adding wall for 3rd bedroom did NOT increase value of 49 East 21 Street loft by 36%

nor did time, or dimmers

This is the kind of thing that drives Efficient Market fans to distraction and buyers to drink (or worse): the “1,461 sq ft” Manhattan loft #10C at 49 East 21 Street just sold at a funny number that indicates a bidding war ($2,510,049) well above the last “C” line public sale (#11C at $1.85 on May 6, 2011). Yes, the 2011 market was not as seller-centric as the current market, and yes, #10C has some improvements over its new-in-2005 condition (most visibly, a wall for a 3rd bedroom / home office), but … $1.85mm, then $2,510,049 27 months later. The wall, the track lighting, the dimmers, the custom closets, even the custom air conditioner covers shouldn’t have added $660,049 in value in that short a time … right??

The broker babbling for #11C two years ago was sadly vague, implying the space was in the same high quality condition as when the sponsor delivered it in 2005:

Mint condition, prewar condo loft, 1461SF, high floor 2br, 2bth, open chef’s kitchen, separate dining (conv 3br), w/d, 11′ ceilings, great light, 10 large windows, 2 exposures and nice open views.

It worked, as that seller got a deal $100,000 over the ask within a month.

The babbling for #11C was much more detailed and enthusiastic, suggesting that every single improvement has been listed:

sun-filled home … has already undergone a conversion to create a windowed 3rd Bedroom/Home Office. This living room has 4 west facing windows, which are exclusive to the 4 highest-floor C-line units in the building. … soaring 11’ ceilings…. mint condition, with beautiful African oak wide-plank floors, California kitchen with Bosch range & oven, all stainless appliances, granite counters, Bisazza tile backsplash, garbage disposal, soft closing drawers & superb storage space. … custom track lights in the living and dining rooms, and along the 12’ long gallery wall leading to the bedrooms. All lights are on dimmer switches. … Bosch washer & dryer …. closets are all custom built-out for optimal organization. … custom designed air-conditioner cover and builit-in bookcases in the Master bedroom ….

The respective listing photos show (to my eye) identical kitchens (same fixtures over the island!), a different stain on the floor, different window treatments, but I am not picking up any difference of significance beyond what has been babbled. You can see that the kitchen and baths in these two “C” lofts are standard issue by noting the similarity to the listing photos for the most recent sale in the building before #10C, for the “1,282 sq ft” #4D, which closed on February 26 at $1.775mm.

That’s a lot of bang for the relatively little bit of buck needed to pay the carpenter, electrician, and cabinet maker.

a record setting push

Here’s another way to put the #10C sale in an inefficient context. Loft #4D does not have the light and open exposures of the high-floor “C” lofts, but with similar utility as the larger “C” lofts (2 bedrooms, home office) it sold this year at $1,384/ft. A month before that, the “totally renovated” “1,308 sq ft” loft #3B sold (with “Handmade doors, built-in wood bookcases with antique brass accents…. Custom lighting”) sold for (only) $1.635mm, or $1,250/ft. Among high floor units that boast of light, the “1,375 sq ft” loft #9A sold 14 months ago at $1.985mm, or $1,444/ft. And, of course, #11C sold for $1.85mm in May 2011, or $1,266/ft.

One of these things is not like the others, boys and girls:

• $1,718/ft in August 2013
• $1,384/ft in February 2013
• $1,266/ft in May 2011
• $1,250/ft in January 2013

Do I have to point out that #10C at $1,718/ft is a building record on a dollar-per-foot basis and, apart from a commercial unit and a penthouse loft, a building record in absolute dollars? (Don’t make me do it.)

The Market clearly thinks that #10C, gussied up, is a superior loft to the others in the building. The degree is rather staggering. The better light is not worth $334/ft compared to #4D 6 months earlier; the lighting and carpentry are not worth $452/ft more than #11C, and the intervening 27 months did not drive the overall market up by 36%. Except that that is what happened.

caveat emptor, indeed

Regular readers will observe that this is three days in a row of posts about surprising changes in value following renovations. The scale of Bang For Buck seems higher with loft #10C than with the lofts I hit in my September 17, 56 Warren Street loft renovation added more value than it cost, or in my September 18, masterpiece designed since 2009, 60 West 15 Street loft doubles in value, if only because the changes in loft #10C are more modest than in those other two cases.

I have to imagine that any bank appraisals of these three improved lofts did not agree with The Market on the value added through renovation or upgrading.