Auctions gain ground in big sales

By Colin Taylor

Clued up buyers and sellers see benefits in process, agents say.

John Bowring says Colliers is selling more properties over $4 million by auction, including 207 Lincoln Rd, left, which went for $5.98 million.
John Bowring says Colliers is selling more properties over $4 million by auction, including 207 Lincoln Rd, left, which went for $5.98 million.

Colliers International reports that its agents sold 51 per cent more properties via the auction process in 2012 than they did in 2011 with a growing number of properties over $4 million being sold by auction.

"The successful sale of higher value commercial properties at auction is the result of efforts by both vendors and purchasers to become better educated in the process," said John Bowring, Australasian auction manager for Colliers.

"In the past couple of years we have observed property owners and buyers becoming increasingly aware of the benefits of transacting property via auction. As a result, it has become a more widely used method for big as well as small properties."

Colliers New Zealand's auction division has grown from conducting around 40 auctions a year at launch in late 2009 to a projected total for this year of over 250.

Bowring says auctions can be most successful when they are treated as campaigns which span a number of weeks. "Auctions are a process and a powerful sales tool, with vendors being able to sell before or after the auction date," he says.

"An auction campaign can often be successful in encouraging prospective purchasers who do not wish to participate in an auction to act quickly, putting in a good offer before the auction date. Likewise, where reserves are not met in the auction room, we can work with bidders post auction to reach an acceptable price for all parties, with the vendor comfortable in the knowledge that bidders are already unconditional."

Bowring says one of the key benefits for vendors of the auction process - when selling properties at all price points - is that it delivers unconditional buyers on the day.

"Vendors know that when selling a property at auction, they will be presented with unconditional purchasers, compared with other methods where they may only receive conditional offers on the deadline date."

Auctions also give purchasers confidence in making bids, knowing that the market price of the property will be set in a transparent environment. "With tenders or private treaty campaigns, purchasers are kept in the dark about the price level of other offers. In the auction room, there is 100 per cent clarity." Bowring says he is keen to maintain momentum in taking higher-value properties to auction, where he says excellent results can be attained.

"There is no reason why properties of even higher value than our recent sales can't be sold through the auction process. Any stock that has good tenant covenant and lease terms can gain a good price at auction. The methodology works for a great number of properties - large or small."

Colliers International industrial broker, Andrew Hooper, says that while there was previously a degree of reluctance among purchasers to participate in auctions of higher value properties, this is changing, helped by vendors up-skilling on auction selling.

"Vendors are now realising that in order to achieve a successful outcome at auction, they must do more to help facilitate the process, including making due diligence material readily available to potential buyers, so that they can do their due diligence quickly, at minimal cost, and be unconditional on auction day. So it's been an education process for both vendors and purchasers."

Hooper says he has concluded several higher-value auction sales campaigns since the beginning of 2012, along with Greg Goldfinch, who runs Colliers International's industrial sales and leasing team based at Highbrook, East Tamaki. These included the sale of 207 Lincoln Rd, Henderson, occupied by Te Wananga o Aotearoa on a six-year lease with rights of renewal, which sold under the hammer for $5,980,000 in July.

"The sale was a great result for the Colliers auction room. We had a packed audience and competitive bidding from seven bidders, one of whom was an offshore buyer," says Hooper.

Sold before auction was 3 Monahan Rd, Mt Wellington, occupied by FloraMax on a 15-year lease, for $8.2 million. "Offering the property under an auction sale campaign created sufficient tension in the market which resulted in the sale being concluded before auction day."

- NZ Herald

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