old school gut-me loft sells at $926/ft at east end of Chelsea

love the truthful broker babbling describing this (quintessential?) Chelsea loft

“[F]air condition and livable” is damn fine praise to describe the “1,980 sq ft” Manhattan loft on the 2nd floor at 106 West 26 Street, a small late condominium conversion in what has become a valley of rental towers. I am not so thrilled that the loft is saddled with the vague label “expansive” (it ain’t gonna grow) but that is a typical and minor misdemeanor in Manhattan loft babbling. The “quintessential” claim is a higher grade misdemeanor to my snobbish eyes, as I see a tin ceiling, some exposed brick, and exposed pipes, which don’t seem sufficient to earn a quintessence, not with ceilings that are only 10 feet high, no architectural details of note, no interesting window frames, and new-ish flooring, but Your Mileage May Vary. To continue to damn the loft, the light out back is non-existent and the direct light in front will be limited from this second floor, though standing in the front east windows you may get an angled slot of light from the nearby 6th Avenue corridor. Factor in the coming gut renovation to a two bedroom loft, and your (the buyer’s) net investment jumps to around $1,200/ft, or almost $2.4mm.

count the ways a Manhattan loft can scream “gut me, please”

The babble notes, as stated, that the place is in “fair condition and livable” but few $2mm buyers are satisfied with merely livable space; instead, most buyers would accept the invitation presented by “endless opportunities to renovate and create your dream home”. The photos are few: two of the interior, one an angled view of  a kitchen of dubious quality suggesting an all-in-one trip to Home Depot 18 or more years ago, and none of the (only 1.5) bathrooms. The floor plan is presented with a proposed alternate (always a scream for gutting) that more rationally uses the space and what little light escapes into this second floor.

That front bedroom is recommended to disappear (a smart move that opens the brighter set of 3 windows to the public space); the two nubby appendages  on each long side in the middle of the loft are similarly targeted (another smart move that opens the middle of the public space to just a bit more light); the extravagant “storage room” was someone’s idea of how to use formerly cheap space that is much better used (as in the proposed alternate) for a dressing room and master bath for a proper master suite; and the silly set of closets along the long west (right) wall are proposed to be reallocated to a second full bath and home office, instead of presenting (as they do now) as closets that just kept getting added (these owners must have acquired a lot of ‘stuff’ over the years, resulting in  8 closets plus that extravagantly wasteful ‘storage room’ plus another “130-square-feet of [additional] storage space”).

Following the babble’s suggested dream home in the alternate floor plan is a gut job that would transform a 3-bedroom 1.5 bath light-challenged loft that is too narrow in the middle and not narrow enough toward the rear into a 2-bedroom 2.5 bath loft that maximizes the ability of light to flow from the south windows. As logically proposed, the present bath and a half  disappear, the kitchen stretches, 2.5 new baths appear in new locations, and the the additional conveniences include that home office and a washer-dryer. If the plumbing and electrical systems are up to modern standards (hardly a given), maybe you can build this out for $200/ft, but certainly not if you want central air (note the air conditioner in the front room visible in the exterior photo). As I said, probably a $1,200/ft buy+gut expense, all in.

Note that you get more photos in a 2010 rental listing for this loft than in the current sales listing, another fact that shows how modestly this sales campaign was conducted. In particular, rental listing photo #5 shows what I meant above about the kitchen reflecting “an all-in-one trip to Home Depot 18 or more years ago”.

fill in the blank: comping is ____

Forget trying to use same building sales to comp this market. The Past Activity tab on the StreetEasy building page shows exactly one other loft ever changing hands since the building was converted to condominium in 1996. That was the 3rd floor, which was sold in a “needs work” primitive form by the sponsor as the overall Manhattan residential real estate market was beginning to thaw in July 2009. That listing history is a little funky, and kinda sad, as the sponsor brought the 3rd floor to market too high (obviously, in retrospect) at $1.6mm 10 weeks before Lehman fell yet sold above the (reduced ask) at $1,501,918 a full year after coming to market. That unit is not even a simple direct comp, even adjusting for time, as it came with “200 sqft of private outdoor space” that must have been stuck on the (dark!) rear of the loft.

much diligence is due in a small Manhattan loft building still under sponsor control after all these years

The 2nd floor listing claims that this 5-story building has 5 units, which must include the ground floor commercial space (a dry cleaner these days). The only sales visible on StreetEasy are of this 2nd floor last month, the 3rd floor as another sponsor sale in 2009, and some kind of related party transaction of the 4th floor in what appears to be from the sponsor to the condo that may not coincidentally match the closing date of the 2nd floor last month. With so few units, any buyer is banking on the financial responsibility of other unit owners, which is a standard form of Small Building Risk. With the 4th floor now (and lately!) owned by the condo and no record of the 5th floor or commercial unit ever changing hands, it appears that the condo or the sponsor may still own the 60% or so common interest represented by these three units, with the civilian buyers from 2009 on the 3rd floor and now the 2nd floor owning about 40% between them. In other words, they remain junior partners of the sponsor and/or sponsor, and very limited partners at that.

This allocation of ownership is not a standard form of Small Building Risk.

But if anyone should be able to appreciate and asses this specific form of Small Building Risk, it is the 2nd floor buyer. Unless there are two guys with this non-Smith-or-Jones name, the buyer is not a civilian, but a very active Manhattan and Long Island City (at least) residential real estate agent who frequently represents condo developers. So you’d expect him to drive as hard a bargain as one can. Here are five digits that suggest that he did drive a hard bargain: 8 3 2 8 5, which is the unusually non-round number portion of the clearing price of $1,832,850. A number like that, for a listing like this, is more likely to be a sign that the negotiation got to a final stage of Split the Difference (avoiding the oh-so-typical purchase price ending in “$…,000) rather than signaling a bidding war.

Best of luck to that Real Estate Guy in his renovation. If anyone gets invited to the post-renovation house warming event in 6 or more months, please report in.