When it Comes to Auction, a Seller Has More Than One Option

September 28, 2011

There clearly is no “one size fits all” when it comes to selling distressed properties.  A commercial real estate broker is truly a partner and advisor to a property owner choosing auction as an alternative method of sale.

No two properties are alike and therefore, no one auction solution fits all. Realizing that different properties lend themselves to a specific accelerating marketing approach, NAI Global has designed a program which offers property owners more than one option. Through the program NAI has developed, NAI Carolantic can offer property owners three distinct auction options: Sealed Bid Auctions, Live Auctions and Online Auctions. Sealed Bid Auctions are suitable for individual properties or portfolios over $500,000; Live Auctions deliver quick results for both residential and commercial properties of all values; and Online Auctions are the best choice for properties that have been previously listed and exposed to the market.

In all cases, auctions provide a sense of urgency for buyers to act. Auctions eliminate drawn out negotiations with a process that typically takes no more than 120 days – start to finish.

Jim Adams, Broker, NAI Carolantic Realty

If you are a property owner considering an alternative to traditional marketing, consider the auction solutions provided by NAI. More information about the program can be obtained by contacting me at jadams@naicarolantic.com, or calling 919.832.0594.

Zombie Developments

October 8, 2010
Many of you may know that the permits developers receive to construct residential subdivisions have expiration dates by which the developer is required to start and effect the completion of the development.  When a developer defaults on the completion of a residential subdivision there are many losers.  Two primary losers are the buyers of the subdivisions lots, and the governing authority that granted the subdivision approval.
A halted subdivision means the completion of utilities, roads, amenities, and entrances that collectively give value to lots may go unfinished.  Lot buyers can be left with land they can not use and the value of the lots can be decimated.
When land is subdivided into residential lots, tax values and the anticipated tax revenue to the governing authority escalate.  However, when the developer defaults on the subdivision completion, values plummet and the tax revenues become nothing more than an uncollectable forethought.
To assure the completion of subdivision construction, counties and municipalities have long used surety bonds.  The developer is generally required to post a bond that is based on the estimated cost to construct the improvements multiplied by 125 percent.
Unfortunately, it is uncertain at best that the purpose for which these bonds were posted will be served.  Bonds in every state are being called into question.  With the vast amounts of construction insured by surety companies and the contemporaneous nationwide suffering of the financial markets, real estate markets, and real estate developers, there is a growing concern, and in some cases recognition, that surety companies will not be financially able to meet all of their bonded obligations. 

Jim Adams, Broker, NAI Carolantic

Now enters The Permit Extension Act of 2009, Senate Bill 831.  This bill provides for the extension of any real estate related entitlements and approvals by counties and municipalities in the State of North Carolina that are current and valid at any point during the period beginning January 1, 2008, and ending December 31, 2010.  As the statute states in Section 2. Paragraph 14, “It is the purpose of this act to prevent the wholesale abandonment of already approved projects and activities due to the present unfavorable economic conditions by tolling the term of these approvals for a finite period of time as the economy improves, thereby preventing a waste of public and private resources.”

The irony is that the statute that was intended for the public good (and perhaps to provide some aid to the real estate development community in a very difficult environment) has perhaps put lot owners in a lurch and taxpayers in the position of having to pick up the pieces of failed or failing developments.  Seizing on wording rather than the intent of the statute, developers and bond companies are contending that incomplete, stagnate developments are not in default on completion requirements.  They contend that the effect of the extension provisions of the Act was to also extend their completion requirements.  Bond companies are challenging the claims of municipalities and counties in court to avoid having to pay on bond obligations. 

The net result of the strategy buys time for both the developer and the bond companies.   In the meantime, it means that there are no funds to complete the developments that have come to be known as “zombie developments”….developments that are neither alive nor quite dead yet.  It is both unfortunate and interesting that our “best laid plans” don’t always work out as we intended them. 


Turning the Corner

April 21, 2010

Jim Adams, Broker, NAI Carolantic, jadams@naicarolantic.com

As NAI Carolantic continues its commitment to tracking the information that will best help its clients make informed business decisions, positive signs are emerging that bode well for the future of the market on micro and macro levels.

In the April 19th issue of Business Week, staff writer Mike Dorning contradicted the polls with hard evidence of a national economic recovery.  Among other things Dorning mentioned that manufacturing has been recovering for eight straight months, and that economists are revising GDP growth forecasts for 2010 from 2.1% to 3%.  While recovery remains slow without a new driver for the economy, it seems that in spite of the recession woes and psychology, the indicators for a favorable return on a national level are present.

Locally, our region continues to receive positive national press with high rankings in various studies.  Raleigh-Cary was recently named as the ‘Third Best Place in the Country for Business and Careers’ by Forbes.com and Durham metro ranked 23rd.  The study ranked the 200 largest metropolitan statistical areas on cost of doing business; educational attainment; and economic, income, job and population growth. 

There are also tangible signs that the Triangle economy is on the rebound.  While liquidity from debt sources remains in short supply and underwriting stringent, at NAI Carolantic we are working with many well capitalized buyers that are seeking buy opportunities either with no debt or with a low debt to cost ratio.  As the economy continues to improve, banks and other lending institutions predict that current lending restraints will ease…a process that appears to already be underway.