January 2005 Archives

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Thursday, January 27, 2005

Penguin Soup and Dozer Wars

Well, the title says it all really. The cute fluffy penguins are all dead now and Halley has been transformed back into a construction site full of boys and their tonker toys. And it's still a great place to be. Forget the magic, the mystery, the endless conversations with the stars, no, don't forget them, but they are the things of dreams and memories. Today we are back in continual sunlight, bright, harsh and true. The light is still magnificent and becoming more entrancing every day as the sun drops lower, the fogs have started returning that obscure building legs and call icebergs up from beyond the horizon. Fairy dust has been seen, and so have 'barchans', crescent shaped dunes of snow deposited as blowing snow crosses the surface. Against my intuition, the outside edges travel at the front. Skiing was slippery a few weeks ago but has now become delightful, especially compared to sinking with every footstep that is the alternative. Kiting has taken off, so many folk flying past the window strapped to snowboards or skis, jumping, falling, laughing with the wind. Yes, it is still a magical place to be. But the penguin chicks are dead and our dozers played tug-of-war today.

There's all sorts of things to report, it's been a great summer so far. And busy. Busy for us at the lab, more instruments arriving and a final push to have a 'summer intensive campaign' that will produce data to justify our year down here and the five years it's taken to plan it. Plus, CODIS is moving in and the impact might be similar to the years when dogs left or women arrived. Everyone here knows what CODIS means, but no-one knows what it stands for. It means internet, it means cheap phone calls around the world, free email with unlimited attachments, privacy from BAS and more personal websites, news at our fingertips and on-line shopping. Independence. Or another step away from isolation? Who knows.

I went inside the big white sphere where the satellite sits the other day and it really is impressive. It's a big white ball that's empty but for a huge satellite dish and a locked box with electronics inside. So I guess, in your world, it might not be that impressive at all. The thing that impressed me most however, was the angle it pointed at. And the cool echoes it gave off when you shouted into it. To all intents and purposes, it was pointing horizontally, not up at the sky as you might imagine. To be precise, it sits at an angle of 5 degrees from horizontal. And that gives line-of-sight contact with a satellite thousands of miles above the equator. Once again, a moment of thought to realise quite how far south we really are.

Ok, ok, the penguins. It was cruel of me I know, shows how hardened I must have become this year. Cruel but funny. And true. The penguin chicks are all dead, those that hadn't changed fluff to feather by about a fortnight ago. All the sea ice at Windy Bay has gone. And I mean all of it. Right back to that cliff that we climbed down to reach them. All that ice, that at one point stretched beyond the horizon and doubled the size of this continent, all gone. I'm not sure which I miss more, the ice or the penguins but I think it's the ice. I do feel for the penguins though, it was a particularly windy winter and then such a warm summer. I don't think the ice usually dissappears this early. In fact, I know it doesn't. It's my third summer down here and in some ways that means I know more than many but in others it means I am realising just how little you can make wild sweeping comments about this place. Summer zero, so much ice that the ship never even made it in. Summer one, not much ice at the beginning of the season and none at the end. Summer two, a thirteen kilometre relief at the start of season and a good few ks at the end too. Summer three, well, it looks like a warm one again.

The lack of ice has implications. It means that any penguins that couldn't swim will have drowned. And as far as I'm aware, they don't have the ability or knowledge of how to swim as long as they wear fluff. I guess they don't need it. More selfishly, it also means that sno-cat after sno-cat won't be able to carry cargo down to the ship at the end of the season. And I have about 8 tonnes of cargo that, in an ideal world, I would like to see on that ship when I leave. If push came to shove, I guess we could get it down to 5 tonnes of 'essential' stuff. And if we can't put it on a sledge behind a sno-cat, most of it could be broken into smaller units that we could handball individually. Could take a while though! First, though, I guess we should focus on getting some science out of this kit.

Another very cool thing about this summer is the arrival of representatives from the three companies competing to design Halley VI. They're here for a fortnight, along with the co-ordinator of the competition, and seem to want to know everything about this place. They've shown us their plans and in return want to know what is and isn't viable, what our grumbles are, what we love about this place, whether melt-tank is as bad as it sounds and if we really need as much space as everyone bid for.

They have a budget of £19 million and all say it's going to be tight. Corners must be cut, glitz lost, to fit within that budget. So today, they had a tug of war between two bulldozers. How much can a dozer really pull? How wide could that ramp be? How much weight can the sea ice take? How reliable is the relief operation? The winner will be decided at the end of this year and then they'll have a year to finalise and commission their plans, two summers to supply and build the new site and one summer to move the science across before handover to BAS in 2009–10.

It's a ridiculously tight timescale on a fairly restrictive budget but these boys are keen and it's great to watch the zeal with which they attack each new day. They've had, or will have, a day or two each with the science platforms, the plumber (tunnels), electrician (fire), garage (vehicles), field assistants (relief and logistics), steel team (legs) and chef. They ask about personal space, work space, colour schemes, hydroponics, buildings that walk, auroras, bar games and boot rooms. One told me recently that he thought the new environment would attract more women and improve the gender ratio but I said it wasn't really a problem. In fact, I was quite surprised when he said he found it a very male-dominated environment. I don't. Shows how long I've been here. That, and the fact that I enjoyed watching bulldozers playing tug-o-war this evening on tv and was seriously interested in the loads they could pull. I've come a long way, and I've got to go back a long way too before I'm half the girl I ever used to be.

Posted by Rhian at 9:21 EST | Comments (11)

Thursday, January 20, 2005

Hirst's shark

The Shark is coming to New York. According to the Telegraph and the Evening Standard, Larry Gagosian has finally succeeded in brokering the deal we first heard about back in December. Charles Saatchi will sell The Physical Impossibility of Death in the Mind of Someone Living to an unnamed US collector, who will promptly donate it to the Museum of Modern Art. The price? Somewhere in the neighborhood of $12 million – as the Telegraph points out, that's higher than any living artist, including Jasper Johns, has ever received at auction. If there was any doubt as to Damien Hirst's art-market status, it has now surely been erased.

The Shark, as the piece is universally known, is probably the single most important work in Hirst's oeuvre. I remember making the trek out to St John's Wood in 1992 to see it in the Saatchi Gallery shortly after it had been made: an instant icon, it more or less became the defining art work not only in Hirst's career, but also in those of Jay Jopling, his dealer, and Charles Saatchi, the man who bought it for what seemed at the time the pretty steep price of £50,000.

It was a magnificent work of art – and I'm choosing my verb tenses carefully here. While death has been a common theme in art for as long as art has been made, Hirst was pretty much the first to bring it literally into the gallery. The Shark was placed next to A Thousand Years, his powerful – and smelly – meditation on life, death and decay, where flies were hatched inside one of Hirst's trademark vitrines, only to migrate over a glass partition towards a rotting cow's head, and get electrocuted on the way by a bug zapper.

Meanwhile, the shark was suspended in formaldehyde, sleek, deadly, and – of course – dead. It didn't look dead, though: it looked as though it was alive, suspended somehow not only in space but in time, the subject, perhaps, of a sorcerer's spell which could bring it back to life at any moment. Walking around it, staring at it staring at you, you felt an undeniable frisson of real physical danger. The Shark delivered an atavistic shock, catapulting the viewer back to our Darwinian past even as we stood admiring its artistry. Much great art works by setting up an ironic tension between the art and the object: are you looking at brush strokes, or are you looking at what they represent? Are you reading a word, or are you looking at a Ruscha painting? In this case, the distance between the shark and The Shark was both greater and smaller than the art world had hitherto seen. The shark was the art, of course; but the art also consisted in the primal reaction to it – a reaction over which any human had almost no control.

After the show at the Saatchi gallery, or perhaps during it, Hirst became an art-world megastar, and he soon started being shown in proper museums. But there was a big problem: his neoconceptual pieces, it turned out, didn't age well. When Sensation, the Saatchi show including Hirst, Whiteread, Ofili and others, went on the road, A Thousand Years had been emasculated. While dead flies still littered the bottom of the vitrine, the cow's head had been replaced by a plastic simulacrum, and the life cycle so unblinkingly displayed became something you had to imagine, not something you could watch for yourself. No longer could you go back week after week and see the cow's head get smaller and smellier; no longer could you see the pile of dead flies get larger and blacker; no longer could you hear the sound of flies getting zapped as they made their way towards the rotting flesh. The art work now stood as little more than a record of its own prior existence, a clever idea, perhaps, but not nearly as visceral as it had been originally.

Meanwhile, the shark was – is – falling apart. The sleek creature of 1992, seemingly captured mid-swim, has started to decompose. Its flesh is rotting, falling off its body; its skin is wrinkled; its scales litter the bottom of the vitrine. Evidently, Hirst's early experiment in preservation in formaldehyde has proved a less than stellar success. The work is still historically important, but when it's shown at MoMA, the millions of gallery-goers will see something very far removed from what Hirst originally intended and created. As Greg Allen wrote about Dan Flavin, "such is the strange afterlife of work that produces beauty from the banal, an object lesson in how the legacy of a strong-willed radical can be brought to heel by an even stronger force, the market."

In an ideal world, MoMA, or Hirst, or someone, would restore, or recreate if necessary, the shark to its original condition. But the Gods of the Market seem to have determined that authenticity trumps art every time – a determination which will only serve to prevent the true nature of Hirst's work being seen by visitors to MoMA, and which will surely increase misunderstanding about what Hirst is really about. After all, a saggy shark in a vitrine is not sleek or deadly at all: you might even say it's a different kettle of fish entirely.

Posted by Felix at 18:52 EST | Comments (6)

Monday, January 17, 2005

Sweden and theWashington Consensus

Both Paul O'Mahoney and Stefan Geens link to a piece by Daniel Brook in Dissent magazine entitled "How Sweden Tweaked the Washington Consensus". It's mainly interesting, I think, for confirming Stefan's prejudice about leftists and their degree of understanding of economics. Here's the nut of the article:

Today the Swedish system is being challenged by a number of economic tendencies and forces commonly understood under the rubric of "globalization." ... According to this thinking, countries must embrace the "Washington consensus," the International Monetary Fund-backed policies of free trade, privatization, and lower taxes and public spending, in order to keep up with lean, mean developed countries such as the United States and rapidly growing economies such as China's.
Although Sweden has modified its economic arrangements, it has kept many features intact in defiance of the Washington consensus. More than half of GDP goes to the government as taxes (versus one-third in the United States). The extremely high level of taxation in Sweden funds a large public sector and an ambitious redistributive program.

The rest of the article is essentially variations on the theme: The Washington Consensus and the IMF would prescribe lower taxes for Sweden, but the country has kept them high and is still doing very well, thank you.

Unfortunately, despite putting the Washington Consensus right there in his headline, Brook seems not to have bothered to look it up. A few points are worth making.

Firstly, the Washington Consensus was always meant to be a set of prescriptions for developing, not developed, nations. While all countries might well benefit from adopting its strictures, developing ones would benefit more. At the heart of the Washington Consensus is fiscal discipline – this is especially important for developing countries which can't borrow at long durations in their domestic currencies. The result is that they load up on dollar debt, leaving themselves open to a classic asset-liability mismatch which can go disastrously wrong. (See Russia and Argentina.)

Secondly, nowhere in the Washington Consensus does it say that public spending should fall. In fact, given that the Washington Consensus was aimed at developing countries, it's almost taken for granted that public spending should rise: such countries are generally desperately in need of the social and physical infrastructure (schools, roads, electricity, etc) that is really the role of the state to provide.

In fact, far from asking for "lower taxes and public spending", the IMF and the adherents of the Washington Consensus generally ask for higher taxes and public spending. Maybe not an increase to Swedish levels, perhaps, but a country like Mexico, which collects just 14% of GDP in taxes, is constantly urged to bring that number substantially higher. There are certainly occasions where the IMF might target individual taxes which they consider to be invidious and deleterious to growth prospects – the financial transactions tax in Brazil is one example. But I would very much doubt that the IMF has ever recommended that any country seek to decrease the total amount of money that it raises in tax revenue – quite the contrary.

To be sure, one of the points of the Washington Consensus is tax reform. But tax reform in the context of development economics (which is what we're talking about here) does not mean the same thing as tax reform in the Grover Norquist sense of the phrase. When a development economist asks for tax reform, she's generally asking for:

More transparency and less complexity in the tax code;
An end to unfair tax burdens on certain individuals or businesses; and
A broadening of the tax base, so that as many people pay taxes as possible.

The problem is that when you want to raise taxes, it's much easier to simply go along to the state-owned oil company, say, or to a handful of rich businessmen, and tax them as much as possible, than it is to set up a transparent nationwide tax-collection system where everybody pays their own fair share. So incentives are distorted, tax collection remains low, and tax avoidance becomes epidemic. (See, um, Russia and Argentina.)

Where the Washington Consensus calls for lower marginal tax rates, it really does not have Sweden in mind. The point is to target tax regimes where the tax system results in people spending more effort on trying to avoid taxes than they do on work which actually benefits the economy as a whole. So long as tax avoidance is not a problem in Sweden, I doubt the IMF much cares what the highest marginal tax rate is.

It's worth bearing in mind that the Washington Consensus was developed as one tool to help bring billions of people out of poverty. Whether it worked or not can be (and is) debated ad nauseam. But the people who developed it – chiefly John Williamson, who is nobody's idea of a right-wing supply-sider – were trying to help build countries where the benefits of maximised economic growth were felt by the poor. The "government is bad and the less of it the better" rhetoric of US conservatives is nowhere to be seen in the Washington Consensus or in any IMF reports that I've seen.

I'm looking forward to the day when left-wingers learn to distinguish between neoliberalism and US-style tax-cutting conservatism. But judging by this article, that day is still a long way off.

Posted by Felix at 15:21 EST | Comments (4)

Monday, January 10, 2005

Normality

I'm writing to you on a Sunday afternoon, the rugby on, fairly loud, in the background. South Africa v Ireland: surprisingly up-to-date by Halley standards as the game was only played about 2 months ago. It must be summer. This morning there was yet more post waiting for us on the table 'though no plane had come in- the pilot just discovered another mailbag in the back of the plane last night! New summer residents are outside enjoying the now calmed-down storm. Bones has his video camera out and is taking footage of newly formed wind-tails, Piglet has gone out kiting with an ever increasing number of recruits. Boards, kites and harnesses are being bartered for over the Sunday fry-up. Next door, in the dining room, those still recovering from last nights revelries are watching the 24 series back-to-back. The rest of the CAS Lab team have gone to the lab to work on their machines and check for damage after yesterdays storm. I'm on my fourth cup of tea and have no intention of leaving the Laws platform today, at least not for long. A fairly normal Sunday.

Yesterday afternoon, as I was helping peel spuds in the kitchen, Kev asked me if I was looking forward to going home. It was tricky to answer honestly as I'm obviously looking forward to seeing people and I'm not psyching myself for the coming winter here so yes, I guess I am. At the same time, I'm very comfortable here, very happy, the lifestyle suits me and I feel very much at home. Flying back from the skiway last week on the back of a skidoo driven by Ness, having received the first load of ice cores from Berkner Island, my only regret was that this lifestyle isn't possible under more sociable circumstances. Perhaps I should move to Alaska.

Last weekend was New Year's Eve and our first weekend after Relief. It was a good party but the male:female ratio was still a bit too weighted against me despite the arrival of eight more women with the ship, so I slipped out early. The next day we went to see the penguins en masse, 17 people in our group and about 27 the following day.

It'll have been my last trip to Windy I should think but I feel like I've seen the complete cycle now. Our first trip in August was extraordinarily cold, the penguins huddled to stay warm protecting eggs and tiny chicks on their feet. The intermediary visits were more tolerable in temperature and the pengus still stayed in loose groups as the chicks grew up and became a bit more inquisitive. The last two visits have shown the end of the cycle – chicks spread out, fat and moulting, cooling their bellies on the snow as it's now too hot in the sun. The landscape is completely changed now as well – the sea ice has melted and broken up, open water is only about a mile from the cliffs. Birds fly around overhead, skuas hunting for weak chicks and storm petrels looking for nesting sites. The ice itself is lumpy, brown and covered in melt water puddles, entirely formed by the presence and residue of thousands of penguins. Little penguin motorways now run between the very rutted ice and the birds walk single file as nowhere is it smooth enough for belly sliding anymore. While newcomers were amazed by their numbers, I found it almost sad to see how many fewer penguins there are now. But the ice won't be around for much longer so if they're going to survive, they'd better learn to swim pretty soon!

What I really missed was the welcoming party, those adolescents, a year or two old but still too young to breed, who used to come right up to us during our visits. They're all off playing in the ocean now, feeding themselves up for the next winter. All that is left are fat moulting chicks and a few adults keeping an eye on the crèche. None of them are particularly interested in us and the little ones are visibly disturbed if humans get too close. It's more as you would expect I guess.

Here on base, the season has been going very well. Relief was smooth and quick and the weather, until recently, has been superb. On Friday a storm arrived that has almost died down now. A few days of 20-40 knot winds is a good experience for the new folk though and not setting us back too much this early in the season. The CAS Lab is noticeably less stressful than last year, a combination of Stéph and I having more of a clue what's going on and there being four others out there to help the campaign, all of whom are experienced and keen.

I've seen the full cycle of penguins and am now also experiencing the full cycle of living here: the new summerer, entranced by the magic of the ice, the new winterer, nervous but excited by the prospect, the winterer, at home in the dark and cold, and now the more experienced summerer, fully at home and loving this place for everything it is. Able to stay in on a Sunday and enjoy rugby and tea as much as skiing around the perimeter. At the end of February I'll get on a big red ship and sail to the Falklands. After that I'll travel and meet up with a few friends before returning to Blighty and slotting back into the world of work and green in Cambridge. After that, who knows.

Posted by Rhian at 17:04 EST | Comments (3)

Sunday, January 09, 2005

Jason Calacanis stands up to bullies

Jeff Jarvis says that Jason Calacanis is "the single most competitive person I've ever met," and quotes an email from him claiming "3-4x the traffic of gizmodo" for his rival gadget blog, engadget. (According to Alexa, engadget's pageviews are just under 30 million per day, while gizmodo's are just over 16 million. The numbers might be wrong, but the relative numbers are probably pretty solid.) Even an exclusive interview with Bill Gates, it seems, can't persuade Calacanis to give his rival Nick Denton any props.

At least Jason Calacanis vs Nick Denton makes conceptual sense. Now, however, let me present to you... Jason Calacanis vs Steve Jobs! That's right, in his latest blog entry, Calacanis menaces Jobs with the threat that he might stop publishing tuaw.com. "We need each other Steve," writes Calacanis, "and you trying to bully us is just unfair and, frankly, pretty ungrateful." Naturally, Jobs is not in any way trying to bully Calacanis or The Unofficial Apple Weblog: Calacanis is using the first person plural here to refer to journalists in general, and "Nick de Plume" of ThinkSecret specifically – the publisher Apple is suing.

Referring back to Alexa, ThinkSecret gets about 2.7 million pageviews per day, while tuaw.com gets, well, nothing, really. Still, the two sites are competitors, and in that respect I'm sure that Nick de Plume would be more than happy for Calacanis to pull his Apple blog. And I'm equally sure that Steve Jobs couldn't care less whether Calacanis writes about him or not. But Calacanis isn't done yet: "you need to learn to play nice in the sandbox or we’re going to go home, and I can tell you it’s no fun playing alone," he tells Jobs, apparently in the belief that if he stops writing about Apple, then so will everybody else.

Reading this latest post reminded me of the Calacanis classic from August, wherein our hero faces down two enormous black men in a gas station forecourt:

I’m five-nine on a good day, and these guys were both well over six feet. One looked like he just stepped out a gym and the other looked like he could have been in the WWF he was so—well—large.
I assessed the situation quickly. First I noticed the size of the first guys neck.—it was big, and was my best shot of taking him out. One punch to his throat would probably kill him. The other guy, well, he was pretty round and there was no neck to punch. I’d have to find another target—perhaps his knees. They couldn’t be very strong since he was carrying all that extra weight around. One low side kick and that knee would snap like a dry twig—he wouldn’t be getting up.
This assessment took about two seconds—it’s what I’ve been trained to do all my life. First by my father and then by the masters of the ancient art, and I put my odds at about 90% given that they might have a gun.

I'll save you the suspense: it turns out the two enormous black men are travelling with their mother, and she ends up saving our Brooklyn hero (who also does a mean southern accent, we're told) from having to play those odds. Calacanis then feels "one the greatest senses of serenity in my life".

I'll say this for Calacanis: his pathological self-importance can certainly be entertaining. Needless to say, however, a spokesman for the journalistic community in general he is not, even if Apple suing ThinkSecret really isn't a very nice thing to do.

While I'm on the subject of blogs, by the way, I should also admit here that I was wrong about Gawker back in July. "Gawker has never had more than 600,000 unique visitors in any given month," I wrote then, "and at present rates, it looks as though it could be a very long time until it does." In fact, it only took until November: in each of the past two months, Gawker has broken the 600,000 barrier, and it will do so again in January. Jessica Coen and Matt Haber might not have the buzz of Elizabeth Spiers and Choire Sicha, but they have many more readers than those predecessors did. It'll be interesting to see whether Lockhart Steele, in his new job, can help get Gawker's numbers higher still.

Posted by Felix at 5:02 EST | Comments (8)

Monday, January 03, 2005

232 Broome Street

I just got off the phone with a friend of mine. "You know everything, Felix," she said, perspicaciously. "Instead of buying a loft, would it be cheaper to buy a loft building and then convert it into lofts?"

The answer, like the answer to any question, is "it depends". Certainly, some developers do seem to have made out very well that way. But let's consider a specific building on the Lower East Side of New York. Lofts around here are rare beasts, but look at the sale prices at 7 Essex: none of them seem to exceed $700 per square foot. Let's be generous, and say that in the wake of recent trend-seeking developments, the going rate for LES lofts is now $800 per square foot.

And let's say you're interested in this good, solid loft building, constructed in 1920, on the north-west corner of Essex and Broome. The building is 37 feet wide by 81 feet long, which means that it has just under 3000 square feet of gross external square feet per floor.

Let's put the ground floor and basement – the 3,600 square feet of retail space – to one side for the time being. There are then three floors for apartments. A standard real-estate rule of thumb states that to work out what the gross internal square footage of an apartment is (excluding things like the stairwells and the width of the walls), you take 85% of the gross external square footage. If you decided to build floor-through apartments, that would give you three apartments at about 2,550 square feet each. At $800 per square foot, that would value each apartment, when fully converted and kitted out, at about $2 million.

Now, it's worth noting that no apartment has ever sold for anything like that amount of money on the Lower East Side, let alone below Delancey Street. But let's be generous and say that if you converted this building into swanky residential lofts, you could get $6 million for them. Then there's the retail space – let's add on another $2 million for that. (I have no idea who might spend $2 million for retail space on Essex Street, but there's gotta be a sucker out there somewhere, right?) Total, once all the work is done: $8 million. So if you bought the building for $5 million, say, and spent another $1 million doing it up, you might stand to make some money by selling it off as lofts.

Then again, maybe you're the Eisner Brothers, owners not only of the eponymous sporting-goods store presently on the ground floor, but also of the entire building. It turns out that they bought the building from the City of New York in 1985 for $330,000. (Here's a PDF of the sale document.) Buying for $330,000 and selling for $5 million after 20 years? A tidy profit right there, in anybody's book.

Maybe the Eisners want more, however. Should they perhaps do the loft conversion themselves? No – they should rather find someone willing to spend even more than $5 million on this building. And the way they can do that is by using a wonderfully recondite number known as Floor Area Ratio, or FAR. The Eisners' building, it turns out, is on a lot which measures 51 feet wide by 96 feet long, or closer to 5,000 square feet. You can take that total square footage and multiply it by the lot's FAR to find the total square footage allowed for a building on that lot – and since the FAR for the lot is 6.0, if you tore this building down and put a new one in its place, you'd be allowed to construct just shy of 30,000 total square feet on the lot. (At 3,000 square feet per floor – ie, if you didn't increase the size of the present building at street level – that would mean a nine-story building, plus basement.)

This is where my expertise runs out. I have absolutely no idea how much it would cost to demolish the present structure and put up a new one, and I also don't know how feasible it might be to try to add some kind of residential tower on top of the building which is currently there. All I know is that if you go to weichert.com, you can find this building on sale for the eye-popping price of $25 million – or about $2,450 per usable above-ground square foot. And that's before it's converted into anything.

What kind of return does that give the Eisner brothers, you ask? Well, if you buy at $330,000 and sell at $25 million after 20 years, you're making more than 24% per annum annualised – and that's before getting a penny in rent or store profits. Even by New York standards, it seems that the Eisner Brothers made themselves an astonishingly good investment back in 1985. In comparison, $330,000 invested in the S&P 500 on August 14, 1985 would be worth just over $2.1 million today, again disregarding income. Looks like Lower East Side property is ten times better, as an investment, than the stock market!

Then again, I can't imagine who would be interested in buying the building for anywhere near $25 million. Let's say demolition and construction costs are zero, and you build the maximum allowable 29,376 gross exterior square feet. Conveniently enough, that translates into, realistically speaking, an absolute maximum of 25,000 usable interior square feet. So anybody buying for $25 million would be spending exactly $1,000 per hypothetical square foot, before spending a single penny on actually building those apartments.

Back when there was a bubble in oil exploration companies in the 1970s, it used to be said that oil was worth more in the ground than it was in the barrel: a hypothetical unextracted barrel of oil which might not even exist was valued by the stock market more highly than an actual traded barrel of oil today. The same thing seems to be going on here: unbuilt apartments are being sold for more than real, built ones. Looks like the days of converting Manhattan loft buildings and making a fortune are, unfortunately, far in the past.

Posted by Felix at 19:38 EST | Comments (8)

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