unsold in 2010, Steiner Building penthouse loft sells 17% off 2007

The Market is uneven. Always.
How many times have you heard me say, more or less, data points are data points, whereas The Market is The Market? Today’s context for such metaphysical musing is the duplexed “2,654 sq ft” Manhattan loft #PH-A at 257 West 17 Street (Steiner Building), which sold on February 1 at $3.8mm despite not having sold in 2010 at prices ranging from $3.95mm to $3.695mm. Of course, the overall Manhattan residential real estate market in 2010 was broadly similar to the market in 2011. Of course, an efficient market theorist would predict (hope?) that a loft that recently sold for $3.8mm would have sold in 2010 if offered at $3.95mm, and should be embarrassed (if not scandalized!) if that loft did not sell in 2010 while asking $3.695mm.

Bummer, dude….

2007 comes knocking (hard)
As if that efficiency indignity were not enough, did your eyes bug at the price at which the recent seller got into the loft? Having paid $4.575mm on January 11, 2007, it took this LLC 5 years to lose a cool $775,000. (17% if you don’t find your handy calculator app open.) I am not going to say that such things never happen, but the lesson from the spreadsheet associated with my September 27, is the Manhattan loft market back to (up to) 2007? 61 repeat sales say “probably”, “a bit”, is that this big a hit from 2007 to 2011 was unusual: of 79 downtown Manhattan lofts that sold in both 2007 and in 2011, only 6 had losses that rounded to 15% or more and that 3 of those were 2007 new development purchases.

Efficient market fans will not feel as badly about all this as the 2007-buyer-turned-2012-seller, of course. But what is interesting to me is that the seller knew this was going to happen: the highest asking price in 2010 was $3.95mm and in 2011 $3.849mm. That takes a certain grace.

can a circular stair be spectacular?
The loft has a terrific floor plan, with High Line exposures from the nearly square living room and kitchen, and a long run of south windows in the living room and both main floor bedrooms. Up the “spectacular” stairs is the 3rd bedroom (and half-bath and an office) with access to the “600 sq ft” private roof deck. I bet that people who do not need 3 bedrooms would make that upstairs room an entertainment space; indeed, some people who need 3 bedrooms might steal space downstairs for that, and still have entertaining space at the level of the roof deck.

I will concede that the circular stair looks nice in the photos, with a (relatively) wide radius, stone steps, and graceful proportions. You may have a different view, but I don’t love circular stairs; they are always a compromise where cramped space prevents a straight stair or a boxed landing. (Note how this stair sits between 2 windows, just off the kitchen island.) The floor plan shows a door to the upstairs bedroom that probably made getting a bed up there easier, but imagine how awkward it is to carry anything larger than a tray with drinks up that stair.

to riff, perchance to dream
That winding stair is (obviously) the route to the plus factor for the loft, that roof deck. So I would expect a lot of people go up and down, holding onto the center post with one hand and carrying a drink in the other, to or from the deck. The pix show a pretty spectacular deck, with planters, some kind of standing water, and a wall with some character. At “600 sq ft” (less than 25% of the interior size), with direct access from the loft, and the wide open views from the deck, I would start from the assumption that this outside space is worth at the high end of the typical valuation for outside space.

In other words, let’s riff!

Under The Miller’s oft-used rubrics, the relative size, utility, privacy, and open views should push this deck to the upper range of the standard 25% – 50% of the interior value on a $/ft basis. Working backwards, the $3.8mm demonstrated value for “2,600 sq ft” interior plus “600 sq ft” exterior would imply an adjusted $1,310/ft (2,600 + 600 / 2 = 2900; $3.8mm / 2,900 = $1,310/ft). Working backwards is, of course, cheating.

To work prospectively, we would start with determining a value for the interior space of #PH-A based on past building sales, then ballpark the deck’s value as a percentage of that interior space value.

We have to go back to the “2,342 sq ft” #4C at $1,196/ft in April 2011 for the last sale in the building. While it is awkward in this case to simply assume that the April 2011 market was similar to the February 2012 market (remember: #PH-A did not sell at its later value in 2010), we are talking ballpark valuations so i am sticking with that ballpark assumption. That $1,196/ft interior value should be adjusted upward for condition (#4C was not as brag-worthy as #PH-A) and for the better views (High Line!) and light from the top of the 10-story building compared to 60+ feet lower.

If you add a small premium of 5% for each of those elements in favor of #PH-A over #4C at $1,196/ft you get $1,316/ft as the interior value for #PH-A with “2,600 sq ft”. (I am starting to get goose bumps; are you?) If you then say (working forwards, mind you) that the exterior space is worth the upper end of the normal Miller range because of its utility and scale, you project the adjusted value of loft #PH-A at $3,816,400 (2,600 sq ft x $1,316/ft plus 50% of 600 sq ft x $1,316/ft).

Voila!

Only a cranky person would quibble that this implied (prospective) value for #PH-A based on the #4C sale and a 50% valuation for the deck comes out $16,400 too high. Don’t go there … that is less than one-half of one percent. Literally a rounding error.

I wouldn’t call you cranky if you comped the interior space differently than my +5% for condition and +5% for light and views, but you would probably still end up in the range of rounding errors or market noise after a principled comp analysis from #4C in April 2011 to #PH-A 4 weeks ago.

I hope that was as much fun for you as it was for me. It is nice when a theory works!

© Sandy Mattingly 2012