Manhattan lofts with outdoor space sometimes do weird things
The “1,280 sq ft” Manhattan loft #2W at 11 West 18 Street that just sold for the very crooked number of $2,101,111 was purchased by these recent sellers in October 2010. The four years were good to these folks, as their purchase price was a modest $1.225mm. This is a coop, so this pair of same-loft sales did not factor into the StreetEasy Manhattan Condo Index of repeat sales, which regular readers of Manhattan Loft Guy know that I treat as a single number proxy for trends in the overall Manhattan residential real estate market. That index in October 2010 was 188.28; now (or, in August, the most recent month with data) it is 235.92.
My calculator tells me that that’s an overall market gain of 25%, and that loft #2W appreciated by 71%. That makes me wonder. I wonder if (had it been a condo) StreetEasy’s ‘magical unicorn dust’ would have excluded this pair of data points as aberrant. I wonder how many bidders there were, to drive the September 11 resale above the ask of $1,999,999. I wonder whether any of those #2W bidders were among the disappointed folks who failed to buy the loft immediately upstairs (#3W sold for $1,627,500 on May 12, well above the ask of $1.475mm), which was a tough comp because it is slightly larger, lacks the terrace that #2W has, and was in “bring your vision” condition instead of the “fantastic” condition claimed for #2W.
There’s nothing like writing your own blog, as I get to think (and write) out loud about things that I wonder about. Much to chew on here, but I’ve tipped my hand in the sub-head. When all else fails in rationalizing a downtown Manhattan loft sale that includes outdoor space I tend to fall back on the buyer pool that has to have outdoor space may overpay for that unusual amenity. Let’s start chewing on the facts, before leaning into conclusions.
same loft, same condition, 47 months apart
The floor plan, the photos, and the details in the broker babble all suggest the loft was not improved by the 2010-buyers-turned-2014-sellers. Now:
ornate tin ceilings, a custom cherrywood-and-granite kitchen with appliances by SubZero, Viking and Wolf, exposed brick walls, central climate control and in-unit washer/dryer. … A long hallway… features an expansive wall of built-in closets, … renovated bathroom with two sinks and a large soaking tub. The master bedroom … [has] multiple walk-in closets and many additional storage areas.
mint condition …. original tin ceilings, exposed brick, custom Cherrywood work throughout, excellent storage and walk-in closets, washer/dryer and central AC. The custom wood-and-granite kitchen is equipped with SubZero refrigerator, Wolf oven, Viking convection cooktop and wine fridge. The bathroom offers double sink and a large soaking tub.
Maybe something changed on the first floor, leading to the skylight that used to sit in the terrace being covered over, increasing the usable outdoor space. This was the terrace in 2010:
The terrace now looks like this:
This issue aside, I have no reason to think there has been any change of economic significant to the space in between selling for $1.225mm and $2,101,111. (I can see that the recent sellers shortened the kitchen island considerably, but it was huge and is now perfectly conventional. I doubt that change has economic significance.)
No, the only internal change I see of economic consequence is the calendar.
one strong sale in the building can lead to another
When the recent sellers bought loft #2W there had been no sale in the building for several years at least, spanning the froth and the the peak. But when they sold, the folks upstairs had just sold #3W above ask, as noted above. Zillow might treat this pair as direct comps, but #3W is bigger (at “1,450 sq ft”, it is a full rectangle, lacking the cut-out that #2W has), was in worse condition (“[f]irst time on the market in over 20 years”), and lacked the terrace that distinguishes #2W. And loft #3W is one flight of stairs higher than #2W … the lack of an elevator being a fact curiously omitted from the recent #2W babble.
There are a great many adjustments to make between the two lofts, with #2W plus factors including condition, the lower floor, and the terrace, with the only adjustment in favor of #3W being interior size. So let’s just play with numbers here. Loft #3W, with all these deficits, got pushed to $1,122/ft. Guesstimate $200/ft as a low ball full renovation, and $50,000 as the deficit for the extra flight of stairs, and the implied interior valuation for #2W comes to $1,356/ft, or approximately $1.74mm. I don’t love this ballparked result, because it implies the “442 sq ft” terrace was then worth about $827/ft, or about 60% of the value of the interior, but I can live with it as a ballpark. (For more on that, see my riff on The Miller from May 6, 2010.)
All this fuzzy math aside, the key to applying the #3W sale to #2W is that #3W closed 12% above ask the day #2W came to market. Potential buyers for #2W were on notice that there was at least one person who bid for #3W still out there, who had already vetted the building and the micro-neighborhood, and who might well appreciate that #2W was already ‘done’, and had the terrace. The result was a second consecutive sale in the building above ask.
The #2W sellers should send a bottle of champagne to the #3W buyers for breaking a price ceiling and re-setting values in the hyper-local market at 11 West 18 Street.
bringing it all back to The Index, and the truisms that flow therefrom
As noted, #3W at $1,627,500 was the ice-breaker for #2W. The #3W seller coming out at $1.45mm started that ball rolling, which was an aggressive approach based on the last sale in the building. That sale was, of course, #2W in October 2010 at $1.225mm. If the #3W seller and agent used the #2W sale as a ballpark comp, then adjusted for condition, size, the lack of a terrace, and the calendar, I suspect they’d have come out at an even lower price than they did.
That math would have looked something like this: starting with the terrace adjustment, ball parked at 50% of the value of the interior feet, implies #2W was worth about $817/ft, then adjusting for time based on the StreetEasy Condo Index (up, to $1,021/ft), then adjusting for condition (down, say $200/ft, to $821/ft), yielding about $1.2mm, then adjusting for the extra flight of stairs (say, $50,000).
All this playing around would suggest a round number asking price of $1.15mm for #3W this year. Obviously way too low. Obviously, not the way the #3W seller and agent (or competing buyers) approached #3W.
This post is long enough (and I’ve gone from wondering to true head-scratching), so I won’t do what the interested parties must have done about #3W: looked at sales in 2014 of lofts of similar size nearby, but not in the building. Obviously, that analysis suggested a much higher value for #3W in 2014 than playing around with a hard-to-comp #2W sale, adjusted for time based on the StreetEasy Condo Index.
Did I mention (today) that comping is hard?