In the not-so-distant past, a real estate auction meant one of only two things.
"It used to be who died or who went bankrupt," said Bob Getts, local director of auction services for Indianapolis-based commercial real estate brokerage Colliers Turley Martin Tucker.
But over the last decade or so, real estate auctions have come out of the shadows, and are no longer viewed as a last resort for owners desperate to unload a property.
These days, no property is considered too good for the auction block. Last year, Class A office space in the sought-after Meridian Corridor traded hands via a sealed bid auction. The buyer of Meridian Corporate Plaza, locally based developer Lauth Property Group Inc., has since established its headquarters at the site.
"It's a great alternative for marketing even a high-profile trophy property," said Getts, an auctioneer who has been with CTMT for 12 out of his 30 years in the industry.
Along the way, he has tried to dispel what he says are myths about the auction process-chiefly that an auction never fetches as high a price as a conventional sale.
"That's the standard question-how much of a discount," Getts said. "But to be honest, when we look at the trophy properties, more times than not they meet or exceed expectations because of the competition that's created."
Auctions are designed to stir up a flurry of activity by giving interested parties a deadline. At CTMT for example, the public is typically given about six weeks to prepare for either a live or sealed-bid auction.
With a conventional sale, however, even a coveted property can linger on the market as prospective buyers take their time making a decision.
"It causes people to declare their intentions and be ready by a specific date," Getts said.
He doesn't always recommend auctions to his clients. In fact, he said, he advises against it about half the time-often when a client isn't motivated to sell quickly.
When speed is of the essence, however, prospective buyers must be poised to act. Last fall, Lauth officials scrambled to do their homework on a piece of property in Johnson County that was slated for the auction block. In the end, the local developer prevailed at the live auction and acquired 90 acres of industrial ground near Interstate 65 and County Line Road.
Where other transactions may leave months or even years to study a property, an auction puts interested parties under the gun, Lauth Executive Vice President and Principal Mike Curless noted.
"It forces buyers to have their due diligence complete in a short time frame and ascertain what the market is very quickly-like that day," he said. "Those people who can work through site-related issues quickly and know how to recognize a quality product tend to be more successful at auctions."
Over the past two years, several notable properties have sold through auctions:
Lauth bought a 60,000-square-foot office building and 15 acres at Meridian Corporate Plaza from Clarian Health Partners, which had planned to use the ground near Interstate 465 and 103rd Street for a future medical complex, but chose a site farther north. The sale price was not disclosed, but observers have pegged it at around $10 million. Six other parties were outbid by Lauth.
In 2003, Indianapolis-based developer Kite Realty Group Trust picked up 57 acres at auction for its new Traders Point retail center on the city's far-northwest side. The seller was Dow Agro Sciences LLC.
In December 2003, Indianapolis Power & Light Co. unloaded 2,500 acres in Morgan County at auction to a group of businessmen, farmers and lumbermen. The sale netted the utility $8.5 million.
Hancock Memorial Hospital and Health Services in December auctioned off 163 acres of farmland in northern Hancock County. More than 100 people attended the live auction, but the buyer's identity was not disclosed.
In November, an excavating firm bought a 193,000-square-foot manufacturing and warehouse facility at 1200 Madison Ave. from Bruce Bodner. The local real estate developer didn't know what kind of buyer to target and wanted to cast a wide net.
"I wasn't clear what the real use of the building might be, so I thought an auction might get to the whole market all at once," said Bodner, president of the Bruce A. Bodner Co.
That sale was handled by Inland Real Estate Auctions Inc. The Oak Brook, Ill.-based subsidiary of the Inland Real Estate Group of Cos. Inc. said last month that its auction activity reached more than 600,000 square feet in the fourth quarter of 2004-double what it was the year before.
Property owners are becoming more aware of the advantages associated with auctions, said Frank Diliberto, senior vice president of Inland Real Estate Auctions.
"Auctions have always been used to accelerate the time of sale," he said in a recent news release. "But sellers are now finding that auctions can also help them achieve a greater rate of return, by eliminating the cost of holding the property through the conventional market process. Conventional marketing can require many months and find only few bidders, while the auction process can be completed in weeks and find many bidders."