The second Terrazzo style condo auction has been booked as predicted, but this one is a little bit more surprising. I am not necessarily shocked that it is the West End building, but I am totally floored by the number of condos being auctioned…45. The December 5th auction will include 5 one-bedroom units, 25 two-bedroom units and 15 three-bedroom units. The retail value of the condos range between $385,000 and $948,000.
Let me first reiterate what I have been saying about the West End condo building for the past 3 years – this is an excellent quality building built by a group of local developers led by John Coleman Hayes, but the individual condos were built too large for this market averaging over 2,100 square feet. The interior feels more like a home than a trendy condo offering buyers a different product in a different location, but it turns out that few wanted to trade in their 4,000 square foot homes for a 3,000 square foot condo that costs twice as much. Perhaps more condo buyers did, but could not sell their home in this market.
The West End is a 12 story, 72 unit, luxury condo tower that only has sold a half dozen condos to discerning buyers. Why didn’t more of these condos sell? The answer is simple. This building is a victim of the real estate perfect storm plus developer/sales team mistakes.
1) The developer built this building without pre-selling the condos
2) The economy then turned sharply downward
3) The sales team had a poor marketing effort that was slow to tell the public about the building
4) The developer and sales team failed to create a “want and need” for this product in Midtown
5) The condos where larger than the market demanded
The auction is the next chapter
Jerrold Pedigo Realty and Auction has been tapped to run the auction, wait a second, who? Jerrold Pedigo that’s who. When I Googled “Jerrold Pedigo Realty“, I was also shocked that a company website did not come up in the first 20 search results. A LinkedIn profile containing 1 connection did appear though.
Who is this Jerrold Pedigo fellow and why did John Coleman Hayes choose this outsider to auction these condos? Well, I actually have no earthly idea, which is a problem. As most of you know, I am a partner in a real estate auction company called RealtyTrust and I have never once run across Pedigo in any of my dealings, conversations or research. Not that I know everything, but wouldn’t you want a proven company with specific area knowledge and expertise to run the show? I sure as heck would.
West End Condos making similar mistakes?
As with preconstruction decisions, there are several mistakes being made right out of the starting gate in the auction. I covered the first possible mistake in choosing the auction company above, but let’s talk about the auction and auction announcement.
1) The auction has been officially announced and none of the details are finalized. The only firm information is that there will be an auction of 45 condos on December 5th, 2009. We do not know if this is an absolute auction, if there are minimum bids, reserve prices, what time the auction starts or even what type of auction it will be - oral outcry, bidder’s choice, sealed bid, etc.
2) There is a website for the auction, but most of the pages say “page temporarily unavailable”. In other words, there is no complete information available. Is anyone else starting to see the issues?
3) During the time that the building has been for sale, three different real estate companies provided representation. Pilkerton, Worth and finally Zeiltin. I fear that a similar game a music chairs may break out with the auction entities involved.
4) Attempting to auction 45 condos in a single day is overreaching in my opinion. There is no way there are 45 luxury condo buyers who are currently in the market to buy an expensive condo by the end of the year. The Terrazzo was going to just squeak by with their 30 condos, but 75 less than 2 weeks apart is unrealistic for this mid cap market.
Clearly, I don’t have all of the details or have all of the back story, but I am not getting a good feeling. More to come as I analyze the effect of the West End auction on the Terrazzo auction and vice versa.
BTW – I am calling this auction a liquidation as they are selling more than half of the 72 unit building. A true auction would aspire to obtain the highest and best price for the seller. This is a bank REO-esque liquidation sale.