58 Walker Street loft recalibrates after missing Peak, sells 20% off old ask

what if? is a fun game (you can make up your own rules!)
When a loft does not sell, it is impossible to know what would have happened if it had been priced differently because (d’oh!) we cannot know how The Market would have reacted to a price that was never offered to The Market. But it is fun to speculate on the carcass of failed sales campaigns, such as the campaign at $2.7mm that did not sell the Manhattan loft on the 2nd floor at 58 Walker Street in 2008, especially as we now have a successfully concluded campaign: that loft sold on June 30 for $2.125mm.

This “1,927 sq ft” loft was created in a 2003 condominium conversion that used the classic Long-and-Narrow template: the floor plan is 23 feet wide, with two bedrooms on the back wall and all the plumbing on the long wall opposite the public stairwell and elevator, with a single side window that appears to be very dark (see the 3rd pic). (Does that second bedroom [pic 7] look 10 feet wide to you? Not to me, but maybe that is the revenge of the wide-angle lens….)

Classic loft elements include the 13 foot ceilings, tall windows and exposed brick, but this is a 2003 conversion, so there is central air, and other nice touches. Finishes are almost certainly original, including “a Viking and Bosch kitchen with granite counter tops”. I suspect that the “private enclosed terrace” is not a huge premium item, as it faces mid-block on the second floor, at the rear of the buildings on Lispenard Street, especially as there are no photos of this ‘amenity’.

history! we got history!
The dangers of mis-pricing in a still-hot market are obvious, and not softened by a much later correction:

April 4, 2008 new to market $2.7mm
Oct 14 off the market  
Mar 31, 2011 new to market $2.3mm
May 7 contract  
June 30 sold $2.125mm

The right price in mid-2008 was … something between $2.7mm (or within reasonable negotiating distance thereof) and $2.125mm. That much is blindingly obvious. The fun question is where?

We don’t know how motivated the seller was in 2008 (the refusal to drop the price suggests ‘not very’), but a fair assumption is that being stubborn in 2008 cost the seller upwards of $225,000. Asking $2.3mm in 2011 generated a contract within 37 days; if The Peak was only a 10% premium over the current market (and April 4, 2008 was very very very close to The Peak), the 2nd floor loft in mid-2008 would have been worth about $2.36mm.

That is a high tax for being stubborn. Higher still if you assume a bigger spread between Peak and Now.

using the sale as a building baseline
Careful Manhattan Loft Guy readers will remember having been in this small (5-unit) 2003 vintage condominium conversion quit recently. In my June 3, 11 months to sell 58 Walker Street penthouse loft at (eventually) modest discount, I hit the top floor unit that sold on May 5 for $2,832,500 with two critical differences from the 2nd floor: the ceilings up there are 20 feet, permitting some odd duplexing claiming an additional 600 sq ft of space, and it came with two private roof terraces totalling “1,318 sq ft”. What does the 2nd floor sale say about the allocation of value for the penthouse lofts sale?

Using the 2nd floor as a comp for interior space in the building (and without adjusting for the better light on the higher floor or the different ceiling heights, and ignoring as trivial the added value from the 2nd floor private enclosed mid-block terrace), the June 30 sale at $2.125mm for “1,927 sq ft” yields $1,103/ft. Simple extrapolation to the 5th floor interior footprint (that same “1,927 sq ft”) implies that the roof terraces account for the difference in value of $707,500. At “1,318 sq ft”, that outdoor space would then be valued at $537/ft.

That implied terrace value is very nicely less than half the implied interior value, rationally within The Miller’s rubric for valuing outdoor space. But comping is hard. Even backwards comping.

If you, instead, adjusted the 2nd floor value for that apparently awkward enclosed terrace (implied adjusted $/ft would go down slightly) and if you considered the ‘extra’ 600 sq ft of duplexed interior on the 5th floor as independently valuable (instead of as a demolition cost; that gets complicated), the implied value of the rooftop drops dramatically. Could that be right?

(Assume adjusted 2nd floor at $1,050/ft, times 5th floor at “2,591 sq ft” equals $2.72mm for the 5th floor interior, leaving only about $100,000 as the rooftop remainder value, or about 10% of the interior space.)

Have I lost you yet? If not …

Here are two ways to look at this comping exercise (rationalization), assuming that both recent sales in the building were rational: (a) the roof terraces are worth about $700,000, less than half the $/ft of the interior, meaning that the market treated that extra space on the top floor as as much an expense as a benefit; or (b) the roof terraces are worth only about $100,000, only about 10% the $/ft of the interior and that the market treated that extra space on the top floor as equally valuable to the other interior space.

what would King Solomon do?
The third alternative mental exercise cuts those values in two, if not exactly in half: if The Market would discount the duplexed ‘extra’ penthouse space (say, at 50%), then the rooftop value sits at about $460,000, or $350/ft, about 33% of the (adjusted) interior.

(5th floor interior at 1,927 + 332 times $1,050/ft equals $2.37mm, balance of $460,000 for the 1,318 sq ft decks.)

Note again the gymnastics: the main comping problem between these two lofts is how to deal with that awkward (irregular!) duplex space in the penthouse. Cutting it in half as far as value results in a rooftop remainder value that is very easy to rationalize, using the third (Solomonic) approach.

Did I mention that comping is hard?

© Sandy Mattingly 2011

Tagged with: , , , , , , ,

Leave a Reply