Real estate managers are becoming more accustomed to auctions, even shopping for deals through online sites. “Investors are now acclimated to the auction process through sites like Auction.com, and use it as a resource when looking for investments which, overall, have increased the number of properties sold through auction,” said David Smith, partner at Cleveland-based real estate investment firm Ten Capital Management LLC, in an e-mail.
In February, Ten Capital completed the purchase of a partially vacant office building in Berkeley, Calif., in an auction of excess property by Alameda County. It did not use an online auction site. Rather, it was assisted by Otto Finlay Investments, which co-invested, assisted with the auction process and helped identify potential tenants.
Although real estate auctions have been around for many years, “prior to the commoditization and sophistication of the auction process, auction buyers were specialists in their field vs. the mainstream investors that participate in auctions today, “ Mr. Smith said.
Auctions have become more widely accepted by a wide variety of investors, including institutional investors, he said.
Indeed, managers now see Auction.com as an investment target. On March 5, Google Capital, Google's growth capital fund, invested $50 million in the online auctioneer of commercial and residential properties and real estate notes. Google joined existing investors, including real estate management firm Starwood Capital Group, private equity manager Stone Point Capital LLC, real estate investment trust Starwood Property Trust Inc. and alternative investment firm Fortress Investment Group LLC.
This article originally appeared in the March 17, 2014 print issue as, "Real estate managers using auctions in myriad ways".