As the creator of Cushman & Wakefield’s initial online auction platform, I can tell you it has been a big help in processing dispositions significantly faster. In 2 out of 3 cases, we achieved higher than expected results. We will know more as we close out future deals.

Specifically to your question: Yes, institutional investors will greatly benefit from the use of brokers incorporating auction technology.
Their biggest problem is not securing the absolute highest price for assets in disposition; but rather getting the transaction done. With over $350 billion of distressed assets coming on line, volume will be priority.

Brokers that insist on processing transactions the traditional way will have a difficult time managing volume sales. Cushman & Wakefield processes over $28 billion annually in capital markets: to maintain our market share, we must produce higher volume with fewer brokers.

The auction process is not easy and does not reflect laziness. It is currently the smartest way to meet current customer demands for disposition of distressed properties. Online auctions will not replace our traditional model; but rather enhance it when necessary.

http://www.linkedin.com/in/edwardnwokedi
ed.nwokedi@cushwake.com

In this upsetting economy, my combined background as a co-founder of Instadium.com as well as practicing banking and finance law in Chicago and Detroit and acting as the former national sales manager of one the country’s largest sealed-bid auctions houses in Chicago.

Sealed Bid Auctions, in this environment, I believe are the best vehicle to create a a scenario of bidding techniques/procedures that maximize the highest returns, independent of market liquidity. While at a former company we had an approximately 95% closing rate. Moreove, as Special Asset Group and know commercial Special Servicers are going to get avalanched with volume, the ability to run a national, regional or local high-intensity marketing campaign, and as Scott correctly points out, different properties command different audience. This is why it’s critical that a successful sealed-bid sale implement a highly charged and laser targeted marketing to the audience/demographics and publications from which the most bidder’s will come from.

I also agree with Scott that the “fear of loss” alone, drives potential bidders to the plate. Where else can you implement the sale of 500 gas stations or 30 former restaurants the country, within 12 weeks, non-negotiable and transparent.

For the two auctioneers that have commented, what happens to the marketability of an asset if an auction is held and no one bids? Have you diminished your marketing and negotiating position by going the auction route?

Second, for the successful auctions you’ve held can you calculate a comparison of how achieved auction pricing compares to what a sealed bid process would have achieved?

Having spent 8.5 years as an institutional broker, I always thought the auction format would achieve the highest pricing (for desirable assets). However, my biggest fear was that we would hold an auction and no one would bid. After that, any re-marketing effort I undertook would be seriously compromised.

I often hear from institutional buyers that they will not participate in an auction, but at the end of the day (and particularly for auctions that exhibit a compelling motivation or are absolute…no reserve)the fear of loss will have them showing up on auction day and prepared to bid. These types of buyers also appreciate that they won’t be bidding against unqualified bidders (“…if it wasn’t for the money, I’d own the Empire State Building” type buyers).

The auction approach is them most efficient manner of sale and an extremely valuable tool to have in your brokerage arsenal.

http://www.linkedin.com/in/davidmkaufman