Spotlight On: Mike Carey, Vice President Tranzon Auction PropertiesSeptember 19th, 2011 by melissa
Spotlight on . . .Mike Carey
This month’s Spotlight is on Mike Carey of Tranzon, L.L.C. Wanting to focus on commercial auctions, we spoke with Mike earlier this month and discussed some topics relevant to the commercial sector of the industry.
PA: How long have you been with Tranzon?
MC: 7 years.
PA: What is your position there?
MC: I am Vice President in the Portland Office.
PA: What type of properties do you specialize in?
MC: We run the gamut. We work mostly with financial institutions and we sell everything from waterfront and single family homes to 20 million dollar condo projects to light industrial properties. I have a pretty broad brushstroke of real estate sales under my belt.
PA: Your firm seems to cater to a mix of sellers, municipalities, financial institutions, developers, etc. Have you seen an increase or decrease of inventory going to auction by a particular type of seller in the last 6 months?
MC: As everyone knows, the banks are in a position to be selling a lot of real estate through REO or foreclosure auctions, so I would say about 95 percent of our business over the last 6 months has been from financial institutions – whether that be marketing foreclosure auctions or selling REO assets that the banks have on their books.
PA: When does it make sense to sell commercial property online as opposed to on-site? Is it based on value, location, other factors?
MC: To me, online auctions are just another way to collect bids. The whole process is exactly the same. I don’t necessarily divide by property type. I do think the trend toward online auction is more about convenience than about an appropriate property. Properties in remote locations that are difficult to get to clearly warrant some sort of online bidding. It makes it more convenient and potentially gets a larger buying pool, which is obviously the goal of every auctioneer. I also think online auctions work very well for pools of similar assets – selling not necessarily commercial but selling bulk building lots, subdivisions, etc. – those kinds of things are great to move out through online bidding. I do still think that eye-to-eye is the best way to negotiate though.
PA: Do you see a difference in the profile of buyers for commercial property over residential property?
MC: Yes, definitely. For residential, you end up with everything from investor/flippers to end-users who want to own the property and live in it. With commercial, it’s commercial, so it’s more of a professional real estate purchaser, and it’s more of an income play and/or value-added play for a lot of people. Business people buy commercial properties, and the breadth of residential purchasers really depends on the quality of the asset and where it is, but it encompasses everything from investors and contractors to someone who’s going to move in to the property in 45 days.
PA: Traditional Real Estate brokerages are increasingly getting into the auction business. Do you see this as a trend for years to come?
MC: Traditional brokers have gone where the deals are getting done, and currently deals are getting done through auctions. I think that some traditional brokers who’ve gotten into the auction business over the last 4 or 5 years will continue to be auctioneers going forward because they discover they like it, but others will migrate back to more traditional sales methodology once the market returns. Auctions are a much more dynamic sales process and it takes a particular set of traits and characteristics to be a successful auctioneer. It’s not for everyone.
PA: You can buy licorice at a candy store with your smart phone today. Will people be buying real estate in this manner?
MC: Yes. I think the device we all carry in our pocket – what we used to call a cell phone is what we now call a Smartphone – will soon be something different. Tranzon as an organization is leading the industry in some ways in developing technologies for the mobile world. We’re currently working on a new mobile platform for our website. I do think you will find people are really embracing the ability to do business through their handheld device. Tranzon as an organization sees that as a growth area and an area that we need to spend development time and money on right now.
PA: You sell a wide range of commercial property types for your firm – is there a specific asset class that seems to fare better at auction?
MC: Real estate is real estate. It’s location-specific and asset-specific. I’ve had 50 gas station sales in the last 24 months and they’ve all been very successful, most in the Northeast and Mid-Atlantic areas. Retail strip is hot right now. We’ve had several retail strip, class B, class C retail strip auctions in the last 12 months that have been very successful. I think it’s as much about where the property is and what the property is as it is about a particular asset class. It’s cliché, but I think real estate is, continues to be and will always be about location.
PA: How important is it for an auctioneer of commercial property to know the local market in which they sell property?
MC: I think that local market knowledge is the most important thing that you can have. With Tranzon, it’s our model so it’s easy for me to talk about. We are firm believers that having feet on the ground in the markets that you’re working is incredibly important both from an asset-knowledge standpoint and a market-knowledge standpoint, but also from a buyer-knowledge standpoint. At the end of the day, it continues to be as much about who you know as about what you know. To me, being able to pick up the phone and call somebody, and ask them about the world that they’re living in because I’ve met them and shaken their hand, is much more important than knowing the property address. The days of “have gavel, will travel” are gone. I can’t say enough about local market knowledge.
PA: We see that your firm does properties with a reserve price, absolute, and other formats. Which format is most appropriate for commercial properties? Does it matter if they are occupied or vacant?
MC: I don’t think it matters if they’re occupied or vacant. For the format, that conversation is one I have with the seller and their motivation, not with the actual asset type. When I recommend an absolute sale, it’s because a seller says ‘I need to sell this asset’. As all auctioneers know, absolute works – it brings buyers to the table. At the same time, absolute means absolute, so sell for one dollar, sell for a million dollars, sell for a hundred million dollars, that property is going to sell on auction day. Not all sellers can sell absolute, and so reserve auctions are more appropriate for that person. It really depends on the seller’s motivation. I’ve booked two absolute auctions in the last week – one for a seller who needs to raise capital for some other opportunities they’re pursuing, another for a seller where he has owned the asset for the past 25 years and says ‘I’m done with it. I’ve already made my money on this piece of real estate and I’m ready to move on’. I’ve also booked five reserve sales in the same time for people that want to move on from the asset, but for various reasons can’t take the risk that the property will sell for a price that doesn’t work for them.
PA: For our ASK THE AUCTIONEER SECTION: What tips would you give personal sellers who are not in the position to sell at a discount off market price?
MC: When I talk to people, it’s important they understand that to some degree that I’m their partner. I have to know going in that I can be successful for them, or at least have a fighting chance at being successful. At the end of the day auctions are about time. In the real estate world, we turn an illiquid asset liquid faster than any other sales methodology. We bring the market to the seller as opposed to waiting for the market to come to us. In circumstances where an auction isn’t appropriate for a seller, I tell people several things – If they have the luxury of time and can wait for the market to turn around or wait until the right person comes along for their property, then they should wait. Time kind of cures all wounds. The other thing I tell people that may not have the luxury of waiting but can’t necessarily stomach an auction, is that they should think about leveraging their traditional broker a little bit more. In most auctions, the auctioneer charges a direct fee for marketing, and we do more marketing in a shorter amount of time than most brokers do. Lots of times, I tell people that if you’re considering going to auction, they should consider calling their broker and say ‘I was going to go to auction and my marketing campaign was going to cost five thousand dollars. How about you and I figure out how to spend that money effectively so that I get more exposure through you, and we can do a more traditional negotiated sale? Bottom line, I need to drive some buyers to my property’. Pay for some of that on your own. I don’t think people pursue that opportunity very often.
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