GlobeSt.com: But now it’s moved beyond just distressed assets, isn’t that right?

Koch: Absolutely. Part of what attracted me to the business model was the fact that you had trillions of dollars worth of real estate in the wrong hands which needed to be redistributed. To solve that problem you really needed a solution that provided scale and could move a high volume of inventory. Auction.com is using technology to do that, so our business model is certainly right for the times. But what’s happened is that as sellers and buyers see the advantage of the platform, they are gravitating to our method irrespective of whether the properties are distressed or not. The Auction.com process is very transparent and democratic. Every buyer gets the same information and a chance to bid in an open environment. Every bidder has the chance to take a last look. That is very attractive to sellers and buyers alike. It’s particularly attractive for those sellers who have a distinct fiduciary responsibility, such as banks, special servicers or anyone being held accountable to a board, shareholders or investors. There’s a lot of scrutiny on how assets are disposed of these days, and the transparency of our process is extraordinary. Our platform allows them to report that a property received, say, 2,000 web hits, 123 people signed confidentiality agreements and entered our data room, and 22 active bidders competed on auction day. We can produce a comprehensive report of every click in a property’s bidding history. It’s very difficult for anyone to criticize the process. As a result, many in the residential and commercial markets, whether they are private or institutional investors doing the buying and selling, have aggressively moved toward this new real estate marketplace. Buyers are attracted by the level playing field that results from transparency and sellers take comfort in knowing that Auction.com’s primary concern is getting them the best price.

GlobeSt.com: Since it is a newer concept, is there an educational process that you have to market to buyers or sellers?

Koch: Sure. There is an education process that we have to go through. We have to dispel certain myths about the industry, particularly the notion that an auction is an avenue of last resort. This couldn’t be further from the truth. There’s a reason why valuable items – fine art, jewelry, or collectibles – have been auctioned for hundreds of years. Auctions are ideal for assets that people want the most. That dynamic is no different in real estate.

New clients sometimes suggest they don’t need help with assets for which they’ve already identified a handful of buyers. We’re quick to tell them that if they let us market that assets on the Auction.com platform, we will bring a whole host of additional interested parties to add to the ones they’ve already identified. As result, we’ll convert what might have been a good conventional sale into a fantastically competitive auction event.

We have found that even very sophisticated players in the real estate industry think that auctions mean they have to buy an asset sight unseen. But our process includes full due diligence just like what is undertaken in a conventional sale. We have secure online data vaults and experienced professionals standing by to answer buyers’ questions, manage information flow, qualify bidders and set up site visits. It’s a very conventional process in that regard. The biggest difference is that we’re applying a super-sized marketing effort to the asset and bringing all interested buyers to compete at a single point in time on auction day. Everybody sees what’s going on, everyone can watch the bidding, and everyone has an equal opportunity to win.

Another myth is that auctions are just for smaller assets. Again, not true. We’re regularly selling assets for over $25 million in all subsectors. We’ve sold $55 million multifamily properties at a 5.5% cap rate. We sold a $74 million office building to Blackstone over the summer. Auctions are suitable for all types of assets of all sizes. And remember, auctions work best for assets that people really want.

GlobeSt.com: You come from lodging and gaming expertise. How are those assets faring in an auction environment?

Koch: On the lodging side we do quite a bit of hospitality sales. It’s one of our areas of strength. There has been a high volume of activity as owners of chains cull out the assets that are perhaps better suited for other flags or overlap with the chain’s other assets in the same marketplace.

GlobeSt.com: Is there a sector you want to call out right now as being really hot?

Koch: We’re seeing requests for our services in virtually every subsector. In addition to the traditional property types, we’re working with a number of less traditional sellers such as school districts that need to sell buildings they’re no longer using. Of course, any government-run entity needs to go through a highly transparent process of disposing of assets.

GlobeSt.com: What is your outlook for next year? Do you think we will continue to see an uptick in transactions and will loans coming due have a factor in that?

Koch: We see that the current distress is going to continue for the next three to five years. It’s going to take that long to work through all of the problems in real estate and get assets redistributed into the right hands. There is always going to be a certain level of default and foreclosures in the overall marketplace, and we’ve got a business model that will operate very successfully with normal levels of distress. What gets us more excited is how market participants—whether they are buyers, seller or brokers—have really become enamored with our method and platform. They are accepting this as an effective, regular way of buying and selling real estate, whether we are in a distressed environment or not.