1 Worth Street loft sells after renovation / how building values change

every picture fails to tell a story
I hope it is not just that I am cranky today, what with the chilly rain not (yet) (really) melting the snow, but I am feeling a disturbing disconnect between the photos and listing description used to sell the “1,400 sq ft” Manhattan loft #6R at 1 Worth Street. I should first note that the marketing campaign was a success, my carping aside: it took a while, but it came to market at $1.695mm after an extensive renovation (and a growth spurt!) and sold at $1.675mm, a significant premium to its pre-renovation condition. I assume it looks better in real life than in the photos, but I don’t read the photos as reflecting a gut renovation “incorporating modern luxuries to create the perfect balance of old and new”, now offered in mint condition.

Here is what I see in the pix: new floors; exposed ceiling beams painted white; a long living room wall of apparent sheetrock, painted white; one spectacularly brick room with skylight; central air; a reclaimed elevator door; and a (retractable!) stairway to the roof. Here is what I read about but don’t see in the pix: a “windowed chefs kitchen [… that] showcases Carrara marble countertops, as well as Bosch and Bertazzoni appliances” (seen only in the distance); any of the 2.5 new bathrooms, including one that is “marble … with deep soaking tub”; and (featured in a photo but not on the floor plan) the “420sqft PRIVATE roof deck and green house”. Most of the photos are long-range, so there is no pictorial sense of the quality workmanship that has been done, apart from the “carefully re-salvaged elevator door” providing access to the larger bedroom.

value added is easily quantified, sorta
I saw the loft in its Before condition, when offered for sale two years ago. Back in the day, it had the open ceiling in a natural dark color, exposed brick on the long windowed wall (again, in a natural dark color), a very primitive raised room at the north end, a single bath and simple kitchen, and dark flooring that was a hodgepodge of rather old and distressed, and more recent but also distressed. In that primitive condition with some classic features, the loft sold for $1,059,581 on February 28, 2011. I’d have loved to have seen some of that distressed old flooring retained, and probably the long living room wall remain brick, but I was not on that committee.

The math is deceptively simple: the gut renovation sold for a premium of $615,419.

The wrinkle is that the loft just sold has something the 2011 loft did not have: the “420sqft PRIVATE roof deck and green house”. We can reasonably adjust for that, ballparking the private space at the lower end of The Miller’s typical range (25% of the value of the interior) because it is not directly accessed from living space on the same level. That yields a ballparked adjusted value for new loft #6R at $1,113/ft ($1.675mm divided by the sum of 1,400 interior sq ft and 25% of the 420 exterior), compared to old loft #6R at $757/ft.

The math is now more complete, still simple: the 2013 value is 47% higher than the 2011 value, or $356/ft, adjusted. The sunk costs for the owner/architect who did the work but never lived in the space includes (a) the 2011 purchase price, (b) the gut renovation and mint build-out, and (c) the apparent acquisition of roof rights and (likely) expense of finishing that space. Interesting question is how much the renovation and roof eat into the $356/ft in added value to begin to figure out how much “profit” there is. (While “profit” is not necessarily the correct prism through which to look at Manhattan loft resales [long story, there], in this case you have an architect who seems to have bought in order to renovate and flip.)

more crankiness about that babble …
People who know the loft and the building will have seen what is not in the recent broker babble. Although there is that “carefully re-salvaged elevator door” in the renovated loft, that provides access to a bedroom, not an elevator. As the former babble put it in 2011, “Worth the walk up? You BETCHA!”.

That’s 5 flights of walk-up, of course, so $1,113/ft strikes me as a pretty healthy market response to the renovated loft.

values are looking up at 1 Worth
This is how the base line for valuations in a building change: primitive lofts are turned into mints, then resold to re-set the values. As noted, the prior sale of #6R was at $757/ft in 2011. That was also the last sale in the building. Before that, the “1,500 sq ft” #5F sold in December 2009 in an improved condition (well into the market thaw for the overall Manhattan residential real estate market) at $1.2mm, or $800/ft, and The Peak was seen locally as the “1,400 sq ft” #4R sold well above ask despite needing upgrading on March 8, 2008 for $1.1mm, or $788/ft. (Completists would want me to include the very chilly sale of the “1,500 sq ft” #4F on December 29, 2008 needing some improvements at $999,000, but that $666/ft says more about that post-apocalyptic market than about the building.)

Despite different market conditions and (slightly) different conditions, these three past sales line up nicely: $757/ft, $788/ft, and $800/ft. And they line up quite a distance from the new #6R at an adjusted $1,113/ft. A few more resales of renovated lofts at 1 Worth Street and The Market will be more reluctant to automatically apply a market discount to this sunny corner near prime Tribeca. There is at least one neighbor for whom the transition cannot happen soon enough.

© Sandy Mattingly 2013


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