Condo Auction Does Better Than Expected

(Read more on the multifamily market.)

ALEXANDRIA, VA-Seeking to unload the 30 remaining condos at the 378-unit Parkside at Alexandria complex, Mid-City Urban put them out for auction last week. The results were better than the Silver Spring, MD-based development firm had expected: the units, which started at $225,000 sold within the hour at prices ranging from $288,000 to $362,000.

The $225,000 represented a significant discount from recent market trades. According to Delta Assoc., the price set before the auction–approximately $204 per sf for the three-bedroom homes, and $212 per sf for the two-bedroom units–is less than half the current average per-square-foot price of new condos in the Arlington/Alexandria area.

Mid-City Urban used Accelerated Marketing Partners, based in Boston, to handle the auction and set the starting price. Jon Gollinger, CEO of the firm tells GlobeSt.com that it carefully calibrates the opening bid price, after determining the property’s value at a mark to market basis. “We price the product at a level at which it will get some traction,” he says. “We look at the ratios, there is nothing left to chance.”

While such auctions have been in existence for decades–either as part of a structured work out or as a prelude before an investment heads towards one–they appear to be experiencing a resurgence. Recent drivers have been the new Internet technology and of course, the condo slowdown and more recently, the credit crunch. Oftentimes the investor or equity partner behind a development that is moving slowly will push for an auction, Gollinger says. In the case of Parkside, it was New York, NY-based Recap Partners that approached Accelerated Marketing Partners.

In general, Gollinger says, “when the market is moving away from you, funds are anxious to get their capital back. They will do a net present value analysis based on how quickly we can move the properties and if it makes sense then that it the option they will take.”

Charles Smith and the Dunton family originally developed Parkside at Alexandria in the 1960s, as a multifamily dwelling called Jamestown Village Apartments. Mid-City Urban acquired it in 2005 in an ownership structure called Parkside at Alexandria LLC acquired the property in 2005 and converted the units to luxury condominiums.