old house guy takes a million dollar bath in new loft on Madison Square

real estate is a tough game, eh Bob?

The end of the story through the sale of the Manhattan loft #20A at 15 East 26 Street (Fifteen Madison Square North) has been anticipated since one of the earliest television real estate celebrities put it up for sale in May, already at a loss to what he had paid the sponsor nearly 3 years ago. Until the end, it was the kind of story that warms a Manhattan Loft Guy heart: guy who made his name (and fortune??) renovating and flipping old houses in Boston, paid $6,007,675 on January 16, 2009 for a “2,577 sq ft” penthouse loft with a terrace of about 600 sq ft facing Madison Square that “offers the finest contemporary finishes within a prewar setting” with high ceilings and huge arched windows in one of the top Manhattan loft condominium conversions of the Great Recession. (The media was all over the story when he listed the sale; here is Curbed’s account.)

That price point is outside my usual area of dollar interest (the Master List of Manhattan Lofts Sold Since November 2008 tracks downtown loft sales between $500,000 and $5,000,000), but his loss is my ‘gain’: when his sale closed on November 9 it was right at the top of my range, $5,000,000. With a round number like that, his loss is easily quantified: $1,007,675, before considering his expenses.

I will leave it to more professional real estalkers to figure out where he is going from here, but I will note that completing a sale at a 7-figure loss is evidence of great motivation. The man has a plan.

(I started this draft yesterday, after noting the deed in my Saturday scan for the Master List; it would be breaking news if The New York Observer had not hit it yesterday afternoon [Sunday blogging!], or Curbed had not replayed that link this morning. Oh well.)

playing with large numbers
If we can use the September 1 sale of the “3,236 sq ft” #12B to set a value for premium interior space in the building, that price of $5,575,000 computes to $1,723/ft. There should be some plus factor for #20A being 100+ feet higher and more plus for having a longer exposure south, over the park. If you call that 10% in total (conservative, no?), you’d get troubling math: the interior space for #20A would be implied as $1,895/ft, or nearly all of the recent clearing price ($4.88mm). Valuing the (roughly) 600 sq ft terrace in #20A at $112,000 seems … ridiculous, only 10% of the value of the interior on a $/ft basis.

If you use the same assumptions in comping #20A and #12B, as above, but factor in some floor plan negatives you get a more reasonable outside space valuation for #20A. The #20A floor plan has been revised to maximize the principal benefit of the space, which is the Madison Square view, but at the cost of the second bedroom. (The Observer’s note that “[u]nlike many of Mr. Vila’s previous purchases, it appears he had no intention to renovate this property, as The Times noted…” is not quite right: the babble focuses on one change in the floor plan, “the flexible floor plan allowed the current owners to open a wall between the living room with a gas fireplace and the second bedroom creating a massive expanse of public space fronting the park”.)

As is, #20A is a 1-bedroom+home-office space. The loft #12B floor plan is not only larger, but has dramatically greater utility, with 3 real bedrooms and an (interior) home office. Valuing the floor plan difference at (a conservative) 10% premium in favor of #12B leaves the implied interior value of #20A at $1,723/ft, or $4.44mm. If the terraces account for the $560,000 balance, that $933/ft is a much more reasonable 54% of the interior on a $/ft basis. I suspect The Miller could live with that (as in my May 6, 2010 explanation of The Miller’s rubrics).

This process of reasoning backwards from two loft sales is obviously results-driven, but is a [moderately] principled way to consider the same-building facts. Assuming, as I must for this purpose, that The Market is rational.

Note to self … watch for the clearing price of another high floor south-facing interior space in the building that is in contract; that looks like it will blow up this rational analysis of same-building facts. For now, that looks like it will be a huge explosion….

grand living is not cheap
I don’t know the details of the finances at 15 Madison Square North, but condo living here will cost you some bucks, month after month. In addition to common charges of $2,720 and taxes of $3,220 for the “2,577 sq ft” #20A per month ($5,940, or $2.30/ft), the babble reveals “a working capital reserve charge of $408 per month and a capital expenditure charge of $1793 per month”, both of unstated duration. That is another $2,201/mo, or $0.86/ft. That is $3.17/ft, in total.

playing with house money?
Celebrities sometimes leave a bright enough trail that they can be followed. Not just from Boston townhouses to Madison Square lofts, but with intervening steps. You’d need to know the whole trail to put this latest million dollar hit in context, but the guy has had some hits and some misses in his very extensive Manhattan real estate career.

His earliest Manhattan purchase that I see publicly reported was a full-floor “5,027 sq ft” loft at 90 Franklin Street directly below Mariah Carey, per this Observer bit from October 2002, for which he paid $3.386mm. The Observer had it then as “two years ago”, but that buy was actually in December 1999, from the sponsor (per our data-base; StreetEasy does not reflect the sponsor sale.) He was trying to sell for $5.25mm (the news in that October 2002 Observer piece), but did not succeed until March 2004, at $3.725mm. That one was a (small) positive in gross terms, plus $339,000 in 4+ years.

Between that Franklin Street huge loft buy and the beginning of its resale campaign, the old house guy’s wife took title to a condo at Museum Tower, 15 West 53 Street. I can’t find a record of her purchase (said to be in January 2001) but she sold the “2,000 sq ft” apartment for $4.5mm in May 2008. Details won’t change the fact that this one was sold at the right time for a big win. (She probably paid in 2001 around the $657/ft paid for this “1,900 sq ft” unit on a nearby floor around the same time; if so, her gross gain was on the order of $3.2mm, or nearly 300% in 7 years.)

Timing is everything, right?

Fun fact: the Franklin Tower loft immediately below the old house guy’s old loft sold running into The Peak in August 2007 for $7.25mm. Had he held it until then, instead of selling in 2004 ….

After that huge Franklin Tower loft sale in March 2004, the guy bought the 1-BR #49F at Museum Tower for $1.45mm in April 2004, which he used as an office and which he sold for $2.85mm in March 2007, per the New York Times in February 2008. That sale deed is here, generating a gross gain of nearly 100% in 3 years.

time out for a recap
Let’s net out these personal use purchases and sales, in gross terms, assuming the wife paid $1.314mm for #35A at Museum Tower in January 2001:

Nov 2011 15 East 26 St ($1,007,675)
May 2008 15 West 53 St $3,186,000
Mar 2007 15 West 53 St $1,400,000
Mar 2004 90 Franklin St $339,000


Net-net, not too shabby.

old-fashioned buy+gut+sell
No one likes to lose money, not even a guy who (with his wife) is very likely nearly a $4mm gross winner on Manhattan lofts and apartments, 2001 to 2011, even with the recent 7-figure bath.

But the old house guy made his name (and fortune) buying old houses, not brand new lofts (as at 90 Franklin Street and then 15 East 26 Street) or luxury condo apartments (as at 15 West 53 Street). The jury is still out on his big Manhattan play in that sandbox.

Again, the New York Observer was on his butt, with this March 2008 story about what the guy and his son have been trying to do since buying an Upper West Side townhouse in 2004, just after selling at Franklin Tower and buying that “office” at Museum Tower, in fact. Guy & Son paid $4mm for a “7,562 sq ft” townhouse (deed record here) from the estate of people who had owned it for 60 years. The plan was to gut it (except for 2 protected apartments) and re-sell. As of that March 2008 Observer, they had just finished the renovation, and made some money in that process:

Their renovation was filmed for season 15 of the TV show Bob Vila’s Home Again: Clips like “Salvaging the Sink and Removing Asbestos Tile” or “Installing the Chimney Liner” are available in all their artful glory online.

Per the StreetEasy building record, progress has been … errr … slow, since completing the renovation in 2008. They did not sell the whole house, as they hoped, and appear to have #3 (and, presumably, one protected tenant unit) unsold, with apartments #2, #1 and the Penthouse having sold and occupied-rent-stabilized #4 in contract. Giving them credit for a full-price contract for #4, that math looks like this:

#2 Nov 30, 2010 $2,438,708
#1 Feb 28, 2011 $765,000
  June 30 $3,049,672
#4 (contract) $495,000

Having paid $4mm to buy, some significant sum for the renovations (offset, in part, by television revenue and their own sweat equity), Guy & Son are about to reach the sales total of $6,748,380, seven years in. That hardly looks like a home run, whether they financed the purchase or not.

Of course, this is a just series of snapshots of the old house guy’s Manhattan residential real estate adventures going back ten years (with wife, and son). He or they may have bought and sold other properties in Manhattan in this time, and they almost certainly own property elsewhere.

The guy is not now homeless. Selling at a $1mm loss is evidence of A Plan, as noted above. My guess is that The Observer will notice the next step, if there is a Manhattan next step. He will only be back on my radar if that next step includes a Manhattan loft; snob that I am, I am not especially interested in his townhouse troubles, or his Museum Tower history.

© Sandy Mattingly 2011

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