the happy (true!) story about that Pearline Soap loft sold at 20% “loss” as massive triplex assembled

not really a loss, but this gets complicated
The fact that a deed was filed transferring the 2nd floor at 414 Washington Street (Pearline Soap) on October 14 for $3mm the same day the same LLC paid $1.6mm for the 1st floor might interest a lot of people. There’s the Justin Timerblake and Jessica Biel no-longer-live here angle about the building, per the New York Post; there’s the (odd?) combination angle that Curbed found as the silver lining (nearly 3,000 sq ft on the 2d floor plus a roughly 2,000 sq ft duplex underneath); and there’s the (odd!) comp angle also highlighted in that Curbed post (#1 resale is a gain; #2 a big loss).

Manhattan Loft Guy cares little for Mr. Timberlake; I am intrigued (but confused) by the future layout for this 5,000 sq ft triplex; and I bear a warning about using the 2nd floor sale as a comp for this (heretofore) very successful 2008 set of newly built “lofts” at 414 Washington Street: put your hands up and step away from the screen! These two “sales” (the building’s first resales) bothered me so much that I dug through the deeds. Follow me into the weeds (and into ACRIS) to learn how I know that the 2nd floor “sale” is not  a valid comp because it is a (very) related party transaction.

hints! we got hints!!

• the purchaser of the two lofts is a corporation, Laight Street Properties Inc.
• the 2nd floor was never publicly offered for sale (“No listing associated with this closing ”, per StreetEasy)
• why would the owner of the 2nd floor take a 20% hit without even testing the market?
• even realizing that the Manhattan residential real estate market is not necessarily rational, how could the 1st floor trade at a 23% gain from October 2009 while the 2nd floor traded at that 20% loss form November 2008? (OK, this might just have been a difference of a contract signed at [about] The Peak and contract signed after a nuclear winter, but it is still a ???)

Start with the fact that the three identified 2nd floor “sellers” have the same last name, L___ (I offer that as mild protection from further snooping). Note that the deed for #2A is signed for the buyer by the President of the Inc., and that he has the same last name, L___ (though he is not one of the named sellers). Now note that the deed documents for #1A (the loft that had been publicly marketed; see the #1A listing) are signed on behalf of the buyer Inc. by its VP [see RPTP page 6/7 and smoke detector affidavit page 7/7] and that the VP is … can we get a drumroll, please … Sebastian L___, one of the “sellers” of the 2nd floor.

So these are clearly related party transactions, though it is unclear exactly why the L___ family is doing it this way. My guess? This is some form of estate planning or inter-generational wealth transfers.

I am not going to give any more links (it is kind of scary what you can piece together travelling the inter-tubes), but trust me that this is what it looks like:

• one of the L___s (a very successful orthopaedic surgeon) bought the 2nd floor in 2008 after a divorce, and bought with his mother on the title, who goes by two forms of her first name [i.e., mother and adult son make up all “three” 2nd floor buyers]
• the President of the Inc. that bought both lofts is the father; he and the mother live in a house in Brooklyn they have owned since 1969

I have no idea if the mother contributed any money to the original 2nd floor purchase, or how shares in the Inc. are held, but Smart Lawyers will tell you that it is easier to move wealth around between generations when there are Incs. involved.

Bottom Line: the surgeon son now controls 5,000 sq ft at Pearline Soap on three levels, with a patio. Some architect and contractors are going to be paid a lot of money to rationalize the new layout for however many people are in the son’s resident family. Best of luck to all involved!

a final note (finally!)
I wonder if the other unit owners at 414 Washington Street were at all concerned about the 2nd floor sale at a nominal $1,002/ft being a bad comp for other higher-floor units. If so, they need worry no longer. I have put an asterisk on the 2nd floor transaction on the Master List of Manhattan Lofts Sold Since November 2008, which should remind at least me that this one is not what it seems.

© Sandy Mattingly 2010