market corrects too-low price drop at Chelsea Mercantile, just as it's supposed to

Conventional Wisdom, vindicated
Regular readers of Manhattan Loft Guy know that I often observe that, absent a thin buyer pool, The Market will correct a price drop that is ‘too low’ by having multiple bidders push the clearing price above the asking price. The price history of the “2,129 sq ft” Manhattan loft #9-I at 252 Seventh Avenue (“the coveted "I" line of the prestigious Chelsea Mercantile”) will not surprise readers who have been paying attention, as it reflects a customary pattern for a loft that has trouble with price discovery, of To High, Still Too High, (oops) Too Low … Fixed:

May 1 new to market $3.695mm
June 19   $3.55mm
Aug 3 hiatus  
Oct 9   $3.45mm
Nov 13 contract  
Dec 17 sold $3.5mm

Of course the odd thing about this sequence is that it took any price drops at all, as the clearing price is a mere 5% off the initial ask, and a language-fracturing even more mere 1% off the first price drop in June. The whole affair took only 4 months of active marketing, with the August-September hiatus for inacive marketing but active soul searching.

was it the unfortunate extra bedroom, Mars?
As the broker babble says, this unit is in the “coveted” I-line, and it is easy to see why this footprint would make others jealous. The floor plan is close to a perfect one for a 2-bedroom 3-bath layout, with 9 windows along the long north wall and 5 on the shorter east wall, splitting the master (north and west) far from the second bedroom (east and south).

Two problems: the loft was marketed empty, always a dreary presentation at this scale; and (as you already know fi you glanced at the floor plan) they ruined the layout by squeezing in a 3rd “bedroom / study”. That room is a decent enough space, at 8 x 13 feet, that adds the utility of a 3rd bedroom at the cost of delaying a visitor getting a sense of space. Instead of the visitor seeing the 3rd and 4th windows more than 40 feet away after taking but 6 steps into the foyer, that visitor now sees the door to that 3rd bedroom off in the distance and does not feel the volume or see the light of the huge great room until passing the kitchen, and even then only at an angle.

Of course it is a simple matter to take down 21 linear feet of walls and door (as any 2-bedroom buyer would) but the impact of that extra bit of carpentry on the sense of space must be dramatic.

sussing out The Market is easier in retrospect than prospectively
It is not hard to guess the sellers’ approach to pricing loft #9-I. My guess (I will bet you a quarter) starts with the June 2011 sale of loft #15-I at $3.65mm. That one was of similar quality to #9-I (as a “sophisticated renovation”, though in the original configuration of 2-bedroom only) but cleared nearby buildings to add the significant premium of “open city views”. My bet is that the #9-I sellers figured their $3.695mm asking price was justified by the passage of time since #15-I sold, the better views up there notwithstanding.

Attentive readers know that I hit that June 2011 sale in my July 7, 2011, why did Chelsea Mercantile loft sell within 3% of The Peak?, a post in which I was obviously impressed at how well loft #15-I held its value compared to a prior sale at The Peak. In that post I distilled some sales data at The Merc that supports that #9-I babble that this line i, indeed, coveted, noting that the (then) “current value of $1,658/ft for #15-I is clearly a strong value compared to past sales of similar high-floor units” and that “none of the other (same building) sales in the first quarter of 2008 approached the #15-I value”.

Coveted line though it is, “I” lofts with clear views are simply more valuable than lofts with light that face building facades to the north and east. I can’t say that the spread between #15-I at $3.65mm in June 2011 and #9-I at $3.5mm 18 months later is excessive, even allowing for hte passage of time. Though I am tempted to think that the spread would have been smaller had #9-I been only a 2-bedroom and if it had been shown as lived-in.

That’s my story and I am sticking to it.

This story, by the way, has the fortunate consideration of (possibly) accounting for hte #9-I difficulty with price discovery. That starts from the premise that #9-! was priced correctly from the start (a $3.695mm ask in a coveted line of an iconic condo should yield a $3.5mm deal more easily) and looks for reasons The Market had trouble doing the right thing (to cop a Spike Lee joint). I suspect The Market had that trouble becaus the loft was empty and showed particularly poorly due to the ‘extra’ room. Now that I have come around to my beginning I will stop before I repeat the entire analysis.

(Countown from 10….)

© Sandy Mattingly 2013

Tagged with: , , , , , , , , ,

Leave a Reply