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HOUSTON-A local limited partnership sold the 153-unit Oakwood Apartments in a deal that closed last week. This asset didn’t come to the market in the usual way; it was brought to market, and sold, through Cushman & Wakefield of Texas Inc’s online auction platform.

According to company director of apartment brokerage services Edward Nwokedi, the concept was launched late last year because of the number of distressed multifamily assets starting to come on line. “Sellers are coming to us because they want a fast process. They can’t wait six-to-nine months to sell their asset, because their asset is going to be foreclosed on in 90 days,” Nwokedi tells GlobeSt.com. With the auction process, he goes on to say, turnaround from market to close can be as little as 45 days.

Selling property through an auction is certainly not new; it’s been done for years through specialty auction houses. But what is somewhat new in this case is brokerage companies rolling out the concept under their own brand.

Cushman & Wakefield’s online auction platform is currently being tested in Texas markets on multifamily assets, with plans to expand the concept to other markets and product type. Other brokerage firms, in the meantime, have successfully launched their own auction arms.

Sperry Van Ness/Guardian launched its MarketMaker service late last year in conjunction with Real Capital Markets. The first auction took place in July with 11 of 24 assets selling. The next auction, geared toward asset in the Pacific Northwest, will take place in October.

Company COO Karlin Conklin says Sperry Van Ness/Guardian decided on the auction option several months ago because of slow market velocity. Furthermore, “the days during which many buyers had a sense of urgency, a sense of doing something now or losing a deal, that’s just not there any more,” Conklin tells GlobeSt.com.

NAI Global, in the meantime, started its PowerSale, and has already had two auctions, both of which have been very successful. A third auction will take place in November.

NAI Global president and CEO Jeff Finn tells GlobeSt.com the company is no stranger to the auction process, having used it in the early 1990s, during the days of the Resolution Trust Corporations. More recently, PowerSale was launched in the face of frozen credit markets and to create a sense of urgency and intensity among buyers. The auction is a process that brings buyers to the table where conventional means might not,” he adds. “In this period, during which there has been little trading velocity, we’ve had a lot of success with this.”

One reason why auctions are successful is because they create a sense of urgency that might be missing through more conventional means. An auction platform also promotes to more buyers. But Conklin cautions that a broad marketing program in conjunction with the auction is almost essential for success. “You take good, traditional brokerage marketing and put it in an auction platform; properties do sell,” she adds.

Nor is the auction format for everyone. Nwokedi acknowledges stabilized assets would probably be better off marketed the traditional way. But a great candidate for auction, he continues, would be distressed products that sell for under a 7% cap. More and more of those types of products are going to be coming onto the market for the near-to-mid-term, he predicts.

Finn agrees, pointing out that sellers who want quick results and are willing to accept today’s market price will benefit from an auction. “This won’t produce a miracle,” he adds. “It won’t change values to last year values. But it will present an opportunity to get the cash price that the market will offer today.”

“The nice thing about an auction is that, if the property is broadly marketed, you’ll learn the true market value of that property,” Conklin adds. “If the seller can’t accept the market price, then the property doesn’t sell.”

All three agree that as the recession deepens, more brokerage companies are likely to come out with their own platforms, if they aren’t already in the planning stages. During the next several years, they predict, loan maturities and debt restructuring will ensure that more distressed properties will arrive on the market.

The experts also acknowledge that the auction method is something that will hold up, even when the current down cycle starts trending upward. “The efficiencies that we’ve created in the PowerSale program will have life beyond the current cycle, and will play into the cycle’s upside, not just the trough period we’re currently in,” Finn says.

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