Photo credit: A.J. Billig & Co. Auctioneers

Recent high-profile auctions fetching $4.4 million for One Charles Center, the 23-story office tower formerly owned by Peter Angelos, and $3.2 million for Kevin Spacey’s 9,000-square-foot waterfront condominium received their fair share of media attention. But most auctions don’t command bold headlines and they don’t match the dramatic, stereotypical image of distressed assets being sold on the courthouse steps with bids being shouted out from all directions.

According to Chuck Billig, a fourth-generation member of Baltimore City-based A.J. Billig Auctioneers, auctions are an often-utilized tool by owners of various asset classes.

The use of auctions is increasing based on its “transparent negotiating method with an expedited marketing platform,” Billig said. “A seller has considerably more control over the timeline as there is a defined finish line.”

Using traditional asset sale methods, the final selling date is typically unpredictable and undetermined.

“Residential and commercial real estate brokerage firms often turn to us for help based on the product type, the timeframe in which the seller wants to dispose of the property and other factors, including property condition, environment considerations, partnership changes and many others,” Billig explained.

“Significant advantages to using the auction process is reducing or eliminating the delays attributable to due diligence periods and feasibility studies, and the ability to set and achieve a firm selling date,” he said. “For certain projects – including large-scale projects, notably those retail developments geared towards big-box stores or intended PUDs with an extensive number of homes and retail considerations – that lack of an extended feasibility study period may not favor an auction process.”

Auctions can be court-ordered or done voluntarily by the seller and, unless it is an absolute-sale situation, the owner is under no obligation to accept the highest bid. Despite popularly held beliefs, most auctions do not involve distressed or lower quality products.

“Most asset classes do well with auctions, including multifamily communities, retail centers and single-user buildings, especially those that are income-producing and are without contingencies,” Billig said. “People in their 30s and 40s who grew up using eBay, are familiar with the auction process and are more likely to use that methodology. In addition, national brokerage firms are realizing its benefit, some of whom have formed relationships with local auction companies.”

With the wave of building refinancing expected to hit the industry in the coming year, Billig said there might be additional opportunities to work with buildings facing distressed conditions.

“The residential downturn in 2008 and 2009 arrived quickly, and we believe this situation will develop over a more extended period of time,” he said. “Commercial lenders are extremely savvy and not every challenging asset will go to auction. But the situation is daunting, there is a large soft spot in the office market, and conditions are expected to play out over the next four plus years.”