MercerGreene loft at 92 Greene Street sells for 4th time since 2007 (trend line is UP, if oddly disappointing)

a series of loft owners in Soho, some happier than others

I will post some thoughts on the major firm Manhattan residential sales market for the First Quarter of 2014, but for now let’s look at the repeat sales of the “2,180 sq ft” Manhattan loft #2B at 92 Greene Street (Mercer Greene) for some time-lapse photography. (Not-much-of-a-spoiler alert about #2B and The Market: values are going up, dramatically, especially if you take the long view.) Yes, this loft just sold up from its prior sale way back in 2010, but the pattern of sales is long, and interesting:

Happiest, so far, is the second set of owners. They had the biggest gain (by dollars or percentage) after holding for the shortest time. They also showed the most fortitude, by buying into a market that was convincingly in a thaw only in retrospect. See what that got them!

The most relieved might be the first owner, despite the fact that he sold for $7,403 (yes, that’s 4-figures, not a typo) more than he paid and had to pay a sales fee and transfer taxes in the mid-$200,000s. Evidently, he had to sell, coming out to market in March 2009 (brrr … chill … Nuclear Winter!) at $3.595mm, a price that would not even have gotten him even on a net basis.

not as happy as they wanted to be, alas

The folks who just sold were the ones who bought from that gutsy (and happy!) guy four years ago. It is hard to feel badly for folks who sold into a market that was $600,000 higher than the market they bought into, but … $600,000 doesn’t buy as much happiness as it used to. And they certainly wanted to be happier:

Even after one price drop they were looking for a seven figure appreciation, or 25% for their four years of ownership. What they got was that $600,000, or 14%. The only people who would not be happy with that would be folks who expected more because the overall Manhattan residential real estate sales market enjoyed much better apprecaition than that gain over those four years. Measured by the StreetEasy Manhattan Condo Index, the overall market index value in March 2010 (when they bought) was 1,840 and 2,331 (gulp!) in February 2014 (the last month available). That’s an increase of 26.7% for the overall market (as measured by same-condo resales).

Now go back and look at their asking prices last Summer, remembering that a deal at the first price drop would have been 24.6% over their purchase price. No wonder they must have been disappointed at (only) $600,000 and 14%.

Of course it remains to be seen how the new owners do financially, but let’s see where all these folks have been (are) living.

a classic Long-and-Narrow loft shape with a bonus level

Loft #2B is billed as a “split level triplex”, but the basic configuration (and most of the interior space) looks like a classic Long-and-Narrow loft with the public space up front, the kitchen in the middle, plumbing on both long walls, and a single master suite in the rear, with about two-thirds of the loft enjoying 15 foot ceilings. The wrinkle in this floor plan is that this second floor space takes advantage of additional volume at the rear of the building by going up some stairs for the master suite and down some stairs to a lower level. This is not merely a matter of taking advantage of 15 foot ceilings to add a mezzanine level (as you sometimes see, though with only 15 feet your head might involuntarily duck at the two half-height levels in a mezzanined loft), as the lower level is definitely down from the main level. Hence, the babbling as a “split level triplex”.

That lower level is the bonus, but there’s more to it than two bedrooms across that back wall of the loft: there’s a “500+sf exquisitely planted terrace with flowering trees and boxwoods with custom mahogony trellis” down there, as well. That is one heck of a bonus, even one so low (just below the second floor of the building) and facing mid-block and any curious neighbors. It is hard to say what the original configuration of this loft was when marketed by the sponsor in 2006, but the last three owners (at least) made the prudent judgment that the outdoor space is best enjoyed with access from a public room rather than from a third bedroom. Hence, the unusual “second family / living room” in the broker babble:

The lower level, currently configured with one bedroom and a second family/living room and a separate home office, can easily be converted back into a two bedroom layout.

My guess is that the sponsor realized the same thing, and probably sold it as a convertible-3 bedroom loft with two living / family spaces on two levels, but I don’t see a floor plan from the as-sold loft in original shape. The finishes, however, seem to be the original (high quality) of this (then) state of the art luxury condo development in prime Soho.

comping is ______

Both the outdoor space and the split triplex aspect of loft #2B complicate a search for comps for this loft, as does the fact that it is ideal as a two-bedroom rather than a three. The last two sales in the building were almost two years ago and are frustrating for being difficult to smoothly reconcile with each other, let alone as the basis for a time-adjusted and Miller-riffing comps analysis for the recent #2B sale.

Both the “1,683 sq ft” loft #3A and the “1,552 sq ft” loft #3B have two bedrooms, 2 baths and both were marketed as though they were still in the same deluxe condition as delivered by the sponsor; yet they sold within 3 weeks of each other in May and June 2012 at divergent prices. #3A at $3.55mm came to $2,109/ft and #3B at $3.104mm came to an even $2,000/ft. On the one hand, that’s barely over a 5% spread; but on the other hand, these lofts are in the same building, with the same finishes, and essentially the same utility. (They also went into contract within 3 weeks of each other, and both were sold by the same agent[!].) Absent learning something more about these lofts or this building before I get to the bottom of this post, I have to chalk the 5% spread between these two sales up to ‘market noise’, and hope not to cause too much weeping on Team Efficient Market. (There’s a wonderful opportunity for that, coming.)

Let’s blend them to get a low-floor interior value for this building of $2,057/ft, circa June 2012. A simple time adjustment using the StreetEasy Index (then 1,995, blending May and June 2012) suggests that the overall Manhattan residential real estate market is up 16.8% since then, so that these lofts, if sold by February 2014, would have sold for a blended $2,403/ft, more or less. That implies that the interior space for loft #2B this year would have been worth … (wait for it) … (look at the clearing price while waiting for it) … about $5.25mm before considering what additional value the spectacular terrace adds.

Let’s tie that up: loft #2B just sold for about $400,000 less than you’d expect based on the 2012 sales of #3B and #3A even before considering that the terrace has some (significant) value.

let’s riff with The Miller about outdoor spaces in Manhattan lofts

You know I love to work off of my blog response to The Miller’s seminal work on valuation of outdoor space (see my March 27 post, just above). Taking this terrace down to the lower end of the typical range (25% of the value of interior space) for argument’s sake (even though a good argument can be made that that is too low), the actual valuation assigned by The Market to loft #2B was an adjusted $2,104/ft. That, of course, is barely 2% more than the blended #3B/#3A value in 2012, and pennies $2/ft lower than the #3A sale in June 2012 if considered as the only comp.

Did I mention that the #2B sellers must have been unhappy selling for $4.85mm even though that was $600,000 more than they paid?

Did I mention that comping is hard?

… in which heads are scratched (and Manhattan Loft Guy’s head may explode) …

I can make an argument that the interior space of the third floor lofts should be worth more than that of loft #2B because multi-level lofts are not as functional (for most buyers) as simplex lofts, but that argument lacks a certain conviction given that the 3rd floor ceiling height is (only) 12 feet while most of the main space in loft #2B reaches 15 feet high. I can make an argument that the configuration of loft #2B is less than ideal, what with the multi-levels and lower ceiling height bedrooms and the logic behind turning space that could be a(n oh so valuable) third bedroom into a second family/living room to get public access to the terrace, but that argument lacks a data set to be able to scale it, even though I believe it to be valid. (The second family/living room is little better than a hallway to the terrace, and the terrace is a long walk from the kitchen.)

I can’t make an argument that these #2B deficits combine to wipe out the observed market improvement from June 2012 to present. (Hence, the scratching and the risk of combustion.)

I am not going to make an argument that these recents sellers overpaid as buyers in 2010 because I don’t have the data (the only sale in the building going back 6 months or forward 13 months from the #2B purchase was a hard-to-comp penthouse). But that, if true, would (help) explain (some of) the problem. Even the possibility of that as a contributing factor to my math problem would probably make these 2010-buyers-turned-2014-sellers even more unhappy.

Please don’t tell them.