unique loft at 236 West 26 Street bends the market by selling well above comps

the beauty that got away
The recent sale of the (not really) “1,288 sq ft” Manhattan loft #10SE at 236 West 26 Street in the Chelsea Capitol is both near and dear to my heart (and to one of my buyers) and a fascinating sale on several levels. You could frame it as the clash of the axioms. From one perspective, this highly specific, highly idiosyncratic space should have a more limited buyer pool because of the many choices made that take this out of generic loft category. From another, however, beauty is beauty, and finding The One Buyer who appreciates the beauty is all it takes to make a sale. Let’s look at the history, then the loft, then the back story I am aware of.

these dollars tell a story
The history requires putting together some stuff on StreetEasy that is not obviously related, but is all about the same loft:

As implied by the numbers, the loft that sold in 2009 changed significantly before selling this year. Back in the day it was a

[f]antastic opportunity to start from scratch and create your own live/work space …. Currently being used as an art studio. This loft space is in original condition

Now?

No detail left undone no corners cut. … Niles Entertainment System, built-in programmable Lutron shades, central air and heat, commercial grade appliances, On Demand Steibel hot water heater, and washer/dryer. The open kitchen boasts a Wolf oven/range, built-in steamer and microwave, Subzero commercial fridge, Miele silent dishwasher, and Italian black granite counters. The spa-like bathroom begins with a magnificent barn door from the Morgenthau Estate in upstate NY. A Samuel Heath custom shower system includes has an electric privacy glass that goes from clear to opaque at the touch of a switch. Ann Sacks marble with a ribbed black concrete wall complete this oasis. The refurbished original concrete floors add color and character as does the Ecosmart fireplace and the Thassos pure white marble in the dining room. The final detail is an 11’ Walnut pocket door salvaged from the iconic Woolworth Building which now iwelcomes you to the master suite. The only way to truly experience this exquisite home is to come see it for yourself, but be careful, you may not want to leave.

Regular readers of Manhattan Loft Guy know that I usually distill the broker babble to a Just The Facts, Ma’am presentation, but in this case I have left that last sentence in because I know it to be true. The pictures are wonderful, but the space in real life is better.

these numbers are puzzling
I greatly respect the decision to market this loft without saying how big it is (the PruDE listing is here), but everyone wants to know how big a loft is, at least to do a comp analysis. Our listing system says “1,288 sq ft”, so that is the number I use in the Master List of Manhattan Lofts Sold Since November 2008 and in this post (I believe our default source is an offering plan number, but I cannot say where this particular number came from; see UPDATE at bottom). When it was marketed in 2009, it was promoted as “1,300 sq ft”.

We all know that it is a truism that square feet can be hard to find, especially in coop lofts, but this loft is a special case. Take the room dimensions on the renovated floor plan and you get a rectangle with one corner missing that has maximum dimensions of 41 x 26 feet, if we are generous and add 3 feet to each dimension for the entry closet and for the space between the bedroom and office. That is a mere 1,066 sq ft before adjusting for the missing corner (200 sq ft??). (Compare the #3SE floor plan, with room dimensions that permit the rectangle to be calculated [1,557 sq ft] and the missing corner to be deducted [212 sq ft] to net “1,345 sq ft”. That one was marketed as “1,425 sq ft”, which makes only-in-Manhattan sense for a coop loft.)

In real life, loft #10SE is something less than 900 sq ft. Every one of those square feet is designed and used well, and the space feels larger because of the classic loft high ceilings and the long wall of windows, but it is what it is: a small loft.

At this scale, no surprise that it has only one bedroom, except that it could easily have two. Remember: the 2009-buyers-turned-renovators-and-2012-sellers started with raw space; they added the walls and fireplace to create a one-bedroom+office space that can only be upgraded to a 2-bedroom by degrading the wonderful renovation they did. The second photo shows the fireplace that would have to be moved one window panel west to make the 5’6” x 8’2” office a roughly 11 x 8 second bedroom. In addition to the expense of moving the fireplace, doing that would cost that lovely built-in that you can just barely see to the left in the second pic, and eliminate the dining area. So I can understand the choice to maximize the space for people who sleep in the same room.

That “office”, by the way, was not used as an office, which illustrates the limitation in the buyer pool posed by this design choice and hints at why these folks did not stay more than 3 years (less renovation time) to enjoy this wonderful loft: there was a crib in it when I saw it. You can raise a baby in a 5’6” x 8’2” with a door directly into the (master!) bedroom, but you probably won’t raise a child in that set-up.

beauty is in the eyes of this beholder
Did I mention that this is a wonderful loft? Putting aside the major issues with scale, the classic loft aesthetic updated with quality materials is a loft snob’s delight. (I am looking at you, Manhattan Loft Guy!) The concrete floors! Those windows!! And all the details that you (really!) do “have to see for yourself” to appreciate!!!

I will mention only one such detail. In the kitchen photo, the glass behind the counter with the knives and the vase is that “electric privacy glass that goes from clear to opaque at the touch of a switch”. From a functional perspective, it brings light into the bathroom, which seems like a relatively small thing. But it also strikes me as a pretty expensive choice to make (anyone know what these things cost?), indicating the kind of choices these folks were willing to make for dollars.

In total, they spent around a half million bucks on the renovation, according to the listing agent. Since the contractors would be working in real world square feet as opposed to coop square feet, that comes to about $500/ft. Sadly, they decided to move within 3 years of having paid $890,000 to buy the loft and another $500,000 to dress it to the nines; worse (for them), they did not (quite) get their money out by selling at $1.35mm, even before considering the sales fee and other expenses.

one buyer’s temptation
My buyer who looked at this loft was sorely tempted by it but could not justify the price it would take to own. He was so tempted that he saw it multiple times and engaged with me in a long dialogue and extensive comp analysis, even though it was not really what he was looking for in a loft (he generally was looking only at real 1,200+ sq ft spaces with 2 bedrooms and 2 baths).

How do you comp a unique loft? Our conversation kept coming back to the fact that there was nothing quite like this loft on the market, and would likely not be anything like it coming to market in any reasonable timeframe. Anything significantly enough bigger that was similarly well appointed would be offered at a significant premium, and the asking price for this one was already approaching his upper limit.

Building comps can’t justify that #10SE asking price.

Loft #901 was said to be “1,500 sq ft”, 2-bedroom+2-bath renovated with a cook’s kitchen when it sold to (next door?) neighbors on January 24, 2012 at $1.335mm, or $890/ft. I already mentioned the “1,425 sq ft” #3SE; that sold as raw space with a “huge” (373 sq ft) private deck for $1.2mm on May 11, 2011 (call it an adjusted $790/ft, ballparking the deck as worth 25% of the interior). The “1,250 sq ft” #3SW sold April 28, 2010 for $989,000, a mere $791/ft (that means I did a nice job ballparking #3SE!). And the “stunning” and huge (“3,850 sq ft”) loft #2E sold for $2.63mm on April 6, 2010, a paltry $683/ft.

That is all the sales in the building going back to the last time loft #10SE sold raw (June 2, 2009) except for loft #2W on March 15, 2012 at a very funky $1,211,933, a loft I have no idea the size or condition of.

Assume that #10SE deserves a comp premium because it is in far better condition than any of these (even the “stunning” one, for this exercise) and has far better light (of course that is true). The same-building comps are at $890/ft, $791/ft, $790/ft and $683/ft. If you take the “1,288 sq ft” from our listing system for #10SE as gospel (ahem), the last ask was $1,126/ft and the clearing price was $1,048/ft.

But in the real world, no one who has set foot in #10SE would think it was even 1,000 sq ft, so would think the ask was at least $1,450/ft and the sale at least $1,350/ft.

is paying above comps over paying?
For a buyer who relies on a professional evaluation of The Market (i.e., my guy with Manhattan Loft Guy comps), the rational conclusion is that the numbers cannot be justified, but this does not necessarily mean that the loft is not worth it. Hence, the oh so sore temptation.

In looking back at our dialogue, I see the buyer acknowledging that there is nothing like it on the market in his price range, and nothing in his price range that excites him as much as this did. I see my working through the actual closed sale comps, my fact-based conclusion that the comps do not support the asking price neighborhood, our recognition that the sellers would have trouble deciding to sell at much less than their $1.4mm investment, and my prediction that (all the facts aside) someone would “overpay” by going beyond the facts. Whether that would be him or not, was up to him.

In the end, he decided this loft was not worth to him much more than $1.2mm. The buyers who just paid $1.35mm were faced with sellers who (apparently) were tough negotiators. If they could have gotten a better deal, they would have. If they could have gotten more value by buying something else for $1.35mm, they would have.

My opinion that they overpaid is based on the sales prices of other lofts; it is not a judgment about their allocation of their own resources. They just bought a spectacular loft at a price that makes sense for them. I hope they are very happy in it.

[UPDATE 8.29.12: on further consideration, I have deleted the sq ft field for this sale on the Master List. That "1,288 sq ft" in our system is so far from what the space really is (probably less than 900 sq ft) that I won’t use any figure without having a source; I would hate to see someone down the line use "1,288 sq ft" for a comp analysis because they found it on a Manhattan Loft Guy spredsheet. Obviously, I know that coop lofts are often marketed with inflated sizes, but this difference is too dramatic for me.

Net-net, this loft closed at something like $1,500/ft, in a building in which $1,000/ft would be noteworthy. Did I metion that I love this loft, but am conflcited about the pricing?]

© Sandy Mattingly 2012