transformed 7 Bond Street loft sells 8% above 2007

“Words cannot fully describe the beauty …” beats “beautifully renovated” by how much?
Inquiring minds want to know the details of the work that was done to the “1,200 sq ft” Manhattan loft #4A at 7 Bond Street before it was sold 3 weeks ago at $1.55mm, because without that knowledge it is hard to assess whether any part of the $119,000 gain since it was bought 54 months earlier was due to an improved market, and how much to an improved loft.

The StreetEasy record on the prior sale is frustratingly spare, with no interior pics and no floor plan. But the PruDE archive contains photos that support the prose, which is also spare (especially excerpted!):

Beautifully renovated …. Sunblasted Southern exposures with open downtown views through enormous windows. 13′ high ceilings, exposed brick, fabulous master bath, excellent closet space. Currently … an open loft space but easily convertible to 1 or 2 bedrooms

Those photos are the key to understanding the scale of change from that beautiful renovation to this:

absolute gem …. open floor plan that is great for entertaining, high ceilings, custom lighting, exquisite wood flooring throughout, large windows create plenty of natural sunlight in the grand living room …. Master bedroom complete with a closet of your dreams, custom kitchen with Diva induction drop in stove in large granite island with seating area. 1.5 elegant impeccable modern bathrooms

In terms of utility, the only change from 2007 to 2011 was the creation of the “Master bedroom” (no window, and kinda small, but it leads to a huge closet and en suite bath). Same number of bathrooms (1.5), with the same great bones and views.

But the photos!

I will grant that it might look better in person, as the current broker babble claims, but it looks awfully swell in these photos. Entirely redone baths and kitchen, and it looks like the kitchen moved south to fit that master bedroom and closet behind. The new floor is probably the simplest change, but what a difference it makes in the look (and feel!).

big bang, but what sized buck?
The space is only “1,200 sq ft” and the difference in market value from June 6, 2007 to December 16, 2011 is that $119,000, or essentially $100/ft. Can you put down new floors at that scale, replace 1.5 baths with lovely materials, and move and replace a kitchen for less than $119,000?

On the one hand, I’d like to think so. On the other hand, I tend to doubt it, and fear that the 2007-buyers-turned-2011-sellers did not get in resale all the money they put into it. (I also fear that the bifurcated and business-like notice addresses on the deed record imply a change in status beyond a change in home, but that’s just Manhattan Loft Guy being nosy.)

I am on record as believing that the downtown loft market in Manhattan was essentially flat for 2007 and 2011 paired resales, so you should not be surprised by seeing another pair at more or less the same value. (The spreadsheet referred to in my September 27, is the Manhattan loft market back to (up to) 2007? 61 repeat sales say “probably”, “a bit”, now has 77 such pairs.) With that lovely and brand new kitchen and baths, I suspect their adjusted basis exceeds their resale price, such that the loft in 2007 condition would have sold 2% or 3% below what they paid; again, essentially flat in market terms from 2007.

The Market loved their loft in 2011: first offered for sale on August 13 at $1.65mm, they were in contract by September 21 at a round number discount to $1.55mm.

Recall that when they bought the loft it did not necessarily need a renovation; it was already “beautifully renovated” with a “fabulous” master bath and “excellent” closet space. They had to fight to get the loft then: the ask was $1.35mm in those frothy days (February 2, 2007, to be precise) and they closed on June 6 that year at $1.431mm, a 7% premium that confirms there were other bidders.

They could have done a simpler upgrade to add a bedroom for privacy, without having to move the kitchen. But I must confess a personal preference for the loft in its 2011 “absolute gem” condition over the 2007 vintage “beautifully renovated” version. I just don’t think The Market rewarded them (sufficiently) for their taste.

not buying into the combination premium
These folks bought loft #4A in 2007 from a guy who also owned the “1,400 sq ft” #4B next door. He also offered #4B for sale on February 22, 2007 and also sold it that June after a bidding war (asking $1.75mm, #4B sold on June 13 at $1,8mm). Loft #4B was described in 2007 in exactly the same terms as #4A, with the pictures (again only on PruDE) again supporting the claim that it was a “beautifully renovated” open loft.

The prior history showed that he owned #4B since 1997 (having paid $430,000) then, but #4A only since 2002 (at $795,000). I would assume that he bought next door with the idea of eventually combining the two lofts, but he never did. Our data-base shows that he rented out that new loft (#4A) by the end of 2002 and that he rented out #4B by the end of 1997. Perhaps he never lived in either one!

I take this digression to touch again on a bit of Manhattan residential real estate conventional wisdom, one that I have riffed off of VToy of the New York Times and bantered with The Miller about: that there is a premium on potential combinations of living spaces, especially for easily combined spaces. I said in my September 10, deconstructing NY Times article about combining apartments to increase value, that I believe that the CW is generally true, but that it can be frustratingly difficult to find in the real world of closed sales.

The Miller would remind me that one data point does not make The Market, so I offer this as just one data point: The Market refused to pay a combination premium for #4A and for #4B in 2007. The owner of these two lofts in 2007 offered them for sale individually (to great effect) or as a combination, asking from February 22, 2007 the sum of the individual asking prices, $3.1mm.

In this case, at least, the seller found a better response from The Market for a loft of “1,200 sq ft” and another loft of “1,400 sq ft” rather than as a single loft of “2,600 sq ft”. Even though the lofts could not be easier to combine (they are side by side, seemingly separated by sheet rock, not brick) and the combination would solve the major floor plan drawback for each loft individually: the combo would permit true windowed bedrooms while still permitting multiple windows for the public space.

a fair test of 1+1=2.5 math, or not?
The guy discovered he was better off selling the pieces seperately in 2007 than as a whole. Perhaps his mistake was in not going all in by offering them only as a combination (as hinted at by one of the agents in the New York Times piece I played with on September 10), but that is what he did. He looked for a combination premium, but did not find that The Market offered one.

This 2007 experience at 7 Bond Street is just like the 2011 experience at 30 West 15 Street that I hit in my November 14, did 30 West 15 Street lofts sell at premium due to combination potential?: a seller of 2 to-be-combined Manhattan lofts that offered them as individuals or as a combination.

Fans of VToy and The Miller will want to read that November 14 post in its entirety for details, but my (extended) key take-away (for this purpose) was this boffo close:

a strategy that showed doubt about the theory

These lofts at 30 West 15 Street might not be the ideal test case for the 1+1=2.5 theory because the sellers were not all-in on that theory. Each loft was offered as a stand-alone property, in the case of #3N for almost 4 weeks before contract, while #3S was available to a stand-alone purchaser for 9 weeks before contract. The eventual combo buyer had at least some weeks to see that the individual loft buyers had not (yet) snapped up either loft.

Separate marketing as separate lofts might have depressed the combination premium by making explicit the single-unit market values (lower, in theory). From one of VToy’s sources:

the “ideal way” to market a combination was at a single price. Listing one of the units individually “waters down” the power of the combination… and makes it harder to get as much of a premium, because buyers can see the fair market value of one unit and then “look at the two pieces and argue that they don’t add up to the number you’re asking.”

Perhaps that is what happened here, and that this form of either-or-both marketing is simply not a good test of 1+1=2.5 math. But it should be at least telling (and disappointing for 1+1=2.5 fans) that the professional agents who marketed these two lofts did not persuade the two sets of owners that they could both be as much as 20% better off if they marketed jointly only as a combination, with the theoretical premium baked in to the asking price.

If the theory works, you’d think that the sellers might try that exclusively combo marketing at first, with a back-up plan to split up into separate marketing plans if Plan A did not work. But maybe in the real world getting separate owners (and agents!) on the same page is akin to herding cats.

Those cats could not be herded at 7 Bond Street in 2007 either, even though the herding then was much easier (a single seller using the same agent). I will keep my eyes peeled in the meantime for a successful herding experience. Dedicated readers can always help, of course.

one more digression before I go
Sometimes I can’t help myself …. The timing may be a coincidence, or the 2007 seller of #4A and #4B at 7 Bond Street might really have occupied one (or both?) of those units. He bought this “2,196 sq ft” penthouse loft (with “1,521 sq ft” of private roof deck) at the then new development 233 East 17 Street a few days after selling on Bond Street. A very different space in a very different neighborhood, but there are very many things to like about that loft. He sold that one, too, over a year ago. His trail is cold, so this is only a short digression.

© Sandy Mattingly 2012