40 Mercer Street news: nothing says successful new development like a 7-figure gain since 2007

nothing to sneeze at here
It is impressive that the “1,745 sq ft” Manhattan loft #21 on the 5th floor at 40 Mercer Street just sold at a gain of $800,000 over the 2007 sponsor sale, of course. How much more impressed are you to learn that the “1,649 sq ft” loft #3A just sold at a $1mm gain over the sponsor sale, also in early 2007? Maybe I have not paid enough attention to new development loft condos circa 2007, but I can’t immediately think of another new set of Manhattan lofts that have done as well in the market as this Jean Nouvel project.

Here is the data, which is easier to track on the new Streeteasy once you know that loft #3A is condo unit #1:

a corner market premium
Though (slightly) smaller, loft #3A was valued more highly than loft #21 by both the sponsor and the resale market, though loft #21 is two floors higher and splits the two bedrooms (on a $/ft basis, 18% higher in the sponsor sale, 22% higher in the 2012 resale market). They obviously directly competed against each other in both marketing periods; anyone looking at one would have also looked at the other.

The principal relevant difference between the floor plans for #3A and #21 is likely to be that, while both have a long wall of north-facing windows, #3A also has a (short) wall of west windows; not having been in either space I cannot find any other difference in favor of the smaller loft that is likely to impact values to this degree.

economics & agents
The StreetEasy page for loft #3A (not linked to unit #1, by the way) shows that the unit was rented as of December 2009 from an asking rent of $20,000/mo, and that the (now newly re-sold) loft is again available for rent at $20,000/mo. The economics of that situation are obviously heavily tilted in favor of the original owner, who paid a million bucks less than the very recent buyer.

This sequence also suggests that the original owner lived in the unit for the first two years, as it did not hit at least the public rental market until October 2008 and was not rented until 14 months later.

Close fans of the Manhattan residential real estate market will recognize the name of the prime listing agent on loft #3A, and will see that the sales listing changed from PruDE to Town when he changed firms. Fans who are as nosy as I am will check the deed record, and have already noted that that lead agent was also the seller of loft #3A. I assume the buyers knew that the seller’s agent was the seller, though the broker babble does not say so.

That agent is famously successful as an agent, but look how well he did here as a seller. The Shark tells me that he took a mortgage for $2.36mm when he bought in 2007, so he put down (and paid in transfer taxes) about $650,000. Assuming he did not take a bath by moving elsewhere before he rented it, $20,000/mo should more than have covered his nut (mortgage payments plus common charges plus abated taxes). For that $650,000 down payment and the obligation to pay the mortgage and other monthlies, he pocketed walked away from the closing with $1.7mm (on which capital gains taxes are due, but still …).

Nicely played, sir; nicely played. Maybe he should quit his day job.

I had put this sale aside, to post about it only after I tracked down the rules about agents-as-principals, but I got lucky today. The email to REBNY members with the “Legal Line Question of the Week” arrived today with the answer. Outside counsel to REBNY’s residential real estate division write today:

Title 19 Sections 175.4, 175.5 and 175.6 of the NYCRR [the State’s rules and regulations, codified] do require a real estate broker to make disclosures to the other parties involved in a real estate transaction when the real estate broker has an ownership interest in the property involved in the transaction.

Those regulations do not specify when that disclosure is to be made, but counsel suggests it be made in writing when the NYS agency disclosure form is provided, and if that form is not required, at “first substantive contact”. Personally, I recall having often seen “broker/owner” at the end of broker babble on a sales listing, so I know that at least some agents do it that way. I assume this agent / seller did the right thing, but I think the better course is to put it in the listing description instead of (or in addition to?) relying on a separate written document to be provided.

© Sandy Mattingly 2012