The Full Nelson

612-18 West 47th Street–Are There Bargains at Auctions?

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My firm was hired earlier this year to market 612-18 West 47th Street in conjunction with a court-ordered auction. Although our firm is not a licensed auctioneer, we can help support such auctions. This was one of the few Manhattan properties which sold by auction this year, as many are sold before ending up on the court room steps.

On the national scene, the Wall Street Journal and New York Times are both peppered with advertisements from auction houses offering everything from condos in Florida to large tracks of land in Colorado. Many properties are sold by absolute auction, which is without a reserve price. This begs the question: Are these sales good values?

Unfortunately, many states have recently experienced double dips. Case Schiller recently reported that Georgia and Nevada home prices are now below 2000 levels, having experienced double-digit percentage drops in the last few years. Those who bought apartments in Atlanta and Las Vegas at auction in 2008 and 2009 might well be having buyer's remorse.

I believe a big reason for this double dip in some states goes to the oversupply of inventory which still exists in many cities. Meanwhile, New York City's inventory has tightened up significantly. Douglas Elliman reported that Manhattan apartment listing inventory fell 14.5% to the lowest level in 5 years.

In addition, along with Washington D.C., New York City remains the top choice for foreign investors for its stability, which has driven demand. As a result, any NYC apartments and buildings that come up for auction are met with strong interest.

This was certainly the case with the sale of 612-18 West 47th Street. Chris Brodhead and Bob Knakal had months to market the property in anticipation of the auction. Before the auction, we already had a dozen pre-emptive offers, so there was a tremendous momentum going into it. Chris told me that ultimately 50 people showed up to the auction; the closing price was well above the pre-emptive offers we had received.

The site closed for $6,790,000 or $343/BSF on the as-of-right 19,750 buildable SF. In addition, there's a planned Hell's Kitchen rezoning that could bring the site to 49,375 buildable SF. “The zoning over there is very archaic,” said Knakal, but added that changes could allow for additional uses beyond the existing light manufacturing buildings. “I think residential is viable.”

As far as other recent auctions, 1107 Broadway, owned by a partnership led by Yitzhak Tessler, is being sold in a public foreclosure auction alter this month. L&L Holding has submitting a stocking-horse bid for $161.5M. Another buyer would have to offer above $164.5M in order to win the building.

In East Harlem, two condo buildings with a combined total of 34 units will be going to auction this month. Once listed for a combined $20 million, eight of the 34 units are being sold with no minimum bid. One of the two buildings, the 12-unit Winfield Condominium, had units ranging from $325,000 to $650,000, but has suggested bids starting at $149,000. The second property, the eight-story, 22-two-bedroom Alto Condominium, had prices ranging from $650,000 to $850,000. Opening bids are being suggested to start at $249,000. At these prices, a buyer might want to consider the feasibility of owning these for rental.

As a marketing firm, we tend to advise against selling a property at auction. The main reason for this is that the seller loses control of the process. In an auction, there's a date certain when the property has to sell, so if buyers are out of town that day or unable to attend, the seller can miss out. Others prefer not to bid in this environment. Most importantly, the seller can't give more time if needed to a buyer who might pay a higher price.

Regardless, it's safe to say that most New York City auctions aren't places to pick up hidden deals. These are generally well publicized and attended. That being said, the key to finding a good buy is looking at a lot of opportunities, so it's always worth while to keep an eye out.

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