31% gain in 20 months for small Soho artist’s loft with charm but no walls

if The Market doesn’t make mistakes, how to explain this Soho oddity?

It is a truism that the sales price of a publicly marketed Manhattan loft is The Market, assuming there is the classic willing buyer and willing seller, neither operating under compunction. Hence, the funky, lovely, weird Soho loft #3R at 140 Sullivan Street that sold a month ago for $2.1mm was, in fact, worth exactly $2.1mm. By that immutable law, the same loft, in (almost) exactly the same condition, was worth exactly $1.6mm when it sold in January last year. In that instance, the loft didn’t take very long to get to contract (7 weeks, and then again 2 weeks after the first one failed, if you can believe StreetEasy; our listing system doesn’t have either contract date), at a price slightly above ask. More recently, the loft might have failed to find a buyer in two months at the end of last year (asking $1.91mm then; again, the inter-firm data-base has gaps, alas) but sailed through The Market when offered on May 4 at $2.15mm, finding the contract by May 20 that closed October 6 at $2.1mm.

That increase (computed in the title) dwarfs the change in the overall Manhattan residential market over the same time frame. Obviously.

But here’s the support: the StreetEasy Price Index for all of Manhattan was up only 5% in those 20 months, now $990,805 (at the end of the Third Quarter of 2016), up from $944,086 in January 2015 (start here, and scroll down to the interactive chart, because StreetEasy is not making this stuff simple). (If you look only at Downtown Manhattan, the market gain was even less.)

the loft is definitely quirky

If the floor plan dimensions are accurate the main part of the loft is less than 600 sq ft, and the rest of the loft is smaller still (400 sq ft?).

two squares, one smaller than the other

Yes, “all dimensions are approximate”, but yes, the arithmetic sum is less than 1,000 sq ft. The loft could be used differently, with a true bedroom added to the layout. But the listing photo show that two owners in a row used the front area as an unenclosed sleep area rather than breaking up the larger square.

the most recent owner

the prior owner (still few books, different art + rug, same arrangement)

You do see one change by the most recent seller in these side-by-sides: a lighter finish on the floors. If you look at the other listing photos, you’ll also note that the loft was painted. No surprise, as the first sellers had an affection for words that most people don’t share. But there’s no indication in the photos, the floor plans, or the respective broker babble that there were any other changes to the loft from one seller to the next. Hence, my slight modifier in the opening paragraph that the loft sold both times “in (almost) exactly the same condition”. Again, check the listing photos and I think you’ll agree that even the window treatments are the same.

it takes only one buyer to break The Market

Fans of the efficient market theory hate data points like this pair of same-loft sales. Fans of the Manhattan loft market niche just shake their heads.

Here’s my theory, and I am sticking to it …. With more cookie-cutter ‘apartments’ (even spectacular apartments), a prior arm’s length sale has a greater impact than with lofts, especially with quirky lofts. While it is true that sellers often over-price their property in reliance on the aphorism “it only takes one” (buyer), sometimes that single buyer is out there, and highly motivated.

In the case of loft #3R, the recent buyer at $2.1mm must not have been looking at the end of 2014 when the loft was offered at $1.595mm (and sold at $1.6mm), and must not have been looking when (if??) the loft was offered at $1.91mm at the end of last year. Had he been out there at either of those prior time periods, he’d have saved himself a couple of hundred thousand dollars, or more.

The recent clearing price does not suggest a bidding war, more like an offer that the seller reacted to as though a preempt. I.e., there does not appear to have been a second bidder, meaning that the buyer went to $2.1mm by himself, suggested by the asking price and (possibly) seller resistance to a significant discount to ask.

Oh how I would like to have been a fly on that wall! We know the buyer was represented by a professional and experienced agent (see the deed record page) so it must be that the buyer knew of the January 2015 sale price. And it must be that the buyer knew that there were no overall market trends to support the increase of half a million bucks in that short time frame. No matter! He had the money, he wanted the loft, and he paid what it took. Manhattan Loft Gu might think that he “overpaid”, but if that is what he had to do to get the seller to agree, that’s The Market, dammit.

I have to wonder how surprised the seller was to get this deal ….