why did Carl Fischer loft re-sell at 62 Cooper Square for +21% over 2008?

do my questions suggest I am getting dumber?
I can’t say that I really enjoy taking note of things that happen in the Manhattan real estate market that I don’t understand, but they do interest me. I hit one such interesting (weird) thing yesterday, wondering, first, how a guitar player got a designer to over-pay for a loft by changing its skin, and second, whether that guitar player over-paid in the not-very-long-ago first place. That was my April 5, 79 East 2 Street lost sells +57% in 19 months with same floor plan, different skin, of course.

I had already put aside the sale of the Manhattan loft #9C at 62 Cooper Square (Carl Fischer Building) as worthy a post sometime soon, when I went back to that sale today to add it to the list of data points in an update of yesterday’s post. My primary interest in the Carl Fischer loft is that it sold on March 10 at a premium of 21.3% over its prior sale on September 16, 2008 (the day after Lehman filed for bankruptcy, and just 2 quarters past The Peak). It is also the 4th highest dollar-per-foot recorded for a downtown loft so far in 2011 (as suggested in yestereday’s post), just beating out the Coldplay guy’s loft that sold to a hotshot designer.

It turns out that there is one simple, if partial, explanation for a significant Peak-to-now gain, taken directly from the broker babble:

It was recently renovated and is finished with mahogany wood wall panels, kitchen cabinetry and storage. It has a custom Gourmet kitchen, beautifully finished master bath and powder room.

from white box to renovated, 2008 to 2011, at +21%
When this “1,452 sq ft” loft sold when Lehman fell in 2008, it had been doing something unusual: (in retrospect) flying against the strongest and deepest residential real estate market Manhattan had ever seen. It came to market at $2.6mm in April 2007, dropped twice (ending at $2.2mm), and went into contract on April 28, 2008 at $1.9mm.

Look at that again: it came out in 2007 (a year in which 35% more coops and condos were sold in Manhattan than any other year, before or since) but was well over-priced; it took two price drops totalling 15% and then a negotiated discount of another 14% to get that contract within weeks of The Peak for closings. (For some reason, it took 5 months to close, but with an April 2008 contract, it was really, really, really close to The Peak.)

That Peak price of $1,308/ft for #9C is hard to assess within the Carl Fischer building because there were no other sales in this small (26-unit) building between the “3,073 sq ft” #6B on March 30, 2007 at $4.6mm ($1,496/ft) and the October 7, 2009 sale of “2,548 sq ft” #5A at $3.125mm ($1,226/ft). Both of those lofts were in prime shape, with renovations of the no-detail-overlooked+high-end-finishes variety, but to me $1,308/ft for #9C without any interior walls seems like a pretty strong price, even at Peak.

either that was some renovation, or …
From that Peak sale of $1.9mm the recent renovation generated a sale of $2.305mm. Comparing then-and-now pictures of the two listings, it appears that a hardwood floor replaced that shiny (stone?) flooring, the old kitchen and bath wall became 2 larger baths along the wall with the kitchen extending from them into the space, and then the place was otherwise simply built out. Not built out simply, as the build-out looks quite luxurious, but the rest of the renovation was adding lighting and custom storage and the like.

Might it have been a $400,000 renovation (at $275/ft)? Maybe, but that would take the cost+renovation just up to the current value, without adjustment for different market conditions, Peak and now. If the 2008 buyer-turned-renovator added $400,000 in 2008 value by renovating, that value should still be subject to some adjustment for Peak-then to off-now.

If the renovation both cost and was worth a whole lot more than $400,000, the gap between 2008 purchase price of $1.9mm and 2011 purchase price of $2.305mm begins to narrow. But only begins to narrow. If a relatively extravagant renovation budget of $600,000 ($413/ft) was both used and justified, that would imply a fall-from-peak only under 10%. If The Market is efficient, or rational.

This dithering with numbers is a long (inelegant) way of saying I have a great deal of trouble accounting for the recent sale price of $2.305mm. Perhaps the renovation was a true game-changer, one that added enough value to change the category for relevant comps. But it is still a 1-bedroom layout; at “1,452 sq ft” a large 1-bedroom, but still just a 1-bedroom.

confusion reigns in my brains, again
For the second day in a row, I cannot account for the clearing price of this loft. At $1,587/ft, it dwarfs the 2008 sale (if 21.3% does not feel like a dwarf to you, remember that the first leg was put down at The Peak). At $1,587/ft in 2011, it beats even the $1,496/ft of #6B a year before The Peak (in March 2007), with its museum-featured, “flawless”, “perfect marriage of urban cool and industrial chic” renovation.

The more I know about recent Manhattan loft sales, the more questions I have. Sigh.

© Sandy Mattingly 2011


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