Real Estate Auction: Student Housing Complex
A student housing complex Grafe Auction worked with was a 150-unit dormitory/efficiency-style apartment complex located across from a university in Winona, Minnesota. The complex was under the control of a regional commercial bank, and under the interim management of Lighthouse Management Company, the court-appointed receiver. The complex reflected rent rolls showing <30% occupancy with inconsistent rental payments 6 months prior to the bank taking control. It was time to find a new owner. Although the property was assessed for almost $3.7 million in 2022, conditions of the apartment complex exhibited a building that was not likely to approach that price when sold. Although some rooms were updated, many were in poor condition and in order to make them livable for students, the building needed many repairs.
Customer Needs
In late 2022, Lighthouse Management approached Grafe Auction Company with the purpose of selling the apartment complex. Traditional methods of real estate did not work, so they wanted to explore auctioning the complex off. The bank needed an experienced auction company to walk them through the process of preparing the site for sale, marketing the location, and finding buyers.
By the Numbers
Solution
Grafe Auction Company’s Chief Sales Officer, Paul McCartan, reviewed the opportunity with Lighthouse Management to determine next steps. It was determined that the best way to move forward was to offer the property at a live, public auction. Bidders were able to see the property prior to the auction date, and the Grafe Auction team was in constant communication with the sellers.
The Grafe Auction Company marketing team worked with the bank and Lighthouse Management to develop a targeted marketing campaign that included:
- Digital ads on social media
- Targeted search and display ads
- Ads in digital trade publication
- Signs on property
The day of the event, Paul McCartan and Director of Logistics, Ben Grafe, walked bidders through the registration process and answered questions. The estimated target range for the property was $2.0-$2.3 million. Paul, a skilled auctioneer, started and finished the auction process in minutes. Up to auction day, the sale of the complex had been a months-long process for the bank but was now finished on a specific date and time with the winning bid at $2.1 million. The auction included an 8% buyer’s premium added to the bid price creating the final sales price of $2.268 million, which allows the seller to net the high bid price. Therefore, the final bid price plus the premium was over $500k more than the best indicated offer prior to Grafe Auction’s involvement, so it was ultimately a successful transaction.
