitive neighbor only at a significant premium above market value. For that is how I approached similar situations in the two other recent times I noted a neighbor selling to a neighbor abov the market: November 9, another neighbor extorted, as Queer Eye tires of “Soho”, leaves 505 Greenwich Street loft for Chelsea, and November 1, no listing, but VERY motivated buyer for O’Neill loft at 655 Sixth Avenue greases a move to Tribeca.

#901 at 150 West 26 Street, #14C at 505 Greenwich Street, and #2G at 655 Sixth Avenue were all sold to an adjoining neighbor without having been publicly offered for sale. Given the premium prices paid, it is likely that in each case the sellers were not as interested in moving as the buyers were in moving in to the sellers’ space.

averaging down, or up
The penthouse buyer paid $1,586/ft in 2007 for the 2 bedroom loft, unadjusted for the huge terraces. If we value that terrace space as low as 25% of the interior space value (i.e., applying the Miller Rules to outdoor space that is much larger than the interior, as in my May 6, riffing with The Miller on the value of Manhattan terraces, decks + balconies) that value changes to $1,144/ft on an adjusted basis.

In that context, (over)paying $1,253/ft for the loft underneath is a relative bargain. After renovation costs to integrate the 9th and 10th floor spaces, the penthouse will have 3,693 sq ft of interior space on two levels to go along with that 3,200 sq ft of terraces on two levels, for $5,283,856 in purchase costs. That’s $1,430/ft without adjustment, $1,176/ft if you adjust for the terraces at 25% of interior value, and $998/ft if you adjust the outdoor space at 50% of interior value (because the interior is now [slightly] larger than the terraces.

For someone named LLC who has the cash and is motivated not to give up what it has, that (obviously) makes sense.

As I said before with these ‘extortionate’ sales: use it as a comp at your peril!

© Sandy Mattingly 2010