Chelsea loft owner loved renovation more than The Market did

4 years later, $1.4 million off … oof!

From all appearances, the “2,250 sq ft” duplex Manhattan loft 263 Ninth Avenue #PHD (The Heywood) is a beauty, with a name-checked architect and designer and enthusiastic broker babbling full of proper proper names and materials.

Remodeled interiors by Architect and Artist Roy McMakin of DOMESTIC ARCHITECTURE showcase a customized home … for the discerning buyer. This fabulous Loft, in pristine condition, features exceptional finishes and stunning design throughout the open living and entertaining space.

… [S]un-filled South-facing Living Room/Dining Room with 12.2 ft beamed ceilings[,] open Chef’s Kitchen with a 48-inch double oven Viking Stove, Sub-Zero Refrigerator, Miele D/W, and a custom Big Leaf Maple island. The second floor offers a kitchenette to serve the terrace, glass doors to the outside, and a completely private Master Suite with a huge spa-like bath, separate shower, and deep soaking tub.

Additional features include dark solid oak floors, custom cabinetry throughout, stone countertops, a fully integrated entertainment system, architectural lighting and an automated irrigation system on the terrace, built-in outdoor Barbeque, exterior vented kitchen exhaust ….

kitchen checks the boxes (images from Stribling)

custom cabinetry, check; architectural lighting, apparently

the money shots are from the huge terrace

price discovery is …

Hard! You know it, especially for relatively unusual lofts. This loft qualifies as relatively unusual in having all that terrace space and sitting at a Chelsea corner not considered to be ‘prime’ or ‘charming’. How many people willing to spend nearly $6 million would choose to live here?

The owner, having done all that customizing, adding “exceptional” finishes, creating a “stunning” loft, thought there might be at least one buyer near $6 million, way back in 2014:

That’s a fascinating history, full of off-market times (most, not very long), full of price drops (most, not immediately after a hiatus), and one remarkable period of Job-like patience (17 months, less 3 in hiatus, asking a stable $4.95mm). From a professional point of view, the most remarkable thing about this history isn’t that it lasted 50 months to contract (less 20 months off, taken in 5 chunks) or had 6 asking prices, but that the same agent held the seller’s confidence throughout, presumably because they were on the same page. Love to see that!

The longest price was $4.95mm, from September 2016 to February 2018 (less 2+ months off), suggesting that was a pretty hard line for the seller.When that didn’t work, they tried $4.7mm, but only for 3 weeks. The last ask was the one that got it done, with $4.495mm asked generating a contract at $4.275mm in (only!) 3 months this past Summer.

To belabor the obvious, the $4.275mm clearing price was $1.42mm off the $5.695mm original ask, or 25% below.

what did the loft neighbors know?

Obviously, this seller had a difficult time figuring out what The Market thought about the value of his loft. His neighbors gave him some hints about that, which he did not take.

At the time that this penthouse loft was first brought to market, two neighbors had just sold. The “1,500 sq ft” loft #7D raced through the market (contract in 3 weeks) and closed on June 4, 2014 at $1.975mm. (That’s $1,317/ft for those without a calculator.) Then, in what appears to have been a private transaction (though publicly filed, so everyone would eventually learn, even if building scuttlebutt might not have been immediately informed), the “1,701 sq ft” loft #5E sold on June 5, 2014 for $2.495mm, a then-building record of $1,467/ft.

If you value the Penthouse D outdoor space as worth 50% of the interior (a reasonable place to ballpark it), the original #PHD asking price was an adjusted $2,071/ft. The first price drop (to $5.495mm) brought the ask down to an adjusted $1,998/ft.

The next sale in the building was the “1,489 sq ft” loft #3D, which closed above ask on May 4, 2015 for $2,252,200 ($1,513/ft), just before the first #PHD price drop. That new building record may have influenced the June 1, 2015 #PHD price drop to $5.395mm, but that was still too rich for The Market at an adjusted $1,962/ft.

Yet another building record fell when the “2,124 sq ft” loft #7C sold on October 22, 2015 for $3.9mm, or $1,836/ft. The #PHD seller didn’t take much solace in that, however, as he had the loft off the market from June 2015 into September 2016.

Nor was there much solace to be taken from two loft sales at The Heywood in June 2016. The “1,536 sq ft” loft #6B sold on June 6, 2016 for $2.5mm (essentially pennies above ask), or $1,628/ft; then the “1,489 sq ft” loft #5D sold on June 21,2016 for $2.22mm, or (gulp!) $1,491/ft.

You can do the math on the next 5 sales in the building to the present time (use the Past Sales tab on the StreetEasy building page; or skip down to the table below), but the October 2015 building record (#7C, $1,836/ft) has never been threatened.

Meanwhile, another penthouse owner had trouble discovering a clearing price. But the owner of the “3,184 sq ft” loft #PHC proved to be less patient than the #PHD seller, trying two prices over two months until going off the market for good in February 2017. With “1,476 sq ft” of terraces, that unsuccessful offering could be ballparked at an adjusted $2,250/ft at the last ask. Still too rich for The Market, and not a helpful data point for discovering the right price for #PHD (which by then was asking $4.95mm, or an adjusted $1,800/ft).

With this history in the building, you can see why the #PHD seller hung at $4.95mm for 11 months into this past February. At an adjusted $1,800/ft, that ask was below at least one sale in the building, even if still above every other sale. Dropping to $4.7mm in February 2018 brought that down to an adjusted $1,709/ft, but the seller didn’t give that price even 4 weeks to work before pulling the loft off the market (again!), then waiting 2 months to come back at $4.495mm (an adjusted $1,634/ft).

That one worked, generating the contract within 3 months that closed on November 9 at $4.275mm, or an adjusted $1,545/ft. Gulp, indeed.

Let’s try this in table form, with the long marketing history of #PHD showing only price change dates (not time off the market) and using a 50% adjustment factor for the outdoor space to get an adjusted $/ft, against the clearing prices for the neighbors at $/ft:

(*#5E was a private sale)

To recap, between #PHD coming to market and going to contract, 11 neighbors sold their lofts; of those 11, 4 (in bold) sold above the adjusted price per foot of #PHD, while 5 (in italics) sold within 5% of that adjusted force per foot (if you give me a rounding error on #5E). Take out the private sale, and the numbers are 4/10 and 4/10.

I’ve not gone into detail about light and condition in these other units, but most read as comparable in condition, and I don’t think it necessary to make granular comping adjustments to make the point that #PHD was priced dramatically higher than its successful neighbors (on a crude price per foot basis) the entire time it was marketed, catching up only with the last price drop (or two), and even then needing a discount to get a deal done.

Note that if you consider the pretty spectacular outdoor space to be even more valuable than the top end of The Miller’s standard rubric (of 25% to 50% of the value of the interior; see my May 6, 2010, riffing with The Miller on the value of Manhattan terraces, decks + balconies), the disparity gets worse because the observed market value of #PHD on an adjusted basis goes down (e.g., to $1,425/ft if you ballpark the terrace at 75% of the value of the interior). I’d be inclined to do that, based on the irrigation, cooking facilities, lovely plantings, and the fact that the terrace wraps.

While if you use the (to me, unreasonable) bottom end of The Miler’s standard range (25% of the value of the interior), the disparity between #PHD and its neighbors gets better, at an adjusted $1,710/ft, but it is still not a building record.

In vicious hindsight, the #PHD owner over-estimated the value of the loft for close to four years. It is possible that he was convinced that the loft was finished at a much higher level than anything else in the building (the babble shouted the name check: “Architect and Artist Roy McMakin of DOMESTIC ARCHITECTURE”); it is also possible that he thought the terraces were much more valuable than they are.

If the latter, I sympathize, as I have been known to say that

some people will overpay for outdoor space, particularly in a market marked by scarcity.

The “some people” card is often played, but when played prudently it is hedged when experience suggests a different scenario. No one but this owner can say whether he waited “too long” to sell, as we don’t know what else was going on in his life; the market facts imply he waited a rather long time to adjust to negative feedback.

Or, as I say (all too often?), comping is hard!