2011 new development loft, nicely flipped at 23% at 16 West 21 Street

take the money and run
One never knows what condo investors plans are, as some people who intend a quick flip end up being constrained by market forces working against them and others who plan on a longer term take opportunistic gains. Planned or not, the investor LLC that purchased the “1,368 sq ft” Manhattan loft #4A at 16 West 21 Street in the 2011 new development saw an opportunity, and ran with it. Having paid $1.52mm on March 2, 2011, the LLC put it on the market on February 1 at $1.79mm, seeking a healthy gain and capital gains treatment. The Market viewed that ask as a bargain, as it went into contract on February 28 (per our listing system; StreetEasy says March 1) and closed on April 20 at $1.875mm, a 5% premium to the ask and a 23% premium to the purchase price less than 14 months earlier. I will play with those numbers below, after touring the loft and bashing some babble.

classic form, new building
The loft is a full-floor floor-through, with a typical Long-and-Narrow floor plan: 2 bedrooms split the back wall, one long wall has the guest bathroom and the public stair and the other the master bath, elevator and kitchen; the windows are only on the narrow walls.

There are no room dimensions, but Property Shark has the building dimensions as 25 x 60 feet, yielding a outer wall footprint of 1,500 sq ft; taking the common stairwell and elevator out probably gets you to the “1,368 sq ft” quoted in the Offering Plan, but remember that that number includes the interior of the outside walls; if the masonry is one foot thick all around, 170 of the “1,368 sq ft” are within the walls.

No slur intended, but there is not much else to do with a Long-and-Narrow footprint of this size with no side windows. The juice for this still-nearly-new development is in the finishes. The current broker babble is actually rather restrained, while hitting the high notes that this is high quality:

open kitchen is ultra sleek and modern featuring a suite of Miele appliances, Sub-Zero refrigerator, and expansive stainless steel countertops. Both bathrooms have heated floors, deep soaking tubs, and fogless mirrors. En Suite master bath also has a steam shower and heated towel bar for added luxury. … house amenities such as keyless entry, doorman 9am-9pm services, keyed elevator, spa & fitness center with steam & sauna rooms, refrigerated storage, package room, and a common roof deck.

That may not read as restrained to you, but contrast that with the word salad in the sponsor’s marketing prose:

a modern landmark building with an exquisite custom glass facade that frames the warmth of the light and vibrancy of the life within. Zac Posen, design wunderkind has crafted the building’s interiors by coupling an artisanal philosophy with the most progressive vision, each of the unique residences and every inch of every common area balances the human and the modern, the handmade and the technological, so that your life here will be uniquely more satisfying, more personal and more creative. The living rooms at 16W21 spanning approximately 23 by 14 feet, boast generous proportions that privately accommodate the most alluring cocktail parties imaginable. With a suite of Miele appliances, sub-Zero refrigerator, expansive stainless steel countertops and bespoke color options, the custom designed kitchen at 16W21 is the perfect canvas for your culinary creativity. So while each full-floor residence offers house amenities such as keyless entry, doorman services, keyed elevator, spa & fitness center, refrigerated storage, package room, and a common roof deck, equal measures were paid to making an environmentally friendly building that is targeted for LEED Silver Certification

I would normally use many ellipsis (ellipses?) for such a big block quote, but I did not want anyone suspecting that I selected only hyperbole and thesaurus thumping. That thing is all hyperbole and thesaurus thumping: “every inch of every common area balances the human and the modern”; “your life here will be uniquely more satisfying, more personal and more creative”; “proportions that privately accommodate the most alluring cocktail parties imaginable”; “bespoke color options”.

In comparison, calling a kitchen “ultra sleek and modern” and countertops “expansive” is restrained.

Can photos evidence hyperbole? If so, the recent listing pix for loft #4A do. I don’t know that the technical term is for the distortion effects in those first two photos is, but I would call it a fun-house mirror effect. Contrast the shape of the black leather recliner in the first photo (short, 2-person wide) with the same piece of furniture in the second photo (really loooong); or compare the widths of the front room windows to each other in each photo, and then between those first two photos, and then note that on the floor plan they are (surprise!) identical in width. Perhaps I look at too many listing photos, but I find these distortions to be jarring.

back to the investor math
Perhaps StreetEasy missed it, or perhaps the LLC leveraged some of the $1.52mm March 2011 purchase price without encumbering the condo, but there is no record of the LLC putting a mortgage on loft #4A. No leverage seems odd for an investor, particularly for a short term investor.

On the expense side, we have the purchase price (which includes any transfer taxes, if the purchaser paid them), no apparent mortgage, the common charges and (abated) real estate taxes for 14 months, and the sales fee on the way out, omitting miscellaneous other expenses, so the red numbers look like this:

$1,520,000
$22,498 (14 x $1,434 + $173)
$112,500 (6% of $1.875mm)
$1,654,998

On the positive side of the ledger, the big number is the sales price of $1,875,000, but a critical and missing data point is the rent paid by that “tenant in place until 4/5/12 providing a great rental income”. For ballpark purposes, let’s assume that the rent paid for #4A is similar to the rent paid for #5A, which was rented as of may 1, 2011 off an asking rent of $7,800/mo, but let’s discount from the ask to $7,500/mo. Assuming that the #4A tenant was in place for 12 months only, the black numbers look like this (more or less):

$1,875,000
$90,000 (12 months at $7,500)
$1,965,000

Combining the different color numbers bring us to a ballpark result:

$1,654,998
$1,965,000
$310,002

That’s a 20% gain in 14 months, assuming no leverage. With leverage, of course, the expenses go way up, but the red number will go down even more dramatically due to the reduced purchase cash.

Net-net, whether in a ball park or in real life, these numbers are likely close enough to the real numbers to safely conclude this was a very successful flip. What does the LLC do for an encore?

© Sandy Mattingly 2012