War, what is it good for?! By: Kyle Malnati
Fall 2014 — The 1970 hit song told us that war was good for “absolutely nothing.” Edwin Starr certainly wasn’t talking about bidding wars, but we have found bidding wars to be absolutely fantastic for clients that choose to list their apartment buildings For Sale with us this year. “War” is good for Sellers in today’s multifamily market… much to the chagrin of Buyers.
After I presented at our multifamily seminar last week, I was told by a respected client that my brokerage team is a “Marketing Machine.” The truth is that I believe its our responsibility to be an amazing, relentless marketer on behalf of our clients. My goal is to generate the highest price possible from a well qualified Buyer that will close their purchase of an apartment building in the fastest possible time-frame.
We have gotten a great reputation for driving the price of our listings ABOVE the asking price, and yesterday, I received a snarky email from another Buyer stating, “as I told you before, I am not interested in a bidding war, so I don’t see how I can do business with you.” I know that this Buyer was frustrated, but I really take this as a COMPLIMENT.
In a highly competitive market, I can not make any sense of Sellers that want to negotiate directly with a Buyer off-the-market without marketing exposure to largest pool of qualified Buyers. Don’t get me wrong, the goal is NOT to get every Peter, Paul, and Mary over to the building for the sake of having lots of “warm bodies” in an open house setting. There is a delicate balance between a public auction and a well designed plan of attack that brings as many qualified, experience Buyers to the table to generate the best offer possible.
We practice what we preach and here are real life examples of great bidding wars orchestrated by the team of Greg Johnson and Kyle Malnati in 2014:
– $170,000 over-list (January) — 950 Lafayette Street: “In 10 years, we’ve never had the level of interest that we did with this property,” stated Greg Johnson. He added, “We had 11 tours on the first day of showings, and received 10 offers for the property.” “By the end of the week, we were under contract for $200,000 over list price,” noted Kyle Malnati.
– $70,000 over-list (August) — 1345 Monroe Street: “A highly competitive brokerage proposal process between many of Denver’s high-octane brokerage teams parlayed into an equally competitive bidding war once Madison Commercial Properties won the listing. We brought the property to the open-market and presented the Seller with three well qualified Buyers in a “call-for-offers” setting that generated a fantastic offer from a 1031 Exchange Buyer.
– $45,000 over-list (July) — 1057 Marion Street: Five offers, all at or above our listing price, were presented to our client the week before Memorial Day.
– $40,000 over-list (January) — 1362 Clayton Street: “We generated a lot of interest in this property right out of the gate. We received three competitive offers and went under contract within 2 days. The property sold for $40,000 over list price,” said Mr. Malnati.“This transaction was part of a 1031 Exchange for the Buyer, and was a great addition to his existing Denver apartment portfolio,” added Mr. Johnson.
-$10,000 over-list (April) — 1335 Monroe Street: Madison Commercial Properties negotiated an offer that was above the list price, a win for the Seller, as well as favorable Seller carry-back loan terms, a win-win for both parties.
-$5,000 over-list (June) — 1236 Pearl Street: “We generated multiple offers on this property,” added Mr. Johnson, who also noted that average sales prices in Central Denver are up 89% in just two years. “We have seen tremendous rent growth and investor demand since 2012.”
– $30,000 over-list (edited after Closing on 11/13/14) — 68 Sherman Street: We received three competitive offers for our Seller, a local developer, and we went under contract within one week of implementing our marketing plan. The property will close well over the list price,” said Mr. Malnati. “This investor is a repeat client of ours, and this transaction was part of a 1031 Exchange for the Buyer. The building will be a wonderful addition to their existing Denver apartment portfolio,” added Mr. Johnson.
– $XX,000 over-list (closing in December) — 1320 Vine Street: Ten showings in two days generated three offers… ALL above list price. We will close this property substantially over-list.
The original song, “War,” by Edwin Starr was released in 1970 and was written by Norman Whitfield and Barrett Strong. http://youtu.be/_d8C4AIFgUg
~Kyle Malnati, Partner/Shareholder
Madison & Company Properties
Madison Commercial Properties
1221 South Clarkson Street, #300, Denver, CO 80210