Chicago–Evan Gladstone, executive managing director and founder of Chicago-based NRC Realty & Capital Advisors L.L.C. Gladstone, has been a real estate auction specialist for over three decades, including a time in the early 1990s as one of the Resolution Trust Corp.’s major auction and sealed bid contractors, selling nearly $1 billion in commercial and residential real estate in that role. These days, Gladstone is seeing first-hand the dispositions of distressed properties, including a generous share of multifamily properties.
MHN: What kind of investor is looking to buy foreclosed multifamily properties: institutions, speculators, foreign capital, all of the above or someone else?
Gladstone: Most foreclosed multifamily properties are distressed with lower occupancy and higher deferred maintenance. These are best suited for experienced multifamily operators, those with the personnel and capital to deal with immediate repairs, eviction of non-paying tenants and repositioning the property in the market.
MHN: Have you noticed that banks’ foreclosure problems are affecting the willingness of buyers to consider buying foreclosed properties?
Gladstone: There’s high demand for foreclosed properties right now because banks are beginning to price their foreclosures closer to market values. In the single-family space, 35 percent of all sales are from foreclosures, notwithstanding the unfolding moratoriums and class-action suits. In commercial sales, most transactions are with lender-owned properties, and are short sale transactions or purchase of non- or underperforming loans. Very few conventional sales are taking place in the market.
MHN: What are the advantages of selling multifamily units (or whole properties) by auction, as opposed to standard marketing?
Gladstone: Condominium units can be sold one at a time in a live or sealed bid auction quite effectively at prices over bulk sales and in the same time period. Multifamily properties are one of the only asset classes with very high demand, and competitive bidding will generate the highest bid amount. Auctions are now the go-to method for lenders and banks’ nonperforming assets. Buyers are aggressively bidding up nonperforming multifamily loan portfolios from FDIC-closed banks whenever they’re available.
MHN: Are sellers more interested in this kind of sale than previously? Are buyers more receptive to it?
Gladstone: A substantial amount of commercial real estate transactions are being sold through competitive bidding processes, and buyers have come to expect this. Buyers appreciate the confidentiality of a sealed bid sale, and the speed by which they can move through the process.