Conventional Wisdom is sometimes right: add value by renovating a loft, reap the benefits on resale
While it did not work out for the folks who sold yesterday’s loft after dressing it up (October 14, long story about a small loft at 650 Sixth Avenue that finally sells up 28% over 2011; perhaps because the base condition of lofts in that building was high to begin with???), the folks who bought and then fixed up the duplex loft #103 at 39 East 12 Street (the University Mews) obviously benefited when they just resold the loft: they bought for $1.34mm a loft with “great bones–the possibilities are limitless” heading into The Peak on August 1, 2007; then created an “architectural wonder of an apartment … to stop you in your tracks”; then sold it on October 2 a few dollars above ask at $2.2mm. Chances are, they spent rather less than the $860,000m between those two prices to get from Point A to Point B. It’s nice when it works!
The full story is hard to see from StreetEasy, as you’ll find nothing there about the loft in 2007 except the listing history. But our listings data-base has the broker babble and some unflattering photos, all consistent with the summary babble I quoted above (“great bones–the possibilities are limitless”). Six years later, the changes are evident in the resale marketing campaign, and in the price. Check that babble, full of details and proper proper names and materials, even though there are “far too many details to describe”.
The Market loved the new look: offered on June 20 at $2.195mm and in contract by July 31 at the $2.2mm that closed on October 2. That small (and round) a deal over ask does not necessarily indicate a bidding war, but if there weren’t two or more interested bidders in July there was at least one buyer who did not want anyone else to take a shot at “his” loft.
2.5 levels of lemonade from a lemon of a footprint
The challenges posed by the footprint are evident in the new floor plan: it is not so much long, but it is narrow, with high enough ceilings on the main floor to double up a second (interior) bedroom over the kitchen at the entry wall. Taking the interior dimensions as accurate (I know: “all dimensions are approximate”), the full floors are just a tad over 500 sq ft with the mezzanined suite on top of the kitchen another 150 sq ft or so. However many feet are allocated to this coop under the offering documents, in real life there are about 1,200 sq ft on three levels, with the widest rooms less than 15 feet and only 2 windows on each full floor at the back wall. Among the awkward layout elements dictated by this footprint is the transit through the kitchen to get into the loft, a deal-breaker for many buyers.
Those buyers never considered this loft, of course, and they missed the truly lovely renovation, with the dramatic stairway, nearly 17 foot ceiling on the main floor (lower, but vaulted downstairs), a massive brick wall, and two columns partially exposed in the walls. There should be a great deal of light, at least on the main floor, but it is hard to say whether the lower level “garden” is a real (plus) amenity or whether the babbling just went on too long before they could sing its praises.
we’ve been here before, of course
We were here, with a similar story, in my May 24, 2011, dream renovation adds 50% to 39 East 12 Street loft. That involved a somewhat smaller loft on a single level that had been purchased as a build-your-dream loft for $850,000 in May 2007 (just a little earlier than the sale of #103) then again (after the dream had been realized) in May 10, 2011 at $1.25mm. Then, my July 11, 2012, “fully renovated” 39 East 12 Street lofts sells at 14% premium to 2010, with pre-2010 renovation, considered a neighbor that sold at the same $1.25mm as the loft in that May 24, 2011 loft, this one boasting of a renovation that was already in place when the loft sold at only $1.1mm not quite two years earlier.
Loft #103 at $2.2mm is at an entirely different price point than those two neighbors, each of which is not all that much smaller than #103, and each of which was also babbled (legitimately) as being in well-renovated, high end, condition. The three levels give #103 an advantage the others lacked (the “before” values confirm that), as does waiting until the more feverish 2013 to sell.
To recap, with help from the StreetEasy Condo Index: you can “get a feel for” the trends in the overall Manhattan residential market by looking at these index values:
- 2,050 in May 2007 when #307 sold at $850,000 as a build-your-dream
- 2,160 in August 2007 when #103 sold at $1.34mm needing a build-out
- 1,910 in August 2010 when #607 sold at $1.1mm after having been renovated
- 1,910 in May 2011 when #307 resold at $1.25mm after renovation
- 1,940 in May 2012 when #607 sold again at $1.25mm
- 2,170 in August 2013 (as close to October as the Index permits today) when #103 resold at $2.2mm
These Index values imply that we can ballpark how much of these changes were due to market changes, with the balance attributable to other factors (the renovations of #307 and #103, obviously) as the renovations accounting for the entire differences. So long as the buyers-turned-renovators-turned-sellers paid less than $450,00o (in the case of #307) and $860,000 (in te case of #103) they created more value than they spent:
- #307 from May 2007 to May 2011, -7% market, 107% other
- #103 from August 2007 to now, -0.5% market, 100.5% other
It seems pretty likely to me that the #307 folks spent much less than $400/ft and the #103 guy much less than $700/ft; the rest would be profit (before considering other expenses, of course). Nicely played, folks; nicely played. For, aside from their own personal financial benefit, proving Conventional Wisdom is borne out, at least some times.