53 Warren Street loft resale shows depth of bath developer took in 2009

snap shot of chilly time
The resale of the “1,562 sq ft” Manhattan loft on the 2nd floor at 53 Warren Street is a happy tale for the sellers, as they paid the sponsor only $1,705,568 in August 2009 for the loft they sold on February 16 at $2.15mm. That’s a gain of 26% in 30 months, if you are scoring at home.

But that 2009 price is more interesting to me than the price last month. Unlike the sellers that I hit on Monday (March 12, 73 Worth Street loft takes a long time to sell above ask), the sponsor did not have the luxury of taking the loft off the market in the nuclear winter to fight another day, in a deeper market; the 53 Warren Street developer took in 2009 what little the market gave. Sometimes timing, timing, and timing are the three most important things about Manhattan residential real estate sales, rather than location, location and location.

Not that the recent sellers had an easy time of it. They thought (hoped) that the market had swung in their favor even more dramatically, as they came to market on November 7 at $2.395mm, dropped quickly to $2.295mm, then were more negotiable still, in reaching the deal by December 14 that just closed at $2.15mm.

got a parka?
I can’t see the listing history for the sponsor sale of this loft, even in our data-base, but the other new development campaigns in the building are instructive. Per StreetEasy, lofts on the 2nd, 3rd, 4th and 5th floors sold within five weeks of each other in August and September 2009, presumably at the earliest time the sponsor had completed the units and gotten certificates of occupancy. They sold for an average of $1,690,740 (essentially at the 2nd floor price).

Let’s take the 4th floor listing history (here, here, and here) as broadly representative of the sponsor’s unhappy experience:

Only the sponsor, his accountant, and his lenders know the full picture of the project, but there could not have been a great deal of margin for negative results here. 53 Warren Street is a 5-story building that at some point acquired a penthouse on the roof (probably, with this development).

They turned the ground floor and basement into a “townhouse” (nice work, that) but could not sell it in 2009 or 2010, at $2.1mm or $2.5mm. (It is now in contract, for the second time.) The penthouse must be set back (can’t see it in the building pic, and it is a duplex with only “1,121 sq ft”). The sponsor could not sell that one until June 2010 (maybe it wasn’t finished sooner?) at $1,781,937, after starting out asking $2.05mm.

got red ink?
Look again at the ugly math, before getting distracted by the ugly calendar. The started the 4th floor at $2.3mm, cleared 28% less, at $1.65mm ($40,740 less than the average price of all 4 full-floor lofts in 2009). They started the Penthouse at $2.05mm, cleared in June 2010 13% lower. They have not yet sold the “townhouse”. Ugly, ugly numbers, related to the calendar, of course.

They probably did not know on January 25, 2008 when the 4th floor came to market that the overall Manhattan residential real estate market was then at its peak, with the prices recorded in the First Quarter of 2008 the highest ever in Manhattan. From the fact that all 4 full-floor lofts closed in such a short time in late Summer 2009, I infer that they could not deliver finished products until then. (Note that the 4th floor contract was signed in May 2009.)

They held the 4th floor price steady until (boom!) Lehman’s bankruptcy petition changed the market overnight, even then holding until taking a breather 10 weeks later then coming back at a small discount in December, when the nuclear winter had fully settled in. By May, 2009 there were signs of a thaw in the overall market, in the sense that some contracts were being signed (including for the 4th floor), but prices were way down. In fact, contracts signed in Spring 2009 probably represented the trough in the overall market.

Let’s review: they came to market at The Peak, offering products that they were not then able to sell; they signed (some) contracts at The Trough, finally beginning to close the 4 full-floor lofts in August 2009. They could not sell the penthouse for yet another year, and the townhouse even yet (contract pending).

I got this far in the draft post, then decided to check the 5th floor loft. If anything, that listing history (here and here) is even more sad than the 4th floor history:

I will just highlight two things here: that first contract may have had a buyer contingency if not ready to close within a year, or the post-Lehman apocalypse did it in; the 5th floor got the highest price of any of the full-floor lofts that Summer, presumably because the contract was signed well into the thaw.

Ugly, ugly, ugly. Do you see why I think the resale of the 2nd floor last month is more interesting for the original price (and the developer’s pain) than for the more recent value?

© Sandy Mattingly 2012