wrapping up last week's penthouse week with 43 Wooster Street loft sale, redux

playing outdoors, again
With last week’s theme in mind, I went back to look at the Manhattan loft #6E at 43 Wooster Street. I hit this penthouse loft sale when the deed was freshly filed (July 19, 43 Wooster Street penthouse loft closes off 6% since 2006, at one-third 2007 asking price), focusing then on its status in the most exclusive wing of the Price-Chopper Hall of Fame.

This one is more like a true penthouse loft than others I have hit last week (September 12, 14 Jay Street penthouse loft sells in a small mystery, with numbers that are mysterious, September 13, penthouse loft at 17 Greene Street sells at ridiculous (adjusted) value after chopping, chopping) and September 17, roof deck added at least $518,760 to penthouse loft at 16 Hudson Street), because the “1,000 sq ft” private roof terrace at 43 Wooster Street is accessed directly from the upper level of the “2,353 sq ft” duplex (the other “penthouses” either had no living space on the deck level [17 Greene Street] or only an upstairs structure big enough for the stairway bulkhead [14 Jay Street, 16 Hudson Street]). The upper level at 43 Wooster Street has a quite livable room providing access to the roof deck.

The short story in my original post was that this penthouse loft sold on September 13, 2006 at $4,171,000 (no interior photos survive on StreetEasy, but we have many photos in our data-base from that listing), and then again on July 7 at $3.93mm. There is enough of a story in a resale down 5.8% since 2006 despite a renovation, but the jaw-dropper data point for me is the asking price for the initial attempts by the 2006 buyer to sell, in 2007: $12.5mm. (Read that again, out loud, using your New York State Lottery Guy voice: TWELVE Point Five MILLION Dollars.)

I have one bit of information I did not have (overlooked??) about the loft in my earlier post (addressed below), but I come back to it again to try to put it some context with those other “penthouse” lofts this week. (Also, because that New York State Lottery Guy voice is so much fun: TWELVE Point Five MILLION Dollars.)

roof deck comping is especially hard
There is no brilliant insight here, other than to note that — as hard as it can be to comp lofts (especially ‘unique’ lofts) — adding outdoor space to the comping mix is even more difficult.

I mentioned last week that “this May 6, 2010 link to my analysis of The Miller’s approach to valuing outdoor space [is probably] the most frequent internal Manhattan Loft Guy link” post. While there is an awful lot more “art” in The Miller’s approach than “science” (to this reader, at least), his post is useful because he is a highly credible source (to this reader, at least) and he lays out a systematic analysis. But it ain’t easy to apply.

awkward elevator conversations
In the case of 43 Wooster Street, it is really really really hard to do a comp analysis that focuses on the rooftop deck for #6E, given what happened next door. Here (again) is a sliver of the #6E listing history from last year:

Here is the listing history for the only-slightly-larger #6W (“2,540 sq ft” interior v. “2,353 sq ft”; “1,073 sq ft” roof deck v. “1,000 sq ft”) that overlaps that sliver:

#6W is all of 8% bigger (in interior space), yet cleared a year earlier 17% higher. Yet yet, they are seemingly as comparable in condition as comparable can be. They only went head-to-head for 7 weeks before that #6E hiatus from May into September last year. One wonders if the #6E sellers were ready to give up then, but came back after the #6W contract. If so, they were disappointed not to make a similar deal, soon.

the 5th floor complication
There is a current listing (ssshhhhh!) that proves that the current market value of lovely interior space at 43 Wooster Street is less than $1,428/ft. How much less, we will have to wait for The Market to tell us.

Of course, you can’t simply plug that interior value in to other lofts in the building (the way you’d like The Miller’s rubric to apply), because if you do you get some weird results.  Applying that ceiling to the two penthouses implies that the #6E interior was worth no more than $3.36mm and the roof deck at least $570,000 (or $570/ft), while the #6W interior was worth no more than $3.6mm and the roof deck at least $1,000,000 (or $932/ft). Of course of course, any approach that valued similarly sized roof decks in the same building that far apart is problematic.

a thin hyper-local market last year
Setting aside the issue of identifying the outdoor space value in this building posed by the #6W sale in August 2010 at $4.7mm and the #6E sale in July 2011 at $3.93mm, the most pressing question for anyone looking for rationality in the Manhattan residential real estate market is to explain that spread. I have a theory, one that cannot be proven (or dis-proven!), and I cannot think of another. Give me a set-up paragraph, then I will explain the theory.

Start from this logical premise: the #6W sale last August established the market value for a loft about 2,400 sq ft on the top floor of 43 Wooster Street with about 1,000 sq ft of private roof deck. For #6W, that proposition is Q.E.D. But for #6E it is only theoretically true that the August 2010 comp (nearly as close a comp a a comp could be), as #6E did not sell off the $4.75mm asking price when it came back to market in September 2010. Nor did it sell quickly with a January price drop below $4mm. If the truth of the market comp provided by #6W is that #6E was worth something like $4.7mm a year ago, #6E should have sold for something like $4.7mm a year ago. It did not.

My only theory is that there was a very thin market for $4mm+ penthouse lofts with roof decks in Soho last year, and that #6W got the sole buyer. Q.E.D. again, riht? Had there been two buyers willing to pay market value last year, #6E would have sold last Fall to that other buyer at a price proportionately lower than $4.7mm. But that did not happen.

So either the #6W buyer overpaid at $4.7mm (i.e., that the real market value was less than the open market sales price), or the problem that #6E experienced since September last year was that there were not enough buyers for $4mm+ penthouse lofts with roof decks in Soho. (Note to self: some day look to see if other $4mm+ penthouse lofts with roof decks in Soho sold last year.)

The Law requires that prices decline if demand declines. If the demand for $4mm+ penthouse lofts with roof decks in Soho was satisfied when that single buyer bought #6W, prices for “$4mm+” penthouse lofts with roof decks in Soho should decline. Based on the small sample of #6W and #6E, that is what happened. Life, for the #6E owners, turned out to be a bitch. Especially because they renovated after buying in 2006.

not an $8mm renovation!
The fact I overlooked in my original post about this penthouse loft sale was that we do have some information in our data-base about the change in condition of #6E between the 2006 sale at $4,171,000 and the sale 2 months ago at $3,930,000. Which gives me another opportunity to talk about the marketing campaign begun a year after that first sale, the campaign that could have featured NYS Lottery Guy.

It is hard to say exactly what the upgrade in condition was between September 13, 2006 and November 1, 2007, as the respective photos (sorry that you can’t see the ‘before’ shots) are not sufficiently matched for before/after and the broker babble are also not well aligned. Clearly, the kitchen has been redone and an island created, it appears as though the ‘skin’ of the fireplace and bathrooms has been upgraded, and there is now a great deal of wood (in built-ins, covering the elevator wall and entry, and in assorted “hand carved wood screens”). I would not be surprised if the Wenge floors were new.

But the floor plan is unchanged since 2006 and the stair structures are the same (albeit with some new “hand carved wood screens”). So, for a new kitchen and baths, and all the rest enumerated, what did they pay for the upgrade? You could spend ridiculous amounts on any of this, of course, but I suspect they were in for (only!) a few hundred thousand dollars in post-2006 for this “Impeccabl[e] renovat[ion]”. Probably not a million. And certainly not $8mm.

One has to wonder what the conversations about pricing were like, starting with $12.5mm, and then the almost immediate drop by $3mm. (“Well, let’s give it a shot…”) I was originally thinking that they missed an opportunity by sitting out the 1Q08 market (aka The Peak), but they were still priced so high that probably did not matter. Note what happened after Lehman’s bankruptcy: it took 4 weeks to see a reaction, but the next drop was a million, followed by another million in 5 weeks than by yet another million 4 days later.

That November 22 drop to $5.9mm must have felt like hitting bone, as they say there well into the nuclear winter before taking a 4 month hiatus, coming back yet another million lower. Their resolve stiffened markedly in 2011, with just the drop to $3.995mm (only a drop of $755,000!) where they held for 6 months until a contract at only a slight discount.

If all you looked at was the last marketing period (the 4 month break re-set my clock for tracking days on market), you’d see a motivated seller (that $755,000 drop was 16%) and a newly-stubborn seller (6 months from last price drop to contract at only a 1.6% discount from ask). But you would miss all the drama (tragedy?) of November 2007 to May 2011, a period of nearly 31 months, of which 21 months were active.

small consolation, for the loft itself
The July 2011 sale at $3.93mm is a 27% gain since the October 2002 sale at $3.1mm. The recent sellers got none of that appreciation, of course. More bitchiness. Sigh.

© Sandy Mattingly 2011