when the market does not appreciate your renovation, appreciation is limited (43 West 21 Street loft edition)

numbers don’t lie, but they can obscure
If you look at only the October 5 sale of the “1,850 sq ft” Manhattan loft on the 3rd floor at 43 West 21 Street (at $2.04mm) and its most recent resale (July 24, 2009 at $1.5mm), you’d think the recent seller (a) did pretty well, and (b) must be pretty happy. But let me add some more letters, and you may change your mind: (c) it sold before that on August 11, 2005 for $1.775mm, (d) since the 2009 purchase the loft has been “recently designer renovated to create a residence full of understated elegance, detail and unique character”, and (e) the recent seller started trying to sell on July 19, 2010 at $2.7995mm. Now how well do you think the seller did, and how happy?

In simple terms, the loft sold last month at a 15% premium to its price in 2005. That result seems to be within an expected range of results, 2005 v. 2011, even though I have not (yet!) done a paired resale analysis for 2005 like the one I did for 2007 sales (September 27, is the Manhattan loft market back to (up to) 2007? 61 repeat sales say “probably”, “a bit”; Note to Self …). But there is that intervening sale, and the change in condition, so 15% understates what the appreciation should have been expected to be. But but the seller thought The Market would react well to an asking price a full seven figures above the 2005 sale price.

from architect’s dream to designer renovated
This is two owners in a row who were disappointed when they left. That 2005-buyer-turned-2009-seller simply missed The Market. Having paid that $1.775mm, he came out on October 25, 2008 — 5 weeks after the Lehman bankruptcy filing changed everything — at $1.95mm, held there through the calendar winter (well into the nuclear winter for the Manhattan residential real estate market), before dropping to $1.795mm on March 3, 2009. That seller needed another 16% discount to sign the contract by May 29 at $1.5mm that finally closed on July 24. O. U. C. H.

That version of the loft was finished, though perhaps not finished so well, as it was marketed as an opportunity:

rich interior space offers two large bedrooms, two full bathrooms, a utility room with a washer and dryer, and a beautiful kitchen with a Viking stove. In many ways, this in an architects dream as there is space enough to create your own office, media, and den areas in this already open and spacious dream apartment.

That is pretty restrained babble.

The 2009-buyer-turned-2011-seller wanted, as I mentioned, to have turned into a 2010 seller, but The Market did not cooperate:

This full campaign history omits two brief periods of hiatus, 22 days in total, but none of the pain:

This seller held for almost exactly a year before putting the loft on the market at 186% of the 2009 purchase price, with much of that year probably taken up with the dream of some designer.

This babble is not at all restrained (and I am cutting it liberally):

An Island of Sophistication in the Flatiron District … recently designer renovated to create a residence full of understated elegance, detail and unique character. …south facing large-scale bay windows with seating at sills atop custom cabinetry. The pre-wired, state-of-the-art audio visual system with prodigy control on wall and via remote with surround sound and speakers throughout … Sunlight streams through the five north-facing brand new Anderson windows in the master bedroom with Roman shades and shears for privacy and tranquil sleep. …luxurious walk-in closet hidden behind pocket doors …. The oversized master bathroom is your own spa with its unique spacious 6′ x 3′ shower with rain shower head and body sprays. Hansgrogh fixtures, double Wetstyle vanities, a Robern Uplift double vanity mirror with night light, internal convenience sockets and mirror defoggers will provide a remarkable bathroom experience. … Open chef’s kitchen with Viking stove and wine cooler is surrounded by a beautiful Caesar stone counter top and stainless steel appliances.

(Odd locution alert: unless I have an outdated babble handbook, this phrase is not standard, so was most likely lifted from the 2009 listing: “[t]his rich interior space”; and these two are just weird: “a remarkable bathroom experience” and “custom hanging and shelving by Elfa”.)

No restraint: I hate the floor plan for this listing, not for what the designer / architect did, but for making it so darn small in the listing. It is hard to tell how much the floor plan changed since 2009, even tugging it larger on an iPad. It is clear that the back wall was changed dramatically to create the new master bedroom, but if there are other ‘renovation’ changes, the rest is hard.

It is not hard to see that much of the skin changed. Start with the kitchen, which has the same basic configuration, but which is clearly a new kitchen. (Compare old pic #3 to new pic #6.) One sort of hopes that the “recent designer renovation” cost a great deal of money, given the premium that the 2009 buyer thought it justified in 2010.

But it did not work.

Fortunately, the seller had been a Buy Low buyer in 2009, if not a Sell High seller in 2011. Whether the seller even had a gain depends on what the “recent designer renovation” cost; she sold for $540,000 more than she paid (before transaction costs), so there is a gain if she spent less than $300/ft in that year after he bought it. Not much of a gain, but still …

is this post the opposite of yesterday’s?
Perhaps the 2009 buyer should have turned to that Henderson guy who worked the magic just 2 blocks from here that I hit yesterday (November 10, at 140 Fifth Avenue, “B” lofts go wild, designer effect boggles).

© Sandy Mattingly 2011