You can tell a lot about where real estate auction website Auction.com might be headed by the companies that have become strategic shareholders in it. A string of major firms have signed onto Auction.com’s vision of making the process of buying and selling real estate properties more efficient – particularly for potential sellers who have large portfolios of smaller commercial and multifamily assets.
Auction.com’s recent investors range from a technology giant to a leading loan servicer that must dispose of large numbers of foreclosed properties.
For instance, the recent $50 million investment by Google Capital in Auction.com will give both companies access to a rich trove of real estate data.
“This investment supports the notion that they [Google] are still very much interested in real estate,” says Ben Thypin, director of market analysis for research firm Real Capital Analytics. As part of Google Capital’s investment, announced March 5, one representative from Google Capital will join Auction.com’s board of directors and another will take a board observer position.
Google’s investment is just the latest infusion of cash for Auction.com. Starwood Property Trust, a leading CMBS servicer, bought a 3.75 percent stake in the firm last August. Institutions like Starwood can use auctions to sell properties that defaulted on their CMBS loans. Other strategic shareholders in Auction.com include Stone Point Capital and funds managed by affiliates of Fortress Investment Group.
“Institutions that have a lot of smaller properties may be looking for a more efficient way to sell,” says Thypin.
Properties bought and sold on Auction.com totaled $7.4 billion in 2013. That’s a 30 percent increase from 2012, according to the company. More than the half of this volume involved sales of single-family homes. The rest has been made up of commercial and multifamily properties. The properties bought and sold through Auction.com are mostly smaller.
“Our sweet spot is properties under $20 million,” says Jake Seid, president. “We typically don’t play in the very, very large property segment.”
An online auction is often the most efficient way to include all of the interested buyers in a bidding process, so that all potential buyers get what Seid calls “a fair last look.” That’s because the auctions always end at a certain set time. Any interested buyer can observe the auction as the time approaches, see how high the bidding has gone and submit a higher bid of their own. In a traditional sale, a seller or a seller’s representative is unlikely to be in touch with a long list of potential buyers as the bidding gets higher. That’s especially true for smaller properties.
“Paper, pencil, phone, and fax is not an efficient way,” says Seid. “Google’s investment in us really validates our vision.”
Google has explicitly approved that vision to expand the real estate marketplace and make it more efficient, especially for real estate owners with portfolios of smaller commercial or multifamily properties.
“Auction.com has quietly built one of the largest marketplaces on the web,” says David Lawee, partner at Google Capital. “We think Auction.com can fundamentally change how real estate, and particularly commercial real estate, can be bought and sold, leveling the playing field for smaller investors.”
This article was republished with permission from National Real Estate Investor.