from fire sale in nuclear winter to +27% at 155 Hudson Street

price discovery can be hard
Take a generic classically Long-and-Narrow Manhattan loft, roughly 22 feet wide, with not a lot to brag about as far as finishes, and try to sell it in two very different sets of market conditions. As an agent (or, as an owner) you might have a pretty good idea of what it should be worth, but — especially in a dynamic market — that can be a bit of a moving target.

The recent sellers of the Manhattan loft #2S at 155 Hudson Street were actually the beneficiaries of this dynamic not once but twice. They lucked out when they bought at what looks like a distress price in August 2009, when their sellers came to market just in time to get creamed by Lehman and frozen in the winter that followed, and they had to have been pleasantly surprised when they found a buyer willing to pay on April 27 more than a quarter more than they had paid 20 months earlier.

In both sales ending in August 2009 and April 2011, the sellers had trouble finding the price in the then-current market. In the first case, the sale took seven asking prices, though it ended up in a bidding war to fix an over-correction (a bidding skirmish?); in the second case, it took only one asking price and a fair amount of patience to generate yet another bidding war (a bidding time-bomb?). The loft seems to have been in exactly the same condition when it sold for $1,753,500 and then again at $2.23mm.

the agony and the ecstasy
The loft is said to be “2,300 sq ft” with the only bragging about the finishes (as opposed to bragging about the space or the bones) in both sets of broker babble being about the chef’s kitchen and island. The fact that it is the largest loft I recall with only a single bathroom (a second can easily be added) suggests that the walls went up in this loft a long time ago and haven’t been moved since, and hints that the latest new owner might be tempted to upgrade the space.

Check out the listing details from the $1,753,500 sale here (ignoring two short market breaks), and from the $2.23mm sale here:
 

a warm welcome, please
Let’s welcome this loft as the first double poster child in the Manhattan Loft Guy family. I see the circa 2009 loft with a caption Staying Behind The Market and the 2010 loft captioned It Is Better To Be Lucky Than Smart. Note that the loft is the same in both cases; only the world around it is different in each case. (Only!)

it is expensive to be wrong
The recent seller of #2S pocketed nearly a half million dollars (before expenses including, in this case, taxes) for having owned it for 20 months. Even apart from starting 5 weeks before Lehman’s bankruptcy, the timing of the August 2009 seller was bad. Regular readers of Manhattan Loft Guy know I do not like to use The G Word, so let’s chalk this up to hubris instead of greed. That August 2009 seller bought in May 2004, very likely in the same condition in which it has now since sold twice: the same floor plan, and little bragging except about the kitchen (“[c]ooks kitchen with granite counter tops and large service island”). That price? $1,487,250.

Four+ years later, the guy who paid $1,487,250 went to market asking $2,825,000, looking for a 90% gain after adding no visible value. Imagine, if you will, that the May 2004 buyer sought ‘only’ a 50% gain, and had offered #2S for $2.2mm in August 2008. The Market would have still descended into winter five weeks later, but this loft might have been one of the few that sold by Spring 2009, and would very likely have gone to contract by July 1 at a higher price than it did.

What if? is a tough game, with no rules except that it is unfair to (eventual) sellers. You might prefer different alternative prices, but you should agree that some alternative would have turned out better.

yet another unfair remark
Power users of StreetEasy may already have noticed that #2S was not the only loft at 155 Hudson Street that was offered for sale as the slowdown preceding Lehman’s bankruptcy metastasized into full nuclear winter. The loft immediately above, #3S, has the same footprint but a One Bed Wonder floor plan, apparently had a higher level of finishes (especially in the two baths), and a rich-for-second-guessing parallel listing history (again omitting some breaks; longer breaks than with #2S):

In sum, these two lofts started at the same time way too high (both closed about a million below where they started) but the sellers, the agents and The Market agreed that #3S was worth more; indeed, The Market thought almost a quarter more. Of course the parallels between the marketing campaigns of #2S and #3S cannot be coincidental. The same guy owned both; the same agents were retained to sell them.

What if (that tough, unfair game) the two lofts had not competed against each other in a thin market?

Keeping on the unfair side of Commentary Street, that guy bought #3S earlier than he bought #2S (April 2002 vs. May 2004), so it is not surprising that he paid less for #3S ($1.36mm) than for #2S ($1,487,250). Unfortunately, I can’t see a listing description or pictures from the 2002 sale, but when #3S was first offered by that guy for sale in 2006, it was babbled as “recently renovated”, so perhaps he upgraded this one before trying to sell it.

Granted, the guy made a ton of money on the two lofts, but he might well have made more, no?

an upgrade, nonetheless
At the cost of additional typing (and, possibly, trying your patience as readers) I cannot resist noting that the #2S buyers last month have significantly upgraded their living space. I suspect that they will upgrade #2S significantly, as the little loft they are still trying to sell has been beautifully renovated. Instead of living up-and-down in a loft with 13 foot ceilings but otherwise sparse dimensions, they will occupy #2S with “2,300 sq ft”.

Help them out, and buy their old loft, won’t you?

© Sandy Mattingly 2011