“fully renovated” 39 East 12 Street lofts sells at 14% premium to 2010, with pre-2010 renovation

another Jedi mind trick?
I pointed out the mind games that broker babble can play with buyers last week in my July 5, did a Jedi mind trick garner 40% premium over 2010 for a small loft at 107 West 25 Street?, about a loft that seemed to have been newly renovated but was, instead, “meticulously built out” before it last sold in 2010. In that case, I can’t explain the fact that that loft sold in 2012 at a 40% premium over 2010 except by the guess that the buyer thought all the nice (“meticulous”) work had been done in between.

Now comes the dressed up Manhattan loft #607 at 39 East 12 Street (University Mews), which sold on May 31 for $1.25mm boasting it has been “fully renovated”; given that it sold on August 5, 2010 for (only) $1.1mm, my mind automatically races to consider whether the renovation cost $150,000, or whether the renovation created more value than it cost. That’s just the way my mind works. But it turns out that is the wrong question.

I am going to leave out four very important words from the recent broker babble, to be put back in later:

gorgeous south facing true one bedroom loft which has been fully renovated save the fabulous original exposed brick wall with cast iron columns. The open, state-of-the-art chef’s kitchen, accented with granite counter tops and island, is home to Wolf, Sub-Zero and Miele appliances. The bathroom is stunning and sleek; done in slate tile and finished with Caesarstone counters. … tilt and turn custom windows by AirShield are seamless and provide the ultimate in sound proofing. The enormous walk-in closet and bedroom closets have been custom designed in dark wood with nooks and crannies for everything imaginable. Add 12′ ceilings, recessed, controlled lighting complimented by stunning fixtures, … solid wood doors throughout as well as … remote controlled AC’s and there is little else one could ask for.

I have to be more careful in reading babble, because I actually read it this way (not noting the missing words on first read), yet concluding that the renovation was new. (I already had the hint that the market value for this loft improved 14% in 14 months in which the overall Manhattan residential real estate market did not.)

The second time I read it I found “brand new”, as in “Brand new tilt and turn custom windows by AirShield…”. Not until starting to draft this post did I find the other two missing words (actually the same missing word, missing twice); you will see them (it) immediately:

Add 12′ ceilings, recessed, controlled lighting complimented by stunning fixtures, new solid wood doors throughout as well as new remote controlled AC’s and there is little else one could ask for.

(If not, look where the ellipses were, in blue, above.)

So you’ve got this “full” renovation, in which the windows are “brand new”, the solid wood doors are “new”, and the air conditioners either have “new” remote controls or the entire remote controlled air conditioner system is “new”. Syntactically, what does that imply about the rest of the “full” renovation (save, of course, the brick wall and cast iron column; were these untouched??)? Are the kitchen and custom-designed closets (to pick just two examples) neither “new” nor “brand new”? Just fully renovated??

babbling can defy the laws of grammar
No, there is no way to easily parse the broker babble that was so successful that it got $150,000 over the August 5, 2010 price. (Why didn’t they touch the brick wall??) What’s the difference between “new” and “brand new”?

Having already tried your patience, and having already given you the link, here is the equivalent broker babble from the 2010 vintage listing (hint: you’re going to hate me):

gorgeous south facing true one bedroom loft which has been fully renovated save the fabulous original exposed brick wall with cast iron columns. The open chef’s kitchen,accented with granite counter tops and island, is home to Wolf, Sub-Zero and Miele appliances. The bathroom is stunning and sleek; done in slate tile and finished with Caesarstone counters. Brand new tilt and turn custom windows by AirShield are seamless and provide the ultimate in sound proofing. The enormous walk-in closet and bedroom closets have been custom designed in dark wood with nooks and crannies for everything imaginable. Add 12′ ceilings, recessed, controlled lighting and new remote controlled ACs and there is little else one could ask for.

Here are the differences that I see, with eyes that may have glazed over by now: the kitchen was just “open chef’s” in 2010, but is also “state of the art” in 2012; the 2012 “compliments” [sic] include “new solid wood doors throughout”.  I will bet you a quarter that neither the kitchen nor the doors have changed between 2010 and 2012.

Cheap as I am, I will bet you $100 that the windows were even more “brand new” in 2010 than they are today. And whatever happened to the AC, it was more “new” then. (By the way, there is no plagiarism issue, as the listing agents in 2010 are the same as the listing agents in 2012.)

what did the buyers know, and when did they know it?
There is a sense in which the recent buyers knew everything that they needed to when they bought it; that they knew it came with these appliances and finishes. Does it matter if the windows are 2 years (or more!) older than they thought, other than for warranty purposes? The doors and AC remotes are unlikely to be much deteriorated by 2 years of additional usage (or more!).

I assume they knew that the loft had sold at $1.1mm in August 2010 and that the 2010 listing description is substantially identical to the current marketing. The only way they would not is if they did not have a buy-side agent and do not have access to things like StreetEasy. Are there such buyers these days? Perhaps.

building comps are useful (d’oh)
Of course you should consider whether something has happened in the building to reset values since 2010, however unlikely that may be in a market as mature as 12th Street in the central Village.

I hit the wonderfully renovated loft #307 soon after it sold in my May 24, 2011, dream renovation adds 50% to 39 East 12 Street loft, with a title that tells nearly all the story. That post looked back at 4 sales in the "x07" line in this building between #607 in August 2010 and #307 in May 2011:

Based on the listing descriptions and photos, #407 was not quite as well dressed as #303, while #607 is of higher quality, and #307 at the top of the heap. The “x07” loft clearing prices line up appropriately. Arguably, the architectural renovation of #307 was 14% more valuable than the architectural renovation of #607. That was a very valuable renovation.

I am still of the view that the #307 renovation is superior to that of #607. (Read that post for my surprisingly enthusiastic response to #307, with both a pod and a raised platform.) The clearing price and market velocity of #307 14 months ago will seem familiar to those who peaked at the new #607 history:

to market to January 13, in contract at the full ask by February 17. Given recent sales in the same line, asking $1.25mm showed confidence that The Market would appreciate the quality of the dream renovation, and The Market did not disappoint.

(If you haven’t peaked, #607 came out on March 5 at $1.25mm and was in contract at full ask by April 4.)

I don’t see anything about the #307 sale that would re-set values in the building; just that The Market last year recognized that as a truly superior renovation.

There is one more ‘high’ sale at University Mews between the two times #607 has sold, but I don’t see the #808 sale at $1.275mm in June 2011 as a re-set either. That one has what looks like a higher level of renovation than #607 and a (roughly) 300 sq ft private roof terrace.

I can’t reconcile the recent sales price for #607 with these same building comps, or with the same loft comp. But willing buyers quickly paid the full asking price. That is how markets re-set.

© Sandy Mattingly 2012