beyond the headlines

 

Buyers Pack Auctioneer’s Tent To Purchase 62 San Carlos Units In One Day
By Clayton Wallace

It was an unusually warm Saturday, Feb. 7, in Gulf Shores as temperatures flirted with 70 degrees. More than 250 registered condo buyers and more than 1,000 onlookers were sweating, packed like sardines and spilling through the edges of a tent in the shadow of the San Carlos condos as the surf pounded in the background.

Potential buyers were waiting for the start of an absolute auction that advertised 30 condos to be sold without a reserve price. The owner of the condos, Los Angeles-based Canyon Capital, paid $40 million for 87 units in the complex two years ago from the San Carlos developers, just before the softening of the condo market.

When the auction began, bidding started at $350,000 for penthouse units that were originally listed for as much as $1.2 million. Bidders quickly took the price to $480,000 for the first unit. The second penthouse unit sold for $465,000.

Fifteen more units were sold at prices ranging from $260,000 to $435,000. The 18th unit, with three bedrooms and three baths, sold for $250,000, a price Real Estate Broker David Swiger of Gulf Shores said was the magic number. “If the price gets to $250,000 you’ll see a mad rush,” Swiger said before the auction began. “You can quote me on that.”

Swiger’s assessment was dead on. When the National Auction Group auctioneer asked if there was anyone else who wanted similar units for the same price, a roar went up from the crowd and people made a mad dash to get in line for units at that price. At the owner’s insistence, only five more were sold at $250,000, leaving many potential buyers frustrated.

The fervor of the crowd pushed bidding back up above $250,000 for seven more of the three-bedroom units, with prices ranging between $275,000 and $280,000. Several two-bedroom units sold for $240,000.

When all was said and done, 62 units sold for more than $20 million, according to National Auction Group President William Bone. He said the seller was pleased with the results of the auction, which led to the sale of 32 more units than were originally planned. “We averaged 81 or 82 percent of what the buyer was asking prior to the auction,” he said. “They were asking about $275 per square foot, and we got $220.18 per square foot.” Each of the winning bidders also had to pay a 10 percent “buyer’s premium” in addition to their winning bid.

Real Estate Agent Chuck Norwood of Gulf Shores commented during the bidding that judging by the prices bid at the auction, the buyer should have accepted offers his clients had made in the past for some of the units. “I had several clients that made higher offers,” he said.

Bone said while it was true that the owners had received higher offers in the past for some units, there’s much to be said for quantity. “It’s one thing to take an offer,” he said. “But it’s an entirely different thing to take 60 offers on 60 units in one day.”

Bone said he was pleasantly surprised at the interest the auction sparked in bidders from all over the globe. “We had 700 or 800 people take the tours,” he said. “And we had registered bidders from 30 states and two foreign countries.”

Kaiser Realty Director of Real Estate Sales Steve Jones said he thought the auction would help bolster more sales. “I think this was a fabulous event for the Alabama Gulf Coast real estate market. The prices were very low, but not so low as to ruin the market,” he said. “We were already seeing some two-bedroom, two-bath products dropping to the $250,000 range, but none of it was new product. The fact that none of these units—including buyer’s premium—sold for less than that, somewhat protected the low price point for new construction.”

Jones said he is optimistic about the long-term results of the auction. “The other bright spot in the economy is that with all those unit sales, we should see that new inventory in the rental market, which is still performing reasonably well,” he said. “The new activity in a previously ‘dead building’ and the expected sales of furniture and materials needed to prepare them for rental or occupancy brings life to sales tax activity as well. These units will require a lot of furnishings and modification, hopefully a shot in the arm to the local retail and decorating community.”

Bone said auctions “cleanse and stimulate the market” to allow normal real estate sales to take place afterwards. “It happened 20 years ago on the gulf coast, and you see what happened after that,” he said.

Jones agreed with Bones’ assertions. “The message is that the Alabama Gulf Coast has plenty of opportunity for the savvy investor, and you don’t need to wait for an auction to take advantage of good prices.”

Bone said the auction market along Northwest Florida and the Alabama Coast has been hot recently, and he sees the trend continuing. “We think the future holds a lot of auctions down there,” he said. “Auctions won’t work everywhere, but we’ve sold 393 condos in the last year from Gulf Shores to Panama City Beach.”

He said an auction is a unique event where, in his experience, more often than not, all parties walk away pleased. “The buyers look at it as if they’re getting a discount on the property. The sellers say, ‘If I can sell 50 units at a time, I’ll take a discount,’” he said. “It’s a win/win situation for everybody.”