Real Estate Auction Is Lackluster
Investors, gathered for what promoters billed as the nation’s biggest private auction of commercial real estate, bought only about half the $500 million worth of property on the block, an indication that the market for hotels, apartments, shopping centers, office and industrial buildings remains deeply depressed.
Although Thursday’s auction at the Century Plaza Hotel was packed with bidders from as far away as Hong Kong and Barcelona, the lackluster bidding surprised many observers who had been closely watching the event to gauge investor interest in the troubled U.S. commercial real estate market.
In one of the most telling indicators of the lack of investor enthusiasm, the most expensive building up for sale--the Bunker Hill Towers apartment complex in downtown Los Angeles--was sold to a Hong Kong investor for $19.1 million, even though the property had a published minimum bid of $22 million.
The twin 19-story apartment towers were sold by Prudential Insurance Co.
“It’s, frankly, a sign of the times” of the poor real estate market, said James Lewis, senior vice president at Real Estate Disposition Corp., a Santa Ana-based real estate auction house.
A total of 27 insurance companies, banks, pension funds and private sellers offered about 60 properties for sale 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.
Auction officials were still compiling official results late Thursday, but they said 34 properties were sold for $178.2 million, and another $100 million in sales were being negotiated between buyers and sellers who had not yet agreed on a final price and other terms.
Auction observers estimate that of the properties that did attract interest, two-thirds of the bids were below the seller’s minimum sales price.
Many other buildings, including the 12-story Coast Savings building in downtown Los Angeles, failed to attract interest even when auction officials offered to accept bids as much as 30% below the published minimum sales price.
“If the property was run of the mill or the least bit distressed, there were no takers,” said Andy Kane, a managing director of the Arthur Andersen consulting firm’s real estate services group in Los Angeles, who attended the auction. “The auction will educate the sellers that this is a buyer’s market.”
