comping is, of course, hard, yet harder for some lofts than for others
The word “unique” is vastly over-used in Manhattan real estate broker babble, where grammar misdemeanors can modify that word in ways that can be aggravating. I have a practical test for whether a given property is unique: unless it is difficult to find legitimate comps, try another word. The “1,829 sq ft” penthouse loft #502 at 300 West 14 Street (The Bank Building) exceeds that standard, and proved to be a hard sell, needing four prices and nearly a year to sell.
This difficulty must have frustrated the sellers, and the sales team. Heck, in retrospect it frustrates me. While the degree of frustration is different (it was their money, of course), the source was the same: while this penthouse loft is very difficult to comp, the comps that are most relevant implied the loft was priced correctly for the entire marketing period, and that it should have sold higher. It didn’t, alas.
To begin to appreciate how difficult this loft was to comp, tell me what word is missing from this bit of broker babble:
…this pin-drop quiet home, a stunning duplex loft with two full baths, and two terraces.
If you said “bedroom”, come on down! The listing description does refer to a “home office / guest room” and a “master suite” and the floor plan uses the magic word, but the so-called master bedroom is open to the living space below (i.e., it is not a “room” let alone a “bedroom”), and it is not clear that the labeled Office / Bedroom is a legal bedroom (is that irregular space 80 sq ft??).
Keep that floor plan in mind when you consider the main listing photo:
This is a great listing photo, taken from the single spot in the loft that best presents the “dramatic 18-foot high wall of windows [that] showcases open views of the West Village and leads to a sunny terrace”. Every step you’d take away from that window will emphasize the (10 ft??) ceiling rather than the 18 ft of window height. This photo makes it plain what nearly all the the lower level must feel like, away from the 18 ft height window:
Don’t get me wrong, this is a pretty spectacular loft, and that main listing photo isn’t misleading; it is, however, selling. I’m trying to help folks ‘read’ the floor plan and photos (especially folks who don’t look at actual interiors and floor plans plus photos of those actual interiors as part of their day job). All in an effort to demonstrate how unusual this loft is, even in a Manhattan loft world that contains many unusual lofts.
The loft claims “1,829 sq ft”, which is Pretty Darn Large by any measure. And a portion (a slice, if you will) has 18 foot ceilings (and window). The fixtures and finishes look pretty good, though there’s no bragging about any materials or brand names. Chances are, it feels pretty luxurious, possibly even the “stunning” the babble claims. But it is a loft optimized for the one or two people who sleep on the upper level.
Let me put this delicately … the master suite is not only open to the light through that huge window, it is open to all sounds in the entire loft, unless the two bathroom doors and the door to the guest / office space are closed. And vice versa. If one half of a couple wants to be alone (out of earshot of the other half), get behind one of those closed doors. One partner can read downstairs while the other sleeps, but probably can’t watch TV without bothering the person upstairs. If a couple entertains (the loft looks like a terrific entertaining venue) and (as in my house) one partner ‘calls it a night’ while the guests are still at the table … that partner won’t get to sleep unless / until the guests leave, or they go outside on one of the terraces.
These considerations will be significant for some buyers, irrelevant to others. But you don’t see that many spaces this large in which these practical life considerations might be ‘issues’. Certainly not many at this price point.
Did I mention that this loft is sufficiently distinctive that it is difficult to comp?
sellers had trouble discovering the market clearing price for this loft
By the numbers, and dates:
|Nov 8, 2017||new to market||$2.75mm|
|May 2, 2018||$2.6mm|
(*StreetEasy has the unfortunate habit of not being able to match things like a sales listing for “#PH502” [“cannot find gov’t record” on the Past Sales tab; “sales reported but not yet recorded” on the listing page] with the deed record for “#502”, which may be why humans still have a future in real estate data.)
That’s 51 weeks from start to finish, 46 weeks from marketing to contract. It took nearly six months for the sellers to appreciate that The Market wasn’t going to bite at $2.75mm, but only about eight weeks for each of the next two prices to result in another price drop and then only a month for that last price to provoke a contract. The deal was done $490,000 off the first ask, or 18% ‘discount’.
a nightmare of adjustments to comp
If you were trying to put this property in context with “similar” properties a year ago, where would you start? You won’t find many “+/- 1,800 sq ft” spaces with two bedrooms, and even fewer with a single bedroom, and then you’d have to adjust for this maybe-a-bedroom-called-a-guest-room plus open master suite. You’d have to give this loft a significant premium for light, compared to most (somehow comparable) units. Of course, this is the West Village, a premium and charming neighborhood; but the corner of 8th Avenue and 14th Street is not at all charming, and not necessarily premium. Make an adjustment for that, too, if you can.
Two terraces are rare, especially in the West Village. (Notice, I didn’t say unique.) Ten foot ceilings (as on most of the lower level) are not so unusual, but an 18 ft wall of windows is (again) rare. How to adjust against a conventional duplex (with, say, 9 ft ceilings), or a simplex layout, even with tall (12 ft) ceilings? My math education didn’t teach me much differential calculus, but that’s what this feels like, with a host of indeterminate values. (Tell me in the comments if I just committed a math term crime.)
we can get closer
Even my one go-to Manhattan loft comp principle fails in this case. I’d generally start with same-building sales, and prefer to adjust for time than to adjust for the myriad other adjustments needed for sales in different buildings. The Bank Building is a slippery source for comps, as there are only 11 units, each different from each other in size and configuration, as well as outside space.
When #502 came to market at $2.75mm in November 2017, the most recent sale at 300 West 14th Street was the “3,450 sq ft” combo unit #202/204, which sold for $4.85mm 14 months earlier. I saw that with a client at the time, and it certainly has the renovation and drama (er … “wow factor”) claimed in the broker babble. They didn’t say “unique” explicitly, but “one-of-a-kind” will do (and did). That one is similar to #502 in having a huge window wall (20 ft high, in that case) and an upper level (here, termed a mezzanine, probably because it is set further back from the huge window). No real bedrooms there, either, with the two sleep areas in #202/204 on the mezzanine level and open to the lower level at the window wall.
There’s just a tiny bit of outdoor space, of a character much inferior to the terraces of #502:
That one sold (quickly: 2 weeks to contract!) for $1,406/ft before adjusting for outdoor space. Call the patio value at 25% of the interior space to get this over quickly (it is truly trivial in scale, in any event), and we’ll ballpark that sale at $1,396/ft. Which implies that #502 would be worth about $2.55mm for the interior, before adjusting to add the terrace value, for light, and adjusting for time.
Time is easy to adjust for, at least in ballpark terms. The StreetEasy Manhattan Price Index (scroll and hover, scroll and hover, here) was $1,145,653 in September 2016 and $1,165.047 in November 2017. I’d call that ‘flat’, but you anal types might add 1.7% to the implied $2.55mm interior value and get to about $2.6mm.
You know how to do this: at $2.6mm for “1,829 sq ft”, that’s $1,422/ft. Guesstimate the two terraces (275.5 sq ft, or so) at (conservatively) worth 50% of the interior and we add about $196,000 for the terraces … or roughly $2.8mm for the entire unit (at an adjusted 1,997 sq ft).
Whether the sellers and sales team went through this sort of analysis, or this was just a real estate coincidence, they offered #502 for $2.75mm. (They wouldn’t have had up-to-date market data, such as the StreetEasy Manhattan Price Index yet.) Not a bad place to start, “objectively.”
There’s theory and there’s reality (or Theory and Reality). That theoretical very rational price didn’t work, as we saw.
By the time the #502 sellers dropped to $2.5mm (giving away the terraces! again: see my November 6, Tribeca penthouse loft sells at 81 White Street with 3 free terraces), there was a new data point in town. The “2,500 sq ft” penthouse unit next door (#503) had just sold for $3.85mm. That one zoomed through The Market while #502 was lingering, finding a contract $100,000 over ask within a month. That floor plan is even more broken up than we’ve seen so far, with three levels of living space, including two real bedrooms and the easy prospect for at least one more, but lacking a dramatic high window wall. Plus, even more outdoor space:
Among friends, let’s call that as 700 sq ft of outdoor space and ballpark it as worth 50% of the interior. Hence, the $3.85mm spent for the entire loft #503 in June 2018 yields an adjusted price-per-foot of $1,351/ft. Uh-oh ….
Applying that implied value to the adjusted 1,997 sq ft for #502, the not just same-building but next-door sale of #503 while #502 was offered for sale implies that #502 would then have been worth about $2.66mm. At the exact time that the asking price of $2.6mm was not working. Uh-oh ….
I could argue that #502 is more dramatic than #503 because of the 18 ft wall of window, but that the #503 outdoor collection (and maybe the kitchen finishes) are superior. Let’s not argue, k?
In Theory, based on the mid-June sale of loft #503, loft #502 was asking exactly the right price to get a deal done, before dropping the price in late June to $2.5mm. In Theory, dropping the loft #502 ask to $2.35mm before Labor Day should have provoked a bidding war.
But Facts is Facts, and each of these lofts is sufficiently different from each other to weaken the predictive value of one for another. Certainly, each of these lofts is sufficiently different from each other to confuse the predictive value of one for another.
In Fact, #502 took much longer to sell than the neighbors. In Fact, loft #502 sold for a significantly lower adjusted price per foot than the others (if you accept my ball parking of the various outdoor space values). At $2.26mm, #502 is badly bringing up the rear.
*Raw price, without adjusting for time.
In Theory, this sequence is … nuts. But that’s life in the Manhattan loft world (sigh).