130 Fulton Street loft sells 4% over 2007, but there’s a really big catch

not a market-driven increase, even if a market price
Readers who remember my September 27, 2011, is the Manhattan loft market back to (up to) 2007? 61 repeat sales say “probably”, “a bit” (one of my favorite posts of 2011), will hardly be surprised that the “1,853 sq ft” Manhattan loft #5A at 130 Fulton Street sold for $1.495mm at the end of 2007 and just re-sold for $1.56mm. After all, lots of lofts had resale experiences like that in 2007 and 2011. Of course, a number of lofts had the opposite experience, selling for less in 2011 than in 2007; those ‘losers’ were out-numbered about 2:1 by the ‘gainers’, so loft #5A has a lot of company. The catch is that the increase in sales price for #5A is certainly not attributable to a rising market, as the loft was bought as “raw” in 2007 and sold 5 weeks ago as “a spectacular loft that has been carefully thought out with no expense spared”. Bummer, dude: no way they spent less than $65,000 sparing no expense.

You can do the math with your own sad assumptions, but upgrading the kitchen plus adding a second bath plus adding 2 bedrooms plus moving the central air plus plus plus whatever else “[n]o detail … overlooked” entails is some six-figure project. And not likely these six figures: $100,000.

white box is not raw
Although the recent broker babble describes the space as being “completely raw” when the recent sellers bought it (November 5, 2007, for that $1.495mm), that is a bit of unfortunate broker babble. This 2005 conversion to residential condominiums left #5A with finished flooring and (exterior) walls, a kitchen, and one bath and no other walls (floor plan, here). I wouldn’t call that “raw”, but maybe my Broker Babble Handbook is outdated.

What’s weird is that the original purchasers did make a pure market play, buying from the sponsor at $1.42mm on July 13, 2006 and re-selling November 5, 2007 still in white box condition at $1.495mm. (The weird part being that the market play gained only $75,000, a paper gain more than offset by selling fee and transfer taxes on the way out.)

If that 2007 buyers planned to live there a while after fixing it up, those plans did not work out, either. Loft #5A was first offered for sale in a new-and-improved condition two and a half years ago, starting a multi-firm, multi-year effort:

time and money, money and time
If it took 6 months to do the no-expense-spared renovation, the 2007-buyers lived it in about a year and a half before trying to move on, even though it was not eventually sold for 30 months. If there is a hint in the asking prices (a big if), the 2007-buyers-turned-2008-renovators-turned-2010-(hopeful)-sellers thought there was enough room in asking $1.75mm to compensate them for the $1.495mm purchase price plus the renovation (in which no expense was spared, no detail overlooked). With “1,853 sq ft” to work with, that’s only $138/ft, before selling expenses like the sales fee and transfer taxes.

In other words, they were staring with a pretty thin margin, both in January 2010 and in September 2011. Which margin shrunk significantly in May 2010 and October 2011. And (alas) disappeared completely by April 2012.

There’s no real story in a loft selling in 2012 for 4% more than in 2007. But when you add in an intervening no-detail-expense renovation, the story is that these sellers lost a lot in the 2007 to 2012 journey.

In overall cold market terms, nobody cares about individual sellers and individual buyers, no matter how interesting their stories. In this case, selling #5A at $842/ft (with those wonderful finishes and no view to speak of) compares rather favorably to the two higher flor “B” lofts I discussed in my August 11, 2011, stubborn seller of 130 Fulton Street loft takes 10% haircut. While one of those was at $882/ft (the other was at $805/ft), that one had all sorts of custom finishes, 19 windows and views of the Brooklyn Bridge, Woolworth Building and the Municipal Building. Loft #5A does not look too bad at all against those comps, suggesting that the problem was not the 2012 sales price or the intervening renovation, but the 2007 purchase price. Not much to be done about that….

The more recent sale of loft #12A in the building, which I hit in my May 2, 130 Fulton Street loft with incomparable light comps out 3% above 2006 after 13 months of a boring price, also suggests that that is the case. That one 7 stories above #5A had “incomparable light, views and a perfect layout”, yet closed only $110,000 higher. Hard to say that #5A was (much) under-valued in the market by this comp, either.

To recap: the recent sale of #5A? Not so bad. But not so good as to overcome a bad starting point. It appears that two sets of buyers overpaid for unimproved space. Both sold for (modestly) more than they paid, but in the first case netted a loss after sales expenses, and in the second case netted a (bigger) loss after sales expenses and no-expense-spared renovations. O. U. C. H. and D. O. U. B. L. E.  O. U. C. H.

© Sandy Mattingly 2012