Tribeca loft sale at $432/ft shows 7-figure discount for rent stabilized tenant
investing in occupied Manhattan lofts is not for the faint of heart
The recent sale of the “1,875 sq ft” Manhattan loft on the 4th floor at 158 Franklin Street was arm’s length, after being publicly marketed. (It came out at $750,000 on July 21, went into contract by September 15, and closed 8% above ask at $811,000 on October 13.) But the sale tells us nothing about the condo loft market in prime Tribeca, at least not directly. There’s a new owner, but the owner’s rights are severely limited here, as there’s a “Rent stabilized tenant in place”. Hence, $432/ft. It is not hard to ballpark the value of this loft if the owner were entitled to live there: about $1,200/ft. That’s a discount for the rent stabilized tenant of about $1.4mm.
Here’s how we got into that ballpark: a fairly similar loft on the 3rd floor sold for $1,823,000 in December 2012; since then the overall Manhattan residential market is up about 23% from then to now (as measured by the single figure StreetEasy Condo Index, of course). That loft, if sold now, would therefore have been worth about $2.25mm. (I say “fairly similar” because there was no bragging about condition when the 3rd floor was marketed, just that the 1.5 baths were new; while the 4th floor probably needs a full build-out after a long rental life, so did the 3rd floor.)
The buyer pool for properties like this cannot be very deep. (I’ve never been involved in such a sale, but have a [morbid] curiosity about them.) The buyer is looking not for cash flow (there’s not likely to be much from a rent stabilized tenant.) The buyer’s upside involves selling the loft after the tenancy concludes, which means making a judgment about the life expectancy of the rent-stabilized tenant. (As I said, morbid.) That’s when the payday occurs. In the meantime, you’ve either spent cash or gotten a commercial loan.
The recent seller bought the 4th floor in August 2006 for (only) $252,500. Clearly, that purchase was already subject to the tenancy, so it appears that the 2006-buyer-turned-2014-seller got tired of (no way to put this delicately) waiting for the tenant to die (or otherwise to not be able or willing to live there). If that was an all cash purchase, the (gross) gain was 221%, compared to the StreetEasy Index appreciation of … (wait for it) … 18%. Even with the tent having survived, the big picture numbers look good for the recent seller. Even after adding in taxes and common charges for 8 years (assuming the current rates for each, which were not in effect over the entire period, of course) and the cash outlay was (only) $131,000, with some of that offset by rental payments (most, perhaps, with taxes and common charges of only $1,313/mo now).
Still a pretty good deal, even if the seller did not have the opportunity to sell completely free of the tenant.
That’s the limit of what I know about this specific sale. But why have a personal blog if you can’t wander, and wonder….
this is a very funky building
I’d love to know the origin story of this condo, as it is rather unusual There are two commecial units on the first floor an in the cellar, then residential full floor condo units on the second through sixth floors. Property Shark shows a Condo Declaration was filed in 1992, apparently by the same three individuals who later transferred each of the condo units that have been sold since the condo was formed.
- they sold the 6th floor for $460,000 in June 1996 to the person who is now the condo’s Head Officer (per that Property Shark page)
- in August 2006 they sold the 4th, 3rd, and 2nd floors to the recent 4th floor seller, for $252,500, $800,000, and $252,500, respectively
- they sold the commercial units in May 2008 for $500,000 and $,070,000
The 5th floor looks like the only unit this trio hasn’t controlled, as it was bought in 1992 by the guy who did a(n intra-family?) transfer in 2011 and who shows as having voted from here as recently as last year. (The Shark page, here.)
I can’t see if the trio were the individuals who formed the condo, but you’d think so from the fact that they owned 7 of 8 units from Day One. And I have to wonder what the 5th floor owner thought he was getting into in 1992, or the person who bought the 6th floor in 1996.
Then there’s our recent 4th floor seller. We know what he was getting into: buying rent-stabilized units in hopes of making a killing down the line. He sold the 2nd floor to an LLC in August 2010 for $1.375mm, in a public sale, without mention of a tenant. Then, as we’ve seen, he sold the 3rd floor for $1.823mm in a public sale in 2012, without mention of a tenant. Curiously (did I mention this was a funky building?) the 3rd floor buyer was the same LLC as bought the 2nd floor from the same seller in 2010. Of course, he just sold the 4th floor to an apparently unrelated LLC.
Over all this time, only the 5th and 6th floors have been publicly offered for rent (see the StreetEasy building page, Past Activity tab). Further confirmation (iff any is needed) that the 2nd, 3rd and 4th floors were occupied by rent-stabillized tenants since before the condo was formed until 2010 (the 2nd floor) and 2012 (the 3rd floor). (Clicking about on the Shark, you will see that someone living on the 4th floor has been a registered voter here since 1986.) I guess the recent seller finally got tired of waiting for her, but his gross numbers look pretty darn good: he bought three floors for $1,305,000 in 2006 and has now sold all three for $4,009,000, in 2010, 2012, and last month.
It pays to be patient, I guess. But this is not a game for the faint-hearted, or the thinly capitalized.
Now the question is, why haven’t the 2nd and 3rd floors shown up as public resales, or as rentals??