Huge Commercial Property Auction on Tap in L.A. : Real estate: The $500 million in structures, at sites across the country, includes the Bunker Hill Towers.
In an important test of buyer interest in the troubled U.S. commercial real estate market, a group of institutional property owners this week will attempt to auction off apartments, hotels, office towers, retail centers and industrial buildings worth $500 million.
The event, scheduled for Thursday at the Century Plaza Hotel in West Los Angeles, will be one of the largest auctions ever of commercial property not held by the government.
A total of 27 insurance companies, banks, pension funds and private sellers will offer about 60 properties during the event organized by Jones Lang Wootton USA, the Los Angeles arm of an international real estate concern, and the Santa Monica-based real estate auction house Kennedy Wilson Inc.
Buildings on the block will range from the twin 19-story Bunker Hill Towers apartment buildings in downtown Los Angeles and the 166-room Kona Kai Resort & Marina in San Diego to a 10-story Washington office building and 70,000-square-foot Lexington, Ky., industrial facility. Minimum sales prices range from slightly under $1 million to $22 million.
Because the auction is expected to attract potential buyers from as far away as Hong Kong and Barcelona, many in commercial real estate say it will be a closely watched barometer of investor sentiment about current real estate values. Since so few properties have changed hands, investors are not sure whether the market has bottomed out.
“I think there will be a lot of interest to see the number of buyers who show up and, secondly, to see the kind of prices achieved,” said Robert Cavanaugh, director of corporate finance for La Salle Partners. The Chicago-based firm provides real estate management and investment services to more than 100 corporations and investors.
“Up until now, there still seems to be a pretty big gap between buyers and sellers (on price),” Cavanaugh said. “So this will be a very important event.”
Although the federal thrift bailout agency, the Resolution Trust Corp., has conducted auctions that have generated larger average sales, large private commercial real estate auctions are rare in the United States.
Industry officials say the Los Angeles auction is rivaled only by an auction held in May at which $250 million worth of property was sold by Ross-Dove Co., a Foster City, Calif., auction house, in association with the San Francisco real estate firm Grubb & Ellis.
In part, the scarcity of private auctions is due to the reluctance of many building owners to put their properties on the market at a time when values have slid 40% or more. What’s more, unlike popular residential auctions that tend to attract first-time home buyers and other novices who get infected with auction fever and overbid, commercial buyers tend to be more hard-nosed about price.
Michael P. Zietsman, executive director of Wootton’s Los Angeles office, said more than 500 potential sellers were approached for the planned auction but fewer than 100 were willing to price their properties realistically. By contrast, Kennedy Wilson has been approached by 11,000 potential buyers and expects about 200 to 300 to show up Thursday.
“We wanted properties that were appropriately priced” to attract buyers, said James E. Peterson, executive vice president of Kennedy Wilson. “But most (potential) sellers had no concept of what their real estate was really worth.”
The auction will cost about $2.2 million to stage, including $700,000 for advertising in 40 foreign and domestic newspapers and nearly $200,000 for printing information packages on each property. Planning for the event began last fall after James Long Wootton sought out Kennedy Wilson, which has handled auctions for the RTC.
On the Block
The 10 most valuable buildings to be auctioned Thursday at the Century Plaza Hotel are:
Value Property City Description (millions) Bunker Hill Towers Los Angeles 456-unit multifamily $22.00 Blanchard Plaza Seattle 237,162-sq.-ft. office bldg. $20.00 Greenhill Park Dallas 250,123-sq.-ft. office bldg. $17.25 1015 18th St. Washington 99,907-sq.-ft. office bldg. $16.00 3401 West End Ave Nashville 250,000-sq.-ft. office bldg. $14.50 Quality Inn Las Vegas 321 rooms and casino $14.00 Torrey Pines 1 San Diego 72,381-sq.-ft. corp. hdqtr. $12.00 Coast Savings Bank Los Angeles 138,234-sq.-ft. office bldg. $12.00 Laguna Terrace Dallas 156-unit multifamily $11.80 Towne Square Chandler, Ariz. 348-unit multifamily $10.60
