303 Mercer Street loft with nothing but potential sells for $640/ft

why so low?
On the one hand, the Manhattan loft 303 Mercer Street #B103 (in Snug Harbor; awwww) sold on January 10 at the full asking price of $1.6mm, as a loft that claimed a “renovated kitchen” and “unique architectural details”. On the other hand, the loft is said to be “2,500 sq ft”, so that $1.6mm comes to only $640/ft, an awfully low value for a Manhattan loft. (Note to self: post about the other Manhattan lofts that have cleared under $700/ft, as there are more than you’d think; about 3% of the lofts in the Master List of Manhattan Lofts Sold Since November 2008 that sold in the second half of 2010 cleared under $700/ft.)

That $640/ft market response was possibly because of this invitation to get creative:

Currently configured with two bedrooms and three full baths…. Easily converts to a three bedroom plus – bring your architect and let’s get creative.

Remember that the sale was at the (last) asking price, so it is not as though the seller (or agent) was surprised by the market response despite (as we shall soon see) dramatically higher valuations rather nearby.

The initial asking price for this loft (with another firm) was $1.75mm, beginning on April 15. But that $1.6mm price that later was successful in generating an October contract had been in place as early as May. It took a while for this loft to find its buyer, even at the right price.

no hinting here
That original listing description was more explicit about what a buyer should expect to have to do:

Bring your designer or architect and imagine the possibilities for your new home! This unique Village triplex has enormous potential!

The triplex layout might well have been challenging for some buyers, but the neighbors next door had proved a couple of years earlier that there is (was!) a strong market for a triplex layout in this building.

timing, timing, timing (plus condition)
The “2,287 sq ft” #B102 sold on January 31, 2008 (essentially at The Peak!) at $2.575mm. or $1,125/ft. (The floor plan is only on the Corcoran site, which also has more pictures than the StreetEasy version.) Yes, it was obviously in much better condition than #B103, and it enjoys a “375 sq ft” garden and some side windows on the lower level. I am just not sure that all that should add up to a $485/ft difference, Peak to now.

I have some trouble accounting for the 43% discount for #B103 compared to #B102, even taking into account Peak pricing, that modern renovation of #B102, and a better layout for #B102. Maybe. But there is a way to rationalize it.

Start with the “375 sq ft” garden, which merits not a single photo of the 11 in the listing. How much sun gets down there, I wonder? I am going to guess that it is worth no more than 25% of the interior on a $/ft basis, giving us an adjusted Peak value of #B102 of $1,081/ft ($2.575mm / [2,287 + 94 = 2,381]).

Maybe if you figure the hyper-local Manhattan loft market is currently down 20% since The Peak. (That would take the #B102 $1,081/ft peak value down to $865/ft.) Then you’d have to value the #B102 renovation as worth $225/ft over the condition of #B103. Maybe.

2005 vs. 2011
But that does not quite do it for me, as far as reconciling the 2011 $640/ft valuation for #B103 and the Peak adjusted value of #B102 at $1,081. At the risk of tying this analysis up in knots, there is an earlier and primitive data point for one of these lofts.

When #B102 sold on May 3, 2005 for $1.45mm it needed, I am told, a complete renovation. That pre-Peak-beginning-to-be-frothy value computes to an adjusted primitive-pre-Peak value of $609/ft. Might the hyper local loft market (west of Broadway, south of 8th Street) be up only 5% from May 2005 to January 2011? That seems a bit low to me, but you’ve heard before that the Manhattan residential real estate market is not efficient, so maybe….

© Sandy Mattingly 2011