Auction.com in late July made the record books, closing the largest online real estate transaction in history.
The Manhattan Towers office property in Manhattan Beach, California, sold for $96.075 million in a custom online auction. The sale of the 309,734-square-foot property topped the previous record holder for largest e-commerce transaction, Mark Cuban’s purchase of a Gulfstream jet for $40 million in 1999.
The Manhattan Towers office complex is located far from any Midwest city. But the sale is still important for commercial real estate owners and brokers working throughout the Midwest. It’s just more evidence that online auctions aren’t only for distressed commercial property today.
Rick Sharga, executive vice president of Auction.com, said that a growing number of owners and brokers are turning to online auctions as a way to sell even trophy properties.
“What commercial buildings are right for online auctions? The glib answer would be to say ‘All of them,'” Sharga said. “But all kidding aside, there are very few properties where an online auction would be a bad idea. The same things that make a property attractive for a traditional sale make it even more attractive for an auction sale: the demographics and economics of an area.”
Sharga said that more owners and brokers understand this today, and many are asking Auction.com to sell their non-distressed inventory.
An auction exposes properties to a broader pool of buyers, Sharga said. That’s why more than 60 percent of the time, buyers purchasing properties sold through Auction.com come from outside the states in which these properties are located.
The auction format often results in quicker closings, Sharga said. That’s because Auction.com requires that all due diligence be done in advance of the auction. Sharga said that 97 percent of the time, sales close within 30 days of the completed auction.
One big hurdle is preventing even more owners and brokers from relying on the auction format to sell their commercial properties, Sharga said: Too many of these professionals still think that auctions — online or traditional — are only appropriate for distressed properties.
“Once brokers and owners clear that mental hurdle, it doesn’t take them long to realize that there are a lot of good reasons to consider the auction process,” Sharga said.
Today, more than 50 percent of the assets that Auction.com sells on the commercial side are non-distressed, high-quality properties, Sharga said.
“The word is starting to get out there,” he said. “That $96 million sale raised some eyebrows. People historically have not thought of auctions for those kinds of properties. But we think we are making excellent progress in spreading the message that auctions are the right way to sell a wide variety of high-quality assets.”