more developer's remorse: scooped by Curbed over 246 West 17 Street loft resale +89% in 3 years

no blogger’s remorse, however
How’s this for a Bright Shiny Object? The “1,717 sq ft” Manhattan loft (with a “321 sq ft” terrace) #1C at 246 West 17 Street recently sold at $2.55mm after having been sold in 2009 by the sponsor of this 2008 new development for $1.35mm. That’s a gain of 89% for those of you without calculators, or who skipped over the headline. Nice pick up by Curbed.com yesterday, even if it did invite some oh-so-anonymous Guests to weigh in on the sanity of the buyer and The Market in … er … colorful terms. Ain’t the intertubes grand?

There are some hints in the brief recital in the opening sentence, especially for Manhattan Loft Guy readers with memories long enough to reach back to Tuesday (June 5, developer’s remorse? Gansevoort loft sells +50% over 2009 sponsor sale at 325 West 13 Street). The wrinkle on this one has to do with a failed contract that seems to have kept this baby off the market as the froth turned frigid, but otherwise it sounds a lot like the loft I hit on Tuesday that just closed in a hurry at $2.3mm:

Bad luck or construction delays, they did not start closing this 7-unit building until 9 weeks after Lehman fell, and the nuclear winter settled over the overall Manhattan residential real estate market. The ground floor duplex loft with “700 sq ft” garden was marketed by the sponsor at $2.595mm beginning in May 2008 before finally going into contract on May 12, 2009 and selling on July 20, 2009 for … (wait for it) … $1,527,375.

repeat after me (again): timing is _____
The West 13 Street developer wanted to sell that first floor loft at nearly $2.6mm starting just after The Peak of prices were recorded in the overall Manhattan residential real estate market, and settled for $1mm less just as the overall market was coming out of the post-Lehman nuclear winter. The West 17 Street developer wanted to sell this first floor loft at $2.2mm in mid-2007 (froth!) and even signed a contract that might have reached that value, but it appears that that  buyer could not perform, forcing the developer back into the market at the worst possible time. This history is a mix of StreetEasy data and (from 2007) the more detailed information from the inter-firm data-base:

The sponsor had locked in some price for #1C as early as May 2007, and rode with that buyer through the remainder of the froth, past The Peak, and beyond Lehman. The full building sales history on StreetEasy shows that some sales closed beginning in September 2008, with 22 closings in this 37-unit building by the end of the year. Just eyeballing those results, #2D seems to be the lowest 2008 sale on a dollar-per-foot basis, at $1,064/ft, with #4C approaching $2,000/ft. Thus, in at least 22 of 37 instances, it appears that the developer did rather well.

The sponsor sales in 2009 tell another story, with #3A having a very similar sequence to #1C (early contract off original pricing, late closing deeply discounted), yet even that one closed at $927/ft. Loft #1B and loft #2E were similar, eventually closing at $826/ft and $821/ft. I am not going ot go through a Miller-riff to adjust for #1C’s terrace, but many of the units in the building have outdoor space. Unadjusted, #1C eventually sold at $786/ft, but this wasn’t even the worst for the developer.

The developer (very eventually) unloaded loft #1A, with “1,659 sq ft” interior plus a “1,28 sq ft” garden for $1.17mm as late as May 2010. That’s an unadjusted $705/ft.

These significant pricing hits the developer took on lofts that had early contracts that did not close may well have been ameliorated by the down payments that those early contract signers left on the table. In the case of #1C, the 2007 history (above) implies a contract around $2.2mm. Keeping a down payment of $220,000 would have made the developer a bit more sanguine as the frost replaced the froth.

patience and resolve are overrated
Curbed looked at the big picture numbers for #1C: 2009 sale at $1.35mm followed by the sale on May 25 at $2.55mm. Our listing history has a ton of open houses in this recent marketing campaign, so that opening Streeteasy bit of history (“Listed in StreetEasy, already sold, by CORE at $2,650,000”) just cannot be right. The loft came out on October 12, 2011 at $2.65mm, dropped to $2.575mm on November 9, and found the contract by February 29 that closed on May 25 at $2.55mm. The Curbed take-away was this:

Market timing helps, but patience and resolve seemed to pay off in this case.

I suppose 5 months to contract with only a small price drop is some evidence of patience and resolve. But I would compliment the seller on correctly valuing the loft in 2011. Much more, I compliment the seller on having the cojones that others obviously lacked in 2009, in bottom fishing the loft away from the sponsor at $1.35mm. Without that ballsy move, this would be just another loft sale. And the seller would not have put 7-figures in his pocket

yes, abatements impact value
This development took a 3-story building and added 7 floors to it. Through the miraculous complexity of the New York City real estate and tax regulations, floors 1 and 2 did not qualify for the tax abatement that floors 3-10 got. Hence, loft #1C taxes are $2,400/mo, while the smaller (but not by that much) #5B sold last year with taxes of (wait for it) $69/mo. I will leave for another day the potential market impact of that kind of spread in the same building, but it should be obvious that a bunch of years of artificially low taxes on upper floors will be reflected in values.

Did I mention that comping is hard?

Did I mention that buyers with the confidence to bottom feed at the trough are doing well? Note to self: find more, now that we have two examples this week.

Did I mention that I am not going to extend this post by showing that the current market valued #1C more or less in line with other sales in the building?

© Sandy Mattingly 2012