AuctionPoint Embraces Orange County Market

February 26, 2010
By Allison Landa, News Editor

Courtesy Flickr Creative Commons user Georgio

The founders of AuctionPoint, an online auction tool for commercial real estate brokers, believe their program’s performance in Orange County, Calif., portends well for the local market.

Since its inception in fall 2009, AuctionPoint has been involved in the closure of ten Orange County commercial condo deals. Founded by Los Angeles-based development firm M2 properties in fall 2009, AuctionPoint takes into account the complexities of commercial real estate transactions through factors such as detailed property information and extensive due diligence materials.

“We are very encouraged by the activity we’re seeing in Orange County,” AuctionPoint co-founder and CEO Joe Tang told CPE. “We are seeing bright spots in the Orange County market for commercial buildings – specificially in the industrial and office sectors.”

The company points to the sale of ten out of thirteen available properties at the Von Karman Center in Irvine and the Valencia Business Center in Fullerton as a measure of this success. On the market for an average of 27 months, the condos’ sale was expedited when the brokers representing M2 – CB Richard Ellis, Cushman and Wakefield, and Voit Commercial Brokerage – chose to auction the properties through AuctionPoint. Four of the ten properties sold prior to bidding to buyers who made preemptive offers, while the remaining six were marketed through the site for an average of five weeks before selling.

“AuctionPoint helped expedite these sales by allowing the commercial brokers to bring sellers and buyers together,” Tang said. “The auction model helps bridge the gap between sellers and buyers by starting with a low price and letting the buyers bid the price up to market value.”

Moreover, he said, the auction model gets buyers off the sidelines by setting deadlines to create a sense of urgency: “Sellers are able to realize market values and buyers are able to buy at historically low values with the certainty that they aren’t over-paying.”

AuctionPoint auctions are managed and marketed by local brokers.

Despite the strong performance of the ten condo deals, co-founder and president Keith Yang said that he forecasts continued difficulties in the Orange County with regard to pricing corrections.

“There is still a significant volume of outstanding distressed commercial real estate debt that needs to be worked out, and pricing uncertainty is making it hard for those underlying assets to be sold,” he told CPE, adding that he believes more brokers will use auctions in order to help clients sell properties and create market liquidity.

He also contends that the long-term outlook for Orange County is extremely positive, citing its past position as one of the top five commercial real estate markets nationwide as well as strong fundamentals including a dense, highly-educated and wealthy demographic drawn to the area by top schools, a good transportation network and a coastal location. He also sees the recent past repeating itself.

“This will create demand for commercial real estate from business owners wanting to locate near their homes and other businesses choosing to locate within the Orange County employee base,” he said. “It’s likely that another bubble will form in the distant future. As the market recovers and early investors begin to realize profits from leveraged real estate investments, others will be drawn back into the market, financial instruments that encourage greater risk-taking will be developed, and the cycle will continue.”