Was 1020 Fifth a Good Investment 86 Years Ago?

kress samuel portrait Was 1020 Fifth a Good Investment 86 Years Ago?

Samuel Kress, five-and-dime-and-million man.

Yesterday, The Observer reported that the gilded penthouse atop 1020 Fifth Avenue had finally sold. Finally for a number of reasons: It had sat on the market for four years, first asking $5o million before selling for nearly half-off—but also because the home had not seen the light of the real estate listings since the Jazz Age. When Samuel Kress originally bought the place, it cost $150,000, at once a staggering and tiny amount. This newspaper could not help wondering: Just how good of a deal was it?

This was not simply a 17,233 percent profit. That is bad accounting, as The Observer learned not so long ago. You have to calculate the compounding interest, because the sale took time. Your money could be off doing better things. It’s Econ 102. (We got a B+.)

Naturally, we turned back to the guy who set us straight last time, Berdon LLP partner Richard Zimmerman. By his calculations, $150,000 invested in 1925 and sold for $24.96 million in 2011—less 4 percent commission, he notes, exacting as always—leaves us with a return of 5.89 percent annualized. That may not sound like much, but it beats out the Dow Jones Industrial Average, which covered 4.65 percent a year over the same period. Even all those gold bugs out there would be disappointed—it cost only $21 an ounce, but even at its record price of $1,625 per, we’re looking at an annual return of 5.19 percent.

This reinforces the fact Ben Lambert did pretty well on his townhouse, which returned 10.5 percent, if not 2,000 percent, and we have a better idea of just why William Lie Zeckendorf would decide to flip the Wasserstein penthouse: “Will Zeckendorf’s 6 month turnover for the penthouse at 927 Fifth. Cost $29.1 M and sale at $34 M, a neat return of about 33%,” writes Mr. Zimmerman in an email.

Another neat fact from our favorite accountant?

The purchase of the penthouse in 1925 for $150,000 sounds like a great deal. However examining it more closely reveals interesting details. The average wage for a skilled US worker in 1925 was less than $32 a week. The cost of the penthouse was 90 years of a skilled person’s labor.

Who says bean counters are boring!

mchaban [at] observer.com | @MC_NYC