known unknowns abound
I am not unusual in always being interested in the impact that renovation has on value; most people who try to follow a residential real estate niche share that interest. I flatter my niche, perhaps, in thinking that this is a much more complicated topic with Manhattan lofts than it is with more (shudder) cookie cutter apartments or even (gasp) tract homes. (Not go all emo on ya.) While this angle is interesting, it is always frustrating to not know the input, i.e., the renovation cost, that resulted in a certain output, i.e., post-renovation value.
In the case of the “2,200 sq ft” Manhattan loft #3E at 56 Warren Street I can see the big-picture changes between the condition when the loft just sold for $3.58mm and when it was purchased by the recent sellers shortly before The Peak in the overall Manhattan residential real estate market at $1.935mm, but I can’t do more than guess at the cost of those changes. I am highly confident, though, that the recent sellers did not spend anywhere near the $1.645mm increase in value after buying at $1.935mm.
Let’s start with dates and dollars, then move to broker babble and photos. The recent sellers bought in the single most active market in Manhattan residential real estate history, closing just a few months shy of the quarter in which the highest prices were recorded, though it took their sellers a while to figure out that dynamic environment:
|Sept 21, 2006||new to market||$1.925mm|
|Jan 12, 2007||$2.195mm|
|May 1, 2013||new to market|
The starting point is easily described: “consider this raw and design a major home [?] that suits your needs”, with some additional photos and a floor plan surviving on the Corcoran website beyond what is on StreetEasy. The loft is a classic Long-and-Narrow with windows front and back, plus 4 presumably dark windows on an air shaft on the long wall opposite the public stairwell. Back in the day, it featured 2 bathrooms and a washer dryer, with a working artist studio at the north end.
babbling that goes on, and on …
The ending point is easily summarized (the 2007 buyers did, in fact, design a “major home”), but it was just sold with the longest bit of broker babble I believe I have ever seen. Distilled to focus on the prose that describes the difference, Then and Now, we see:
Chef’s Kitchen … abundant cabinetry; an enormous Island with a 4’x 9’ honed Calcutta Gold Marble slab countertop; a Bertazzoni five-burner stove; a Jenn-Air microwave/vent; and integrated Bosch dishwasher and French door refrigerator. A solid 10’ folding door leads to … Den/Media Room with custom built-in bookcases, a large flat-screen TV, and a marble tiled Second Bathroom. … Master Bedroom … features built-in cabinetry with a flat-screen TV… en-suite Master Bath flaunts a magnificent mirrored arch over a Caesarstone wall hung vanity, honed Statuary Marble tiles, a large walk-in rain shower with mosaic glass tiles, a separate 6’ Zuma soaking tub for two, heated towel racks, Grohe fixtures and a Duravit commode. The Second Bedroom features a unique large sleeping loft, akin to a gigantic bunk bed, and again custom built-ins …. [with] a vast walk in closet that could be converted to a home office or third full bathroom. [and a] Third (windowed) Bedroom, more custom built-in closets, and a large laundry closet with side-by-side Bosch washer and dryer.
… central AC, … ample custom bookcases and closets throughout, Caesarstone window sills, Lutron light dimmers, dual front/rear intercoms, and Bluetooth sound system in living and media rooms
(I am pretty sure that the “hot water radiator heating, solid wood maple flooring, exposed brick walls” were in the Then version, as well as in the Now version.)
Net-net, a total renovation to a floor plan with 3 bedrooms where the former artist studio had been and the new plumbing in the places the former (primitive) plumbing had been. The proper proper names and materials indicate a high-end renovation (as does the recent sale price, of course), but the potential range of expense for these materials, these brands, and labor for a quality job is very large. But even if it was $400/ft in cost, that gets the 2007 buyers only to $2.815mm, compared to the $3.58mm at which they just sold.
Whatever they spent on renovating, they also benefited from the current market conditions. I just don’t think the difference in coop values at the bottom of Tribeca between September 2007 and August 2013 is anywhere near a 27% market appreciation. Nicely played, folks; nicely played.
we’ve been here before
If you have a better memory for old Manhattan Loft Guy posts than I do, you will remember that I hit the loft below this one when it was offered as a “raw and original condition” project, essentially identical to the condition of #3E at the same time. In my June 8, 2007, Tribeca buy & build opportunity under $800/ft at 56 Warren, my information about initial pricing was off, as #2E came out (only slightly too low) at $1.895mm and found a contract in a month, closing at $1.975mm only two days after #3E closed at $1.935mm.
By my lights, that 2% spread reflects a delightfully efficient market for primitive lofts in extreme southeast Tribeca in mid-2007, with that $40,000 “premium” in favor of #2E being either simple market noise, or a reflection of a frothy market that improved marginally between the #3E contract on May 24 and the #2E contract on July 18. Take your pick; I don’t care.
If there is a smarty-pants that remembered that 2007 post (from back in the day while I still discussed active listings), those pants will surely remember that I hit the last market sale in the building before the recent #3E sale. Those pants may even remember that my April 27, 2012 post, truly “one of a kind” bathroom sells for $2.35mm, loft at 56 Warren Street comes with it, about the sale of loft #5E featured a cameo by #3E, which had (then) recently not sold. That’s a fun post, but for present purposes the short story is that loft was a difficult comp because the design was so idiosyncratic, but it sold for $2.35mm in the year after our model,
Loft #3E[,] did not sell at $2.695mm or $2.895mm when offered over about 12 weeks last Summer, despite being “[n]ewly renovated … with an eye to every detail” and having custom this and custom that.
if only we had a matched set of raw-to-prime sales (oh wait…)
In more concrete market data, I noted in that post 17 months ago that our 2007-raw-comp was also in play, following its make-over:
It appears as though loft #2E is about to sell (it just went into contract) off an asking price of $2.85mm, also with a 3BR+ floor plan much more similar to #3E than to #5E. That closing price will tell us how The Market values a built-out 3BR+ floor plan over the open-as-open-can-be #5E. (Note to Self …) It looks like a premium in the range of 15%.
In fact, #2E closed at $2.7mm on July 17, 2012, making the spread between “a built-out 3BR+ floor plan over the open-as-open-can-be #5E” in 2012 14.89%. (I was pretty close!)
The 2007 buyers of raw #2E built that loft out with a slightly different layout than the new #3E (#2E floor plan, here), with the differences in bedroom and bathroom arrangement being immaterial. I didn’t see #2E, and that babble was neither as long or as detailed as the Homeric #3E babble, but it did claim for #2E last year an “Elegant Luxury Renovation”.
The known unknowns in comparing #2E last year and #3E this year include the how-luxury-is-luxury? angle, with the properly naming proper proper names and materials in the #3E babble suggesting that the upstairs loft had a more expensive renovation. I have to believe that The Market thought so (d’oh! $2.7mm v. $3.58mm), as not much of the spread between them should be due to the 13 months between their respective contracts. And by “not much” I mean that The Market for like-to-like is not up 32% in 13 months.
I really hope the recent #3E sellers spent a lot more on their primitive loft in 2007 than the 2012 #2E sellers did on their primitive loft in 2007. And I wish I knew what the respective budgets were. The $720,000$880,000
[oops … thx reader KTG for the math catch] market preference for #3E speaks pretty loudly.