The Tranzon Auction Leader
Volume III - Fall, 2004
The Tranzon Auction Leader is published quarterly by Tranzon LLC, national experts in accelerated marketing and auction sales. This E-newsletter focuses on trends, auction highlights, and expert analyses on how a professionally marketed auction may maximize an asset's value.
What's Up, What's Down in Real Estate
The Tranzon Team
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of Tranzon offices
While the Federal Reserve has made good on its pledge to increase short-term interest rates in small, incremental steps, long-term interest rates have not followed suit. After a sharp increase earlier in the year, long rates have retraced most of their advance and now hover at levels far lower than at the beginning of the year.
The impact on the markets of the short-term rate increases has been muted in our experience. While investors holding property against loans indexed to short-term interest rates are experiencing some added financial stress, this is not that significant. Those able to secure longer-term indexed loans or fixed-rate traditional mortgages are still finding attractive financing and willing lenders. So the only impact we are seeing of the rise in short-term interest rates this year is "on the margin".
By "on the margin", we refer to both thinly capitalized owners with short-term indexed financing AND the propensity of prices to continue to advance faster than warranted by what we would consider reasonable, fundamental factors. Neither of these negative impacts is bad for the longer-term health of the real estate market. In fact, they represent modest and welcomed corrections to what was becoming a potentially troubling acceleration in price increases.
We continue to see strong demand for real estate across the spectrum. It seems that the stock market travails of 2000-2002 have chased a large group of investors out of the market, at least with their non-retirement investment funds. It is interesting that smaller investor demand remains quite strong, which is apparent in the bidding for "fixer upper" residential property and just about any type of multi-family rental available.
While buyers seem to be a little more rooted in "reality" when bidding today versus one-year or even six-months ago, the prices fetched at auction are still attractive. Potentially owing to cultural and secular trends favoring auction marketing, as well as the strong realty market, we are seeing a trend toward more and more participation of bidders and buyers in our auctions. The confluence of strong interest in the competitive bidding process, strong interest in real estate, and the availability of affordable financing, yields a potent real estate auction buyer community. We may be early on this, but these factors may go a long way to explaining why auction prices secured for Tranzon clients have been quite strong relative to traditional brokerage expectations for the same properties.
What's Hot
Reflecting
a solid economy and confidence in the availability of low cost funding,
Tranzon has seen good demand for most commercial property types. A
recent sale of a dark K-Mart portfolio resulted in 75% of the properties put
under contract for sale within 90 days of the signing of the listing agreement.
While empty boxes in declining economic tracts continue to garner little
interest, we are seeing increased interest in better-located properties even if
they are dark. Tranzon's auctions in this sector
are up more then threefold in 2004 compared to 2003.
We continue to see good demand for neighborhood shopping center property and convenience store/service station property offerings. Overall we would reiterate our comment last quarter that there seems to be an improving tone to the demand for income producing commercial property in general, most notably in the sub-investment quality categories.
Reflecting
the tremendous liquidity in the market and favorable investor sentiment toward
real estate, land and farm prices remain strong throughout our trade areas. We
continue to have significant success in this market and prices seem to be
continuing at a strong pace. Auctions provide a superior selling methodology
for land and farms. We expect to see a continuation in the trend to use more
auctions to sell these properties.
There was a small but noticeable change in some of the residential market's we serve since our last newsletter. While many homes continue to sell well and quickly using conventional brokerage, we are seeing that the market is becoming a little more discerning. Many properties are now moving more slowly from conventional listing to sale. In many cases, they are moving too slowly for the seller's needs. We have seen an up tick in both inquiries and listings from residential owners. In September of 2004, the number of single-family homes Tranzon companies auctioned was up more than 200% from the year ago period.
As
noted previously, the demand for residential investment property continues to
be strong in our markets. Multi-family unit offerings are scarce and have met
with excellent demand from bidders at auctions. There is no better way to take
advantage of these types of supply and demand imbalances than through the
competitive auction marketing process.
The recovery in the resort and hospitality industry has been widely reported and we are seeing this also. In the distressed market, this is evidenced by properties going to auction, successfully, that have more significant property or competitive challenges. Buyers appear more willing to confront these challenges amidst the strengthening business backdrop.
The pipeline of office and apartment projects going to auction is limited. Demand for these properties is quite strong and those owners using the auction method are benefiting from competition for their properties. But we are not seeing much product from sellers now. Office rents continue soft in some markets, but this has not impacted sales or values of these properties yet. In our West Coast region, we expect more office inventory to come to the market next year as rents stay soft and guarantees from credit tenants on dark space begin to roll off.
Finally,
Tranzon's accelerated marketing program continues
to succeed in moving high end "trophy" or vacation property. The back up in
interest rates earlier in the year and "price rise fatigue" have led to a
slowdown in the movement on many of these high-end properties. Auctions have
been effective in generating timely offers in this environment.
Tranzon Fast Facts
Tranzon has one of the most active auction-listing websites in the real estate auction industry averaging over 1 million hits per month with, on average, about 100 active auction listings at any time.
Auction inquirers download 1,000 information packages on an average business day from our website saving our clients thousands of dollars in postage and speeding information delivery to interested bidders and buyers.
Among the Tranzon companies, there are 24 licensed auctioneers. Almost all possess at least one advanced industry designation.
Tranzon is dedicated to continuing education and has a tuition reimbursement program for our companies' associates that pursue advanced auction and real estate program designations.
Tranzon companies have conducted auctions in 42 states and the District of Columbia.
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ABOUT TRANZON
Tranzon is unique in the real estate industry. We are a group of real estate auction companies who believe that combining the powerful auction selling process with a highly professional organization with national resources and local market knowledge, offers a compelling value proposition to sellers of real estate desiring to sell their property for the highest price in the shortest time possible. We have experience in selling virtually all types of property and our team includes some of the most respected names in the industry with backgrounds in many professional disciplines. Tranzon companies auction over 1,000 properties each year and have conducted auctions in 42 states and the District of Columbia since 2000.
We are excited about our business and would welcome the opportunity to speak with you directly about our capabilities.
CLICK HERE to go to Tranzon's Team Page
Questions or comments? Contact an expert toll-free at 1-866-TRANZON (872-6966) or e-mail us at info@tranzon.com or E-mail Tranzon President Jeff Levin personally at jlevin@tranzon.com. All inquiries will be kept strictly confidential.
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All references in this e-newsletter to "Tranzon" refer to Tranzon, LLC and the individual Tranzon member companies.
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