After taking a look at some recent December closings, there were two interesting and unique land sales in the 400-block of the North Manhattan Beach Sand Section.
The area I will be discussing, is contained between 26th Street to the south, 36th Street to the north, Vista Drive to the west and Grandview Avenue (or a dead end into the Sand Dune) to the east. I have written about this area before, but it has been a minute.
I enjoy taking a look at this market because lots are roughly 2,700 square feet and the size of homes built tends to be very comparable when maxing out the lot.
The North Manhattan 400-block is an easy area to break down thanks to its uniformity. In this pocket, there is new construction, old beach bungalows which are land deals, and then everything else in between. From there, to value the property, one just makes adjustments for age, condition, and location. Easy! (Okay, it is not that easy, but easier than other South Bay markets…)
So, what if a home or lot falls outside of the box? A property that is unique or rare? Well, that is when it can get a bit tricky to value.
That is where the December sales of 425 29th Street and 465 33rd Street come into play.
These are unique one and a half and double-sized lots that can be either difficult or quite easy to figure out the value.
“Old World Charm” on a Double Lot
My first subject:
- 435 29th Street
- 3 bed, 2 bath, 1,953 sq. ft., 5,402 sq. ft. lot
- Sold Price: $4,050,000
This double-lot listing originally came to market in February of this year asking $5.5 million.
Buyers and Agents familiar with the market knew that this was aspirational pricing looking to attract an unsophisticated buyer or someone who loved, and I mean loved, the north 400-block.
If you have $5.5 million to spend on land in Manhattan Beach, you are likely looking elsewhere.
So, how does this one work? Well, this is the easier of the two to value due to the double lot size. The only way to accurately value this property is if a developer was to subdivide the property and sell two homes on spec. Here are the comps and numbers…
There were three land deals consisting of single lots that closed over the past couple of years nearby.
- 441 34th Street
- Sold for $1,805,000
- 428 34th Street
- Sold for $1,964,000
- 469 32nd Street
- Sold for $2,100,000
Without getting too detailed, land value is roughly $2 million. So, a double lot should get around $4 million. Pretty simple.
If we work backwards like a developer would looking for a profit, then here are the new construction comps, costs, and potential profits.
These are the most comparable new construction spec sales on the 400-block:
- 468 30th Street
- Sold for $4,250,000
- 420 31st Street
- Sold for $4,637,500
So let’s assume this…
- $4.4 million resale x two homes
- $400/square foot x two 4,250 square foot homes
- 6.5% selling costs
Now, let’s calculate the potential profit:
- $3,400,000 in building costs
in selling costs
- $4,825,000 of money left over
If you used the land comps of $2 million each or $4 million for a double lot to come up with the land, would there be a profit?
There sure would…$4.825 million less $4 million for a double lot would be $825,000 in profit.
I am likely being conservative because a developer with economies of scale and maybe even being the General Contractor of their own project could squeeze costs to $350 a square foot or maybe even closer to $300 a square foot. That would yield a much better $1.2 to $1.5 million or so in profit.
The $5.5 million asking price was likely never going to happen.
And guess what? Efficient markets prevailed.
The comps, the numbers, and a developer set the price and the property was sold for $4.05 million.
Now, onto the harder one!
Land “on a Rare One and a Half Sized Lots”
The second subject:
- 465 33rd Street
- 3 bed, 2 bath, 1,396 sq. ft., 4,045 sq. ft. lot
- Sold Price: $2,560,000
This one and a half sized lot certainly is rare for what is normally a very uniform area, and as a result, valuation gets tricky.
Truly, value might really be only in the eyes of the beholder.
From the previous section, we know that comps show that land is worth around $2 million.
The problem is a one and a half sized lots cannot be subdivided.
A reasonable person might say multiply by one and a half by the $2 million and you would get a value of $3 million. I wish it were that simple…
Resale value drives the price of land and the hard part about this one is that there are no one and a half sized comparable lot sales or spec builds.
So, we do our best to try and find somewhat comparable properties to value this one.
Firstly, there are “special” land sales on 26th Street. I call them special because 26th Street is most desirable because of its southern location in the north 400-block and its views overlooking Grandview Elementary, the city of Manhattan Beach, and fabulous ocean views.
- 461 26th Street
- Sold for $2,700,000
- 436 26th Street
- Sold for $2,900,000
These properties above can be used as a guide. They are not a lot and half, but the quiet street and views are a premium assigned to a special lot.
Does the premium of privacy and views of 26th Street equal an extra half of a lot?
Now let’s explore a “special” spec sale, and yes, this one was on 26thStreet as well.
- 2600 Grandview Avenue
- 6 bed, 8 bath, 4,410 sq. ft., 2,700 sq. ft. lot
- Sold Price: $5,300,000
This rare and unique home on the corner of 26th Street and Grandview Avenue was extra fabulous due to its corner location and wonderful layout.
If new construction spec sales on standard lots from the last section are getting $4.4 million and Grandview Avenue got close to a $1 million premium for its views…would a new home with an extra half lot command a $1 million premium as well?
You really would not know until a new house is listed and sold…if the owners decide to build and sell right away.
In the end, the listing price was cleverly set at $2.7 million, the lower of the 26th Street land sales. After just 22 days, a deal was made.
It eventually closed for $2.56 million.
During certain times, this property would sell for even less, and during other times, buyers may justify $3 million for it. But for today, it is worth $2.56 million.
In my opinion, this was a fair deal for both parties.
If I were a buyer, I would probably take the views of 26th Street over another extra half lot.
In this case, there was a win-win for both sides.
A Buyer got 50% more land for just 22% more in price.
A Seller got the same price as a special view lot at just a 5% discount.
Although there is no way to be sure of the true value, I think the parties did a great job and this stands as a great example of how to value a tricky property with comparable sales that are not perfect.
Hope this was a helpful post and I will see you next week for the latest on South Bay real estate.