when bad things happen to nice lofts, 136 Baxter Street edition

then to now, with detours
The simple facts about the “2,558 sq ft” Manhattan penthouse duplex loft (with “600 sq ft” of private terrace) #7A at 136 Baxter Street (the Machinery Exchange) is that the guy who paid $4mm when he bought it from the sponsor on June 5, 2009 just sold it for $3.8mm. Those simple facts are evident from those two StreetEasy hyperlinks, but the intervening history is a little garbled on StreetEasy, and painful for the recent seller. The last bit of history is on StreetEasy here (though it is not coupled with the deed); StreetEasy associates the deed with an older extended marketing campaign, though that trail ended a year ago. Putting it all together yields this long effort:

(Obviously, ignore that “listing sold” with the March 15, 2012 date in StreetEasy, as the “new” listing started up soon after, by the same agents with the same firm.)

If the numbers could talk (er … type) they would say things like this: the guy really thought he had gotten a deal from the developer (after all, he started asking 22% less than a year later); the guy should have gotten a deal when he bought from the sponsor (after all, it had been on the market from October 2007 at $4.5mm without finding a buyer until this guy stepped up to the plate in March 2009, still nuclear winter for the overall Manhattan residential real estate market); the guy (correctly) figured that the 2011 market was better than the 2010 market, but he was still too high; the guy was incredibly patient, being on the market continuously for 30 months (you rarely see that) without a break, and held at his last asking price that would give him a gain (after paying a sales fee) for 6 months in 2012, before caving twice in 6 weeks.

what’s not to like?
The loft has a pretty good floor plan for a duplex, with entrances on both floors, with 2 bedrooms plus a quirky (windowed) home office on the lower (6th) floor and the living room, kitchen and terrace above. None of the rooms are cramped (even the quirky home office is 8×20 feet) and the upper level at 14×33 feet probably feels even larger, with floor to ceiling windows looking out on the terrace. The classic loft elements (“10 foot timber beamed ceilings, original cast iron columns and exposed brick”) seem to be limited to the lower floor, suggesting that the upper floor is a true penthouse: a structure built on the roof of an (originally) 6-story building. Finishes appear in the photos to match the broker babble: “modern luxuries like red oak floors, full length, custom designed, steel frame windows and a high-end Valcucine kitchen which vents out”.

The location is what it is, and is what it was when the sponsor was selling: the gritty commercial blurred border between Little Italy, Chinatown and the industrial past that give this condo its name (Machinery Exchange). While a market-limiting factor, in other words, it is not a new market limiting factor. (The description on the StreetEasy building page is poetic, but not quite true in my experience: “quiet, undiscovered, almost secret, tree-lined street”.)

One thing does jump out in comparing the sponsor’s listing to the most recent listing: monthly real estate taxes were $1,264/mo and are now $2,643/mo, with common charges claimed to be unchanged at $1,992/mo. The extra $1,379/mo can be a new market limiting factor.

can comps help?
With 14 units and only one resale in 2010 and another in 2011, there is hardly a rich history on which to base comps. The only recent other sale was #2C, a “1,558 sq ft” simplex 2-bedroom 2-bath that took 4 months and 3 prices to get to contract before selling on January 9 at $2,083,333. Unlike the #7A experience, the #2C original purchaser exited at a 19% premium to the original purchase (in this case, May 28, 2009); like #7A, the real estate taxes doubled since the sponsor sale. That sale at $1,337/ft, if used as a baseline for interior valuations in the building in order to riff with The Miller about valuing the exterior space, works pretty well:

The #2C sale implies the #7A interior was worth $3.42mm, leaving only $380,000 for the “600 sq ft” terrace, or $633/ft for the private terrace. That $633/ft happens to be 47% of the implied value of the interior, which fits nicely in The Miller’s rubric of outdoor space being worth 25% to 50% of the interior, with space like this (directly accessible from the interior public room, proportionate to the interior size) warranting the upper limit instead of the lower.

In other words, the #7A sale at $3.8mm, difficult as it was for the original purchaser at $4mm to accept, lines up essentially perfectly with the only other sale in the building since July 2011. And it is higher than the 2011 sale or the 2010 sale.

The 2011 sale deed is for “#5A” at $1.7mm on July 28, 2011, which matches with the listing for the “1,594 sq ft” duplex “#6A”, or only $1,066/ft. That helps explain why #7A did not sell in 2011 when asking approximately an adjusted $1,678/ft to approximately an adjusted $1,573/ft. The 2010 sale was the “2,580 sq ft” #3AB combination, which sold on October 13, 2010 at $3,054,750, or $1,184/ft, at a time when #7A was asking $1,627/ft.

In other other words, it appears that the #7A 2009-buyer-turned-(eventual)-2013-seller overpaid in 2009 rather than getting squeezed by The Market in 2013. O. U. C. H.

© Sandy Mattingly 2013