nice flip at 73 Worth Street, but why is a foundation doing that??

there’s a wrong way to flip, and there’s this way

After picking on a guy with so much money that he didn’t really care if his aborted flip burned a barrel of cash or not (in my February 26, 155 Franklin Street loft sells in a reverse flip (viewer discretion is advised)), the sale six weeks ago for $4.6mm of the “2,565 sq ft” Manhattan loft #2B at 73 Worth Street near the government corner of Tribeca is refreshing. The seller paid only $3.6mm a year ago; unlike Hollywood Soderbergh, the March-2014-buyer-turned-January-2015-seller completed a renovation, though it seems unlikely to me that the seller intended this real estate adventure as a Buy, Fix & Flip. (Soderbergh didn’t either, most likely, but this seller should have been worried about money.) The key, as the many expenses associated with the Soderbergh Reverse Flip show, is to keep expenses down. For loft #2B, broker babbled as “a newly renovated loft space”, it doesn’t appear as though they spent enough on the renovation to drive them into a red ditch, so there should have been a nice profit.

The most interesting Before v. After view is of the kitchen:

note the way the counter is perpendicular to the long wall (there will be a quiz) [Luxe Group pic]

 Why do agents misuse compliment / complement?

Hardwood floors have been stained ash and lend an organic quality to the space and compliment the kitchen where double-hung cabinets with touch latch openers are abundant. The counter tops are all Calacatta marble.

Sub-zero frig, 6-burner Wolf range, Bosch DW. And to top it all off a 100 bottle Euro Cave wine cooler.

You might have legitimately complimented the earlier kitchen, though the old floor complemented the cabinetry differently:

the island used to run parallel to the long left wall; the overall feel was darker and heavier

The range, hood, Sub-Zero and sink look familiar to those who’ve skipped ahead to the recent listing photos:

who rips out a lovely kitchen if planning a flip?

Of course, taking a pretty wonderful dark kitchen and creating another pretty wonderful light kitchen is not the typical flipping plan, even if you keep the major appliances. Before:

The Chef’s Kitchen boasts a granite breakfast island anchored by a beautifully restored original cast-iron column, a full complement of state-of-the-art appliances and a large walk-in pantry.

I’ve toggled back and forth between Before and After photos, without finding another significant ‘renovation’ (cosmetics aside, including a new stain on the flooring), which is not surprising given that the building was finally finished only 9 years ago. Certainly, the master bath appears to be the same.

The kitchen and baths are “money rooms”. The recent seller paid the former owner for mint-y money rooms, then charged the recent buyer for a new kitchen that is different, if not more mint-y.

Did I mention this is odd behavior for someone intending to sell within a year?

the seller was not a professional flipper, or real estate speculator

The deed record identifies the seller as this foundation, apparently formed to do good in education and human services, with assets in 2013 of $22mm and a grant history of $457,750 in 2013. Nothing about Catholic agencies & churches, Higher education, Hospitals (general), Human services, Law school/education, Medical school/education, or Museums (art) implies buying, renovating, and selling high end Tribeca lofts to me.

Maybe they bought it as a residence for the executive director and that person’s plans changed. I am not saying there is anything wrong with that, but the foundation that made grants of less than half a million in 2013, looks as though it paid $3.6mm in cash for this loft in 2014 (Property Shark shows no mortgage).

Of course, it worked out well enough for the foundation, earning (say) $530,000 on the round trip, after a new kitchen and floor finish ($100,000?), mansion tax ($36,000) and title insurance (say $21,000) on the buy, and the big hits on the exit of the sales fee ($230,000) and transfer taxes to the state and city ($83,950). That leaves about a half million, on which I hope they may well pay taxes; if not, that’s about a 15% return in under 11 months. Kinda a high risk process, though.

 location, location, and … what’s the third one?

Anyone who knows where this building sits (StreetEasy’s got a map that helps you cheat) and sees this second floor floor plan on the southwest corner of the building, which is the northeast corner of Broadway [nope: Church, d’oh, see helpful reader with gentle correction in comments] and Worth, two heavily trafficked, heavily bused, heavily trucked thoroughfares, will be concerned. The good news? The loft has One World Trade views from every room and was said to be “super-sunny, super quiet” in the latest babble.

Interesting that the earlier babble included CitiQuiet windows in the list of features. I usually tell folks that money can buy sound amelioration, though not sound proofing; the latest babble gets close to that unattainable standard with “super” quiet.

an outlier, no matter how you slice it

When StreetEasy does its Manhattan Condo Index based on repeat sales of the same condos, they don’t account for renovation. That’s just too hard, for a great many reasons, and gets washed out (in theory) in the volume, with radical outliers being ignored when they sprinkle the repeat sale data set with unicorn dust. They also (rightly) ignore transaction costs, as those things are highly relevant to an individual buyer-turned-seller’s experience, but not directly related to the loft’s market value at any point.

The StreetEasy Index was up 7% from when this foundation bought (March 2014) and when it sold (January 2015). Loft #2B was up 28% in that time, a portion of which a very generous person might ascribe to the new mint-y light kitchen with light ash floors, as compared to the 10-year-old dark mint-y kitchen. But if they spent $100,000, it’s hard for me to see a dollar-for-dollar increase in value. Give them $100,000 in added value (I’m feeling generous at 50 degrees), that’s still an increase in value of … (don’t hold your breath, or get your hopes up) … 27%.

We don’t have data yet to compare how the change in value in #2B compares to neighbors, but all the neighbors should be happy with #2B at $1,793/ft after being at (only) $1,403/ft in March 2014. Maybe something’s happened on this corner in the last 6 months (the end of road work??), but the mint-y loft #5D sold for an adjusted $1,455/ft in May 2014, very tolerably in line with #2B just two months earlier at $1,403/ft, and the equally mint-y #2F sold for an adjusted $1,412/ft in July 2014, again very tolerably in line with #2B four months earlier.

Did the light kitchen and floor really add that much value to #2B, or should the next sale at 73 Worth Street look more like #2B-in-2015 than this trio from 2014?

 

 

 

 

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2 comments on “nice flip at 73 Worth Street, but why is a foundation doing that??
  1. lowphat says:

    Just wanted to point out that the building is actually on Worth and Church, not Broadway. I also wonder if perhaps those sidewalk sheds that are set up all along the front of the building have anything to do with affecting the price. They’ve been set up for at least a few months now and I have no idea why they are there.

    • Sandy Mattingly says:

      Of course you’re right about the corner being Church and Worth. As I was writing this my mind’s eye saw the traffic coming *up* Church St, but my brain scrambled over to Broadway in typing. Thanks for the correction.

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