Chelsea penthouse loft at 240 West 23 Street takes million dollar hit (or, was it a 44% hit?)

is this loft trolling Manhattan Loft Guy??

The recent sale of the “1,800 sq ft” Manhattan loft #7D at 240 West 23 Street (aka “Penthouse 7D”) for $2.2mm pushes a lot of Manhattan Loft Guy buttons. Most prominently and recently, it took nine calendar months and a very large discount to clear The Market. Then, there’s the is this low-ceilinged space really a loft?? angle. Finally (perhaps!), there’s the angle that the seller turned out to be secretly negotiable, a phrase I must have used more recently than 2011,  though I did not quickly find evidence of that. That is a lot to unpack ….

This listing history is painful:

(As people familiar with my Master List of downtown Manhattan loft sales know, I consider periods less than 90 days ‘off the market’ as part of the same marketing effort; hence my November 2014 start date, above.)

I hit the themes of long marketing and big discounts (though at a higher price point) in my recent matched set of posts, February 23 ($5 million data points: unrealistic Manhattan loft sellers or market softening?) and February 26 (more on the $5 million Manhattan loft market, a year over year look).  Loft #7D doesn’t match those examples in the length of the marketing effort, but the clearing price fro this penthouse loft was nowhere near the asking prices.

if they aimed for the top, they found the bottom of The Market

In fact, that’s only five months of active marketing to get to contract, but look at those asking prices …. This seller was rather responsive to the lack of response from The Market, with four price drops and no two prices separated by more than seven weeks. Problem was, none of these prices were anywhere near The Market.

Only the seller and her marketing teams know whether they were intentionally fishing for a well-heeled buyer who just had to have outdoor space in central Chelsea, whether they simply had no idea what this penthouse was worth, or whether there is some other real-time explanation for this history. All an informed outsider can infer is that they were extraordinarily wrong about The Market. The last asking price was 25% off the first. The deal was cut $1.7mm off the original asking price and $999,000 off the last one, discounts of 44% and 31%, respectively.

The informed outsider can also infer that something probably happened last Summer to change the seller’s approach. The sequence of asking price changes under $300,000 stopped in July. She suddenly became much more motivated to find where The Market was, without waiting to see whether another $300,000 drop (or two, or three such drops) would work; after all, the last ask of $3.199mm was only on public offer for four weeks before the final deal was struck.

the problem for a secretly negotiable seller

This sequence shows that that the seller was, in fact, much more (and secretly) negotiable than all but bottom fishers would have reasonably thought. (“Secretly negotiable” is a phrase I must have used more recently than in my November 29, 2011, secretly very negotiable penthouse loft seller at 129 West 20 Street secretly negotiates a 28% discount, but if so, I can’t find such usage.)

A seller takes some obvious risks in setting a too-high price. Why would a buyer with a budget in the mid-to-low 2s look at lofts asking more than $3 million? (I often counsel buyers not to even open web listings out of their price range for fear that their preferences will become skewed by conditions, finishes, size or other factors that they cannot afford.) Many buyers will want to know how long a listing has been available, and then think that it is ‘stale’, or be predisposed to look for things ‘wrong’ if they do go see it. And most buyers will simply not bid on listings well beyond their budget, preferring to focus on listings that are visibly in their range (a reasonable, don’t waste my time approach). But sellers say things to themselves like it only takes one, right?

Sellers are better off if there are two. And trying to attract two low-ball bidders at the same time is not quite as difficult as drawing to an inside straight, but it is … challenging.

market metaphysics in the Manhattan loft market are not different from the overall market

The hard cold market fact is that this penthouse was worth exactly $2.2mm last August … can’t argue with that. But one can wonder …. Forgive me if this seems too much like Real Estate 101, but here’s how it works.

The purpose of an asking price is to attract the highest offer from a qualified buyer. In that (strict) sense, asking $3.199mm ‘worked’. (She was in contract in four more weeks.) But I would argue that the $999,000 gap between last ask and contract price leaves open the possibility that The Market would have produced a qualified buyer at a higher price, if only that qualified buyer understood how negotiable the seller actually was. (My aggressive sellers hear from me “The Market is much better at correcting a too-low price than it is a too-high price“, as often as necessary.)

I’d bet a quarter (that’s $0.25) that a buyer could have been found above $2.2mm off an asking price of $2.75mm, but I can neither collect that bet nor be forced to pay out. Indeed, I’d double that bet that a buyer could have been found above $2.2mm if the asking price had been dropped to $2.2mm. (In other words, that there would have been a bidding war, even after all those price drops.) You can find examples of this dynamic in the downtown Manhattan loft market by looking for loft sales on my Master List of downtown Manhattan loft sales that have a green selling price (green for above ask) without having a blue first asking price (blue for no change in price); some of these are dramatic.

I hit a few of these from time to time, when The Market is right and when I have a particular jones for this phenomenon. Once I started looking for ‘a few’ examples it was difficult to stop.

See, for example,

• my January 28, 2013, if robust, The Market will fix a too-low price (at least, it did, at 124 West 24 Street), where I wondered whether the price drop was necessary
• my May 8, 2011, The Market corrects a Cast Iron loft over-correction, as 67 East 11 Street loft sells above (reduced) ask, which I opened with “[s]top me if you have heard this before: if a seller sets a price that is ‘too low’ The Market has an opportunity to fix that price“,
• my April 25, 2011, bidding war was a long time coming to 21 East 22 Street loft, about a loft that did not sell off asking prices of $925,000, $875,000, or $849,000 but sold above the last ask of $799,000 (a small loft, obviously, plus Those Were The Days!)
• my April 4, 2011, late bidding war for another forever loft, as 714 Broadway goes for $613/ft, or more, about a loft that did not sell off an asking price of $2.595mm or $2.225mm, bit sold above ask when dropped to $1.975mm,
• my October 18, 2010, another late bidding war, as 55 White Street loft sells at 104% of (reduced) ask, about a loft that did not sell when offered at $2.1mm or at $1.975mm, but that sold above ask when offered at $1.85mm. In that post I quoted a prior post that involved a bidding war after nine months on the market and six prices:
• in my September 15 [2010],  bidding war after 9 months, 6 price drops at 244 West 23 Street loft. I stopped by the Department of Metaphysics in that one, offering this conundrum:

  Looking at this another way, if the loft [that was #5B at 244 West 23 Street ] was worth $1.4mm in May (a ‘fact’ established by the arm’s length transaction), then it must have been worth $1.4mm for at last some time before hand. (What changed from January 1, for example??)

  But, if the loft was not worth $1.4mm in February (a ‘fact’ established by the failure to sell off the $1.41mm asking price), then how could it have been worth $1.4mm in May?

• my August 10, 2009, bidding war erupts VERY late, as 49 Warren St gut job closes, about a loft that sold above the fourth asking price

Surely you get the point … I must stop ….

can you have a not-loft in a loft building?

Finally (!), there’s the is this low-ceilinged space really a loft?? angle to poke Manhattan Loft Guy in the eye. This (originally) 18-unit building tends to have small units, as do many residential loft buildings converted to coop in the early 1980s. We’ve been at this post for along time by now, so let’s make this quick….

The building is clearly a loft building, one with a prior life as a manufacturing facility, or with some other commercial usage.

nope: not built abut 100 years ago as a residence

Penthouse #7D is on the top floor, and above, in rooftop space not visible from the street. That sort of structure leads to not very loft-y rooms like this bedroom:

A small loft on the third floor looks very loft-y:

#3A is only “1,170 sq ft”, but recognizably a loft

A true penthouse (to purists snobs like me) contains space built on the roof, with a different feel from the ‘proper’ floors of the building. That sense of difference between the penthouse units and units on other floors is enhanced in a building like 240 West 23 Street, in which ceiling height is lower at the top of the building than on the lower floors. (See the building pic above, again.)

This can lead to metaphysical questions such as can you have a non-loft in a loft building?, and other distracting taxonomy questions. The only response that can keep me sane is to treat all units in a loft building as lofts, regardless of how different they may be compared to their ‘proper’ neighbors. If you are intrigued by metaphysics or taxonomy, consider these Manhattan Loft Guy blasts from the past:

• my January 30, 2013, elevator does not go to top floor at 258 Broadway, penthouse loft sells anyway (eventually, eventually),
• my April 7, 2012, NY Times on Chelsea penthouse leads me to wonder “what is a loft”?, and
• my February 15, 2011, 18 Leonard Street penthouse (not really a) loft fits a bidding war into 3 weeks.

With that, back to March Madness ….