another neighbor extorted, as Queer Eye tires of “Soho”, leaves 505 Greenwich Street loft for Chelsea

there’s nothing like leverage
The Wall Street Journal has the story today about loft owners at 505 Greenwich Street who so wanted additional space that they hugely overpaid to help the semi-famous neighbor next door realize that it was time for him to move to “the next up-and-coming area”, Chelsea near the High Line.

When I hit on an O’Neill Building owner who so badly needed room to expand that she overpaid (by probably 16%) for her neighbor’s loft on November 1, no listing, but VERY motivated buyer for O’Neill loft at 655 Sixth Avenue greases a move to Tribeca, I wondered about relations between the (now former) neighbors:

I would like to think that [they] … were on friendly terms, friendly enough to withstand what might have been a difficult negotiation. Unless the expanding neighbor started the conversation with I need your space, so if you move I will make it very much worth your while, the #2G owner drove a hard bargain.

The 505 Greenwich Street sale was even more extreme: the neighbor paid 50% more than the last sale in the line (which was on a significantly lower floor, with no river views, but still …). Talk about the value of location, location, location!

it might not be arm’s length if you can bang on their wall
Sales between neighbors are tricky for Firms That Track The Market and The People Who Love Them. I can imagine neighbors who might attempt to find a market value if one leaves and the next door neighbor expands, especially when they are equally motivated (one to move, the other to expand). Whether they use a broker or not, such sales can reflect The Market. (They can also distort The Market, but let’s not get too theoretical here.) But a premium like the 16% paid at 655 Sixth Avenue and this not-50% premium paid at 505 Greenwich Street have to be taken out of any rigorous market analysis, especially one that aspires to granularity.

no matter how you comp it in the building…
Once more to Sesame Street! In this list of all sales at 505 Greenwich Street in the last six months, which of these things is not like the other? 

*Yes, #PHC looks like another sale that is out of whack, and is not so radically different from #14C on a price-per-foot basis. However, #PHC comes with a “581 sq ft” terrace. If we value that terrace space as 50% of the interior space value (i.e., applying the Miller Rules, as in my May 6, riffing with The Miller on the value of Manhattan terraces, decks + balconies) that value changes to $1,370/ft; easily the next highest value on the board but more reasonable.

The average price per foot value in the last six months at 505 Greenwich Street is $1,204, without considering #14C.

#14C sold to the neighbor next door at a 44% premium to the building six month average, and at a 26% premium over the next most highly valued unit (#PHC, as adjusted).

principles of prudence emerge (one has limited applicability)

1. if a price looks out of whack, there is usually a reason
2. non-arm’s length transactions should be ignored for purposes of comparative analysis
3. don’t play poker with a guy with a Queer Eye

tired of “Soho”? then move to Soho
You know I am curious about why people move from lofts. In this case, the guy

said he was tired of SoHo and was moving to an apartment in West Chelsea near the High Line. "I see it as the next up-and-coming area," he said, while declining to specify the price he paid.

Nothing against West Chelsea (to the contrary!), but unless the guy also moves his business (WSJ: he “runs an interior design company in SoHo”), it sounds more as though he is tired of living on the western-fringe-of-Soho-that-feels-little-like-Soho. Analogies are always limited, but living in “Soho” at Greenwich below Spring Street is like living in “Gramercy” on Third Avenue.

Best of luck to the guy in West Chelsea. He took his neighbor to the cleaners and then ran to the bank, as the loft he just sold for $1.7mm cost him on January 31, 2005 from the sponsor $1,201,535. The WSJ implies he has already applied his gain to a new place in West Chelsea. Alas, I can’t find that … he may have done that through an LLC (or maybe the deed has not yet been filed there; this sale was only last week).

h/t Curbed

© Sandy Mattingly 2010