New York Times explains “how to land a loft”

I take this personally

The headline feels like Manhattan Loft Guy bait, at least to me: the latest Michelle Higgins Sunday real estate piece in the Old Grey Lady is How To Land A Loft (in tomorrow’s physical paper, on-line now of course). The thesis is that in a tight Manhattan loft market, buying a commercial loft and going through the process of converting it to legally residential space expands the market. True that. Higgins can’t be accused of sugar-coating the difficulties, as her examples include folks who formed an LLC with complete strangers in 2010, paid their share of the LLC’s purchase of the building ($800/ft) around the beginning of 2011 and began renovation, moved in in September 2011 (not sure if that was legal, yet), while renovations continued through June 2012. They have a spectacular loft, now (apparently) a legal residence, which they believe “cost 20 to 30 percent less per square foot than a regular apartment”. It’s nice when it works.

Interesting stuff, not for the faint-hearted (or poorly capitalized). It is one thing to buy into an established residential coop or condo, with a history of operations that establishes that the strangers who will become your new neighbors can run a building for mutual benefit; it is another thing to start a LLC with the hope that all will get along well enough to build out the building and navigate the darn regulatory twists and turns to get legal residence status, and then run the thing for mutual benefit of all. It is one thing to get a standard residential mortgage (even a big one), at favorable rates based on your own credit worthiness; it is another thing to get a commercial loan as part of an LLC (higher rates, higher down payment) and hope to refinance down the line, when all is done. It is one thing to take on all this uncertainty, and project management as a professional developer; it is another for civilians to bite off the same challenges. Again: It’s nice when it works.

Fascinating stuff, and a sober (and seemingly fair) rendition. Having been involved with two buyers this year who considered lofts with Certificate of Occupancy or other Department of Buildings issues (one bought in, one bought elsewhere) I have seen the toll that uncertainty and bureaucratic swamps can cause even sophisticated buyers. (Those folks did not set out to buy such problematic properties, unlike the folks profiled by HIggins.)

cleaning up building issues, literally

The story about the “a green-insulation consultant, bought an 1,800-square-foot loft in the flower district in Chelsea for $970,000” 8 years ago makes for great journalism. First,

“It should have been a 6- to 12-month process,” … adding that outstanding building issues have continued to thwart her efforts.

(That’s “continued”, as in 8 years later.) Second,

Ultimately, [she] and a few other residents in the 16-unit building who were in the same boat took matters into their own hands. First they tackled the fees accumulating from improperly sorted refuse. “I put on a mask and gloves and started going through our garbage,” she said. “It was disgusting.”

She supervised work on the elevator to make sure it would pass inspection. And with help from neighbors, she cleaned out the basement, clearing it of dusty sinks, old televisions and other discarded items. “We literally got rid of all that stuff, and then because the process took so long, we did that again.”

Sometimes it takes more than money to solve these problems. Eight years later.

That flower district building is pictured in the Times, so it is easy to see which building she has been cleaning up. That’s her purchase on February 17, 2005 on the StreetEasy building page. Only two lofts identified as commercial units in this 16 story building have changed hands since 2004, with 9 others sold without being identified as commercial. (Presumably, this building is like the nearby Capitol Building at 236 West 26 Street, which has a mix of commercial and residential lofts; hence, that energetic owner and [only] “a few other residents in the 16-unit building who were in the same boat”…..)

I’ve hit sales here only once, in my December 15, 2011, 151 West 28 Street loft sells at $694/ft, $400,000 short of triple mint. The data set is not large enough to see if there really is a difference in value between the “few” units in the same (commercial) boat and the others, but so far no one has sold for as much as $1,000/ft, even after mint-y renovations. (My post hit loft #4W as the ‘done’ pole in a pair of done/not done neighbors sold in 2011; the also done loft #4E could not break 4-figures-per-foot when it sold as recently as 9 months ago.

Not for the faint-hearted, my friends!

© Sandy Mattingly 2013