'tis a puzzlement / moving upstairs at 644 Broadway

comp analysis is screwed, perhaps
I have been going back over Manhattan loft closings to update my Master List of loft closings (I have only about 8 weeks of closings left to do … this is hard). [Click here for the Master List, a Google Docs spreadsheet; see my August 23, 2009 post, master list of Manhattan loft closings since November, for some limitations.] I keep finding weird things, but this one bears mention.

I noted two sales in the same loft building (644 Broadway) on the same day (September 30). They appear to have identical footprints (#3W and #4W) and traded at nearly identical prices ($3.4mm and $3.435mm). As I have lately been fixated on the comp-worthiness of data (Feb 9, the unique property next door at 114 East 13 Street, "sold" to a unique buyer, and Feb 7, measuring arm’s length / not a real "sale" at 125 East 12 Street, are the most recent; January 17, riddle me this / the naked data point at 35 Wooster Street, started me on this path a few weeks ago) I looked at the two deals to see what I could see.

Fog. I see fog.

two sales are usually better than one
Ordinarily I would see these two sales as strongly supporting each other as accurate indicators of true market value, even though one had a REBNY listing, one had no listing associated with it. But I discovered that the seller of #3W is the buyer of #4W (his counter-parties are artificial entities with different names). Why would someone move upstairs if the 4th floor loft was worth only $35,000 more (transaction costs aside, there was probably a hefty capital gains tax due and owing on the sale of #3W)?

As revealed by the listing description, #4W is a beauty: claimed to be "jaw dropping" and a "perfect balance" of old and new. They did have some trouble selling, though, with an unsuccessful campaign in 2005 ($3.55mm) , another in 2006 ($3.925mm), and yet another in 2008 ($4.75mm) before starting a successful effort in February 2009. They started at $3.95mm, then dropped to $3.75mm in April. Evidently, the downstairs neighbor in #3W was monitoring their progress (or lack thereof) with more than the usual interest of a downstairs neighbor.

patience on the 3rd floor
That downstairs neighbor signed a contract to buy #4W for $3.435mm by May 23. Since that neighbor never put #3W on the market through a REBNY firm, I have no idea when he decided to sell his loft and buy #4W. Both lofts closed on September 30, but it may be that the #4W sale had to wait for the #3W deal to be set up, or vice versa. Was the purchase of #4W somehow contingent on the sale of #3W? Or had the #3W owner previously resolved to sell (and maybe even found a committed buyer for #3W) before negotiating a deal with his trying-to-sell-since-2005 neighbor?

The long history of #4W establishes that no one else was willing to buy it for anything more than the #3W seller was willing to pay for #4W. But what does the pair of sales say about the two lofts?

What is so odd about these sales is that their prices imply that they are substantially similar, yet the #3W went to the trouble (and expense) of buying and selling. Whoever bought #3W for $3.4mm evidently decided not to buy #4W (which had been actively marketed) for a similar price. Perhaps #3W is as jaw dropping as #4W but in a different way (with a different floor plan??); if so, the #3W seller-#4W-buyer might have preferred what was different about #4W and was lucky enough to find someone who preferred #3W over #4W at essentially the same price.

I wish I knew.

one more (more) far-fetched possibility
There is one further possibility here, which seems unlikely but (if true) makes these deals even less useful as arm’s length comps. #4W was sold by one LLC and #3W was bought by a second LLC (at least, they have different names and different notice addresses). If the #3W owner is connected to both entities, then there may be something very complicated going on, irrespective of the actual market values of these two lofts. But this possibility seems very remote, as the #4W seller had been publicly trying to sell for a very long time.

Intriguing.

Net, net, going forward I will assume that the price of $3.435mm for a jaw dropping loft in this building was Fair Market Value  as of May 23, 2009, unless I learn something more. The fact that a loft in unknown condition sold for $35,000 less is a small enough difference that (1) it might be treated as a rounding error, (2) it might reflect a little bit of light/view preference for being one floor lower, or (3) it might simply be the result of two sets of hard-headed negotiations coming remarkably close to each other.

I wish I knew this story. (You may be be bored by now, but not me.)

© Sandy Mattingly 2010