Yesterday hundreds of people packed a ballroom in Midtown's Roosevelt Hotel to get a taste of something that's still a rarity in the New York City real estate scene: the condominium auction. This one was a double-header, with the possibility of 26 new apartments in Washington Heights' New Amsterdam and 25 new apartments in the East River Tower on the Long Island City/Astoria waterfront up for grabs at minimum bids starting at $125,000 and $195,000, respectively. Did real estate get sold? Was there adrenaline by the bucketload? How about live music? Did things go according to plan? Yes, yes, yes and we think so! Here's our report on a fascinating afternoon.
The day's proceedings were organized and conducted by Sheldon Good & Co., the auctioneer striving to make NYC property auctions not just a last resort for developers struggling to sell units, but a preferred method of selling apartments. The crowds for both auctions were wildly diverse (young couples, Orthodox Jews, Hispanics, Asians, yuppies with iPads, a pregnant woman rubbing her belly, some dude who looked like a trucker), and it was clear that this was a first-time experience for many in attendance.
Registered bidders had already been educated about the auction process and pre-qualified by the Sheldon Good team, but after a 10-minute instructional video that felt a bit like a high school Driver's Ed course, a practice round of bidding was held, in which the Empire State Building, Eiffel Tower and Golden Gate Bridge were sold. If the practice round was a sign of things to come, there were going to be some bargains. The Empire State Building went for just $100 million!
Both auctions were "bidder's choice," meaning the winner of a round of bidding had the pick of any remaining apartment in the auction pool, and first up was the no-frills New Amsterdam. Only six of 26 apartments were guaranteed to sell yesterday, but this was being billed as a "closeout," so few expected the developer to call it quits after six rounds (the building had been on the market for over two years). All of the available apartments were listed on two large projection screens, with the units sliding over to the "Sold" column after winning bidders claimed them.
As we found out, every auction has its curveballs, and what happened here in the early rounds was that when bidding reached $400,000, a besuited gentleman seated at the dais would walk up to the auctioneer, who then announced that the developer had removed all restrictions on the penthouses. Needless to say, the four penthouses were the first to go. They had been asking $642,400 to $838,760, and including the 10% buyer's premium and a $30k parking space (11 spots were offered to winners), the priciest one?a 3BR/2.5BA at 1,488sqft?went for $503,000. Winning bidders had to immediately announce their selected unit and whether or not they wanted a parking spot. They were then escorted to a buzzing-with-activity side room to sign all the paperwork.
Despite the auctioneer occasionally baiting the crowd by saying the developer could call it quits at any moment, the gavel banged on 25 of the 26 apartments, for an average of just over $300 per square foot. The 26th unit has a rental tenant in place with an option to buy the apartment, and it eventually was removed from the auction pool. However, buyers were invited to come forward and cut a deal on the side, and it appears that may have happened because the press release says all 26 units were sold for a total of $8.5 million including premiums and parking. The cheapest 1BR/1BA went for $211,000. Sound low? Well, when all was said and done, the developer (who admitted being nervous to us just before the auction) was all smiles, the look of a man who just paid off his bank.
The room was cleared and next up was the main event, East River Tower, the 19-story luxurious curiosity in a remote part of the Queens waterfront, which we visited last week. The room was more crowded, the atmosphere, more tense. ETA, the band that attempted to fill all the downtime with funk, soul and Rolling Stones covers, could sense they were playing for their lives.
The auction guaranteed that 15 units would be sold, and up to 25. Buyer's premium was 6%, and parking spots could be had for $10,000 (uncovered) or $15,000 (covered). Bidding started off fast and furious, but not without some light moments. Here's a video clip of the first round of bidding, which, at three minutes, was also one of the longest. The men seen pacing up the aisles shouting at everyone are the bidders' assistants:
The winning bid was $567,500 ($601,500 after everything got added up), and the same bidder won the next round with the same amount. In both cases he took the highest-floor 2BR/2BA available, and these units were once asking $870,000 and $830,000. After a few more round of bidding in the low $500s for the biggest available units, the developer removed some high-floor units from the auction pool and slapped hidden reserve prices on the remaining two-bedrooms, leading to some audible groans in the audience. Five apartments were sold free-and-clear of any restrictions before that happened, and a slew of 1BRs/1BAs were added to the auction pool. In all, 19 apartments sold before the developer pulled the plug, but only the promised 15 without reserves. The total for the units sold, including premiums and parking, was $8.3 million, and the cheapest unit went for $333,000 with those extras added, which is $68,000 below the lowest asking price.
Was the pulling of the "premium" units a panic move? Not according to Sheldon Good COO Mark Troen. The goal in the East River Tower auction was not a closeout, but rather some momentum building. They wanted to set a "price floor" for the developer to work with, get the 74-unit building to 30% sold for FHA requirements, and generate more interest. Next up is a post-auction marketing period, in which bidders who didn't end up buying and other house-hunters tend to approach the developer to cut deals based on the auction prices. And after that? Maybe even another auction. So will developers get over their fears about this whole auction thing? One thing we can tell them: The excitement of the auction sure beats months of boring conference calls with the banks.
· Sheldon Good & Company auction results press release [PDF]
· Curbed's auction coverage [Curbed]
· Sheldon Good [Official Site]