NoLIta neighbor buys neighbor’s modest loft at 225 Lafayette Street at a modest price

yes, Virginia, we live in a Manhattan loft world in which $1,789/ft is modest

Last week we saw that a Tribeca penthouse loft owner with a lot of space was able to persuade his next-door penthouse loft neighbor who also had a lot of space, to sell so that the first guy could combine the lofts into a great deal of space (over 4,500 sq ft interior, a variety of private terraces outside); that was my December 6, 110 Duane Street penthouse loft owner loves it so much he bought another one. Among the interesting facets of that private deal was that pricing was relatively modest, i.e., there was no obvious extortion by the seller (who never announced publicly an interest in selling) of the unique buyer next door (who had the means to put together two lofts purchased for over $7mm). Today’s example of neighbor on neighbor action is similarly benign: the owner-since-2005 of the “936 sq ft” loft #4B at 225 Lafayette Street was persuaded to sell privately to the owner-since-2005 of the “1,168 sq ft” loft #4A for $1.675mm.

Among other things, that price is only a 24% premium over the price the recent seller paid to buy #4B in April 2005, it is a significant premium over the last closed sale in the building (#8C sold for $1,602/ft in May 2012),  and it is quite rationally related to the asking price of loft #9C, which was in contract off an asking price of $1,836/ft at the time that the fourth floor neighbors made their private deal (even if the fourth floor folks knew that #9C sold above ask at $1,873/ft, that can be rationalized with #4B at $1,789/ft, given the difference in floor height, and the “open views and amazing light” up there).

There’s a lot of data to unpack in those preceding introductory paragraphs….

what’s to be gained with another loft?

Whether it’s a growing family or growing financial resources and a desire to spread out a bit, buying the loft next door can address some obvious needs or desires. In this case, it may be the desire for a real second (or second and third) bedroom or it may simply be the desire to almost double your space without having to move. There’s no public listing from when the recent #4B buyers bought their base of #4A but we know the condition in which lofts here were sold by the sponsor, and we have in our listing system the #4A floor plan, which is not quite identical to that of the “1,281 sq ft” #8A, which was recently offered for rent.

If you look at the building photo in that #8A rental listing (listing pic #6) before looking at the #8A floor plan, you will note that the base of the building has columns that extend just above the height of the 4-story building to the right (south). Loft #4A is at the top of that base; its “1,168 sq ft” floor plan differs from the “1,281 sq ft” plan of #8A in two significant respects: the columns in the base cut into #4A from the middle of the living room / dining area into the master bedroom (hence, the difference in size); and the fourth floor does not have the two south windows seen in #8A in the living room and den (hence, #8A can be used as a true 2-bedroom, with that den having both the dimensions and window of a legal “bedroom”, except that those windows are lot-line windows so it is still labeled “den”).

The “A” line above the fourth floor thus has significant advantages over #4A: the two southern windows bring in light and (at least by the 8th floor) the “A” line looks across rooftops all the way across Lafayette Street and Cleveland Place (with the triangular Petrosino Square tapering off between them). The #4A floor plan has a dark south wall, so less light, and a den that is-a-den-is-a-den. A 1-bedroom loft, though “1,168 sq ft”. The “936 sq ft” #4B floor plan has the same cut-out for those base columns as that of #4A, with the bedrooms in the two lofts being side by side.

While it is a simple matter of combining the two units by breaking through the bedroom-to-bedroom wall, the integrated space will be better if the usage switches to using the old public space in each loft for sleeping, and the old master bedrooms as a combined living / dining area. Even a real estate agent can see how simple it would be to have 2 bedrooms on opposite ends plus den / guest room, with modest additional expense to turn the #4B kitchen into part of a master bath, and similarly modest expense to extend the #4A kitchen into the space that is now the half-bath in that unit. Professionally creative people may have more sophisticated ideas, but this is an easy combo, starting from a rectangle with a long wall of windows facing west and multiple plumbing risers on the interior (east) long wall. Not to be rude, but the two lofts separately are rather … cookie cutter; together they can shed that tawdry label.

at what cost?

Now that you know that these 4th floor lofts lack south windows that higher floors have and are slightly more narrow because of the base columns and do not clear the rooftops to the west, look again at the $1,789/ft paid for #4B compared to the larger “C” line sales (“1,498 sq ft” of true 2-bedroom + 2.5 baths): #8C in May 2012 at $2.4mm ($1,602/ft) and #9C a month ago at $2.806mm ($1,873/ft). The #4B seller charged only 4% less than the above-ask deal for #9C (before taking into account the fact that the #9C seller paid a sales fee; the #4A seller did not). So, a strong but not extortionate price. By which the #4A owner doubled his space by adding the unique loft next door.

Nicely played all around; nicely played.

a word about same-sale indices…

I mentioned in the intro that the #4B seller got out at only a 24% premium to her purchase price from April 2005. Fans of the StreetEasy Manhattan Condo Index will want to know (may already know!) that the Index was up (only) 21% in that period. Kinda sorta another indication (though just a ‘feel’) that the #4B seller reached a fair bargain with her next-door neighbor. But if you look at the full #4B history you see that the recent seller was not the original owner. Too bad for her, as she paid her $1.345mm in April 2005 to the buyer who paid only $911,333 to buy from the sponsor a mere 9 weeks before flipping to our recent seller.

I’ve mentioned before the difficulty of using sponsor sales as “market values”, even though they were between willing buyers and willing sellers, with neither party being under undue compulsion. The sales prices imply the market for this loft went from $911,333 in February 2005 to $1.345mm two months later. Of course, with new development sales there is often a time lag between contract and closings; in this case our listing data-base shows the original buyer went into contract to buy #4B in January 2004, 13 months before closing.

I’m not going to argue that the overall market was up 48% in those 13 months, but the data points indisputably show that the hyper-local market for this loft increased by that degree in that time. (Fans of the StreetEasy Index will want to know [may already know!] that the Index was up a dramatic 23% in that short period.)

What I am going to argue, or at least point out, is that if the recent seller had been the original buyer, we’d be looking at a same-loft sales pair that increased 84% from February 2005 to October 2013, compared to the StreetEasy Index at only 24%. You know this, but let’s repeat. Caution: same-loft paired sales that start with a new development purchase often do not reflect true market changes; those that are less dramatic than this (which is likely to be caught in StreetEasy’s algorithm as an outlier) may still give you an inaccurate ‘feel’ for The Market.