PikeNet Dispatch, July 22, 2003
Vol 8 No. 56 (685), "More than 9,000 subscribers"
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Are Auctions Gaining Traction?
 
Auction Date: July 23

Seeking an Efficient Marketplace... Until last week, I was not familiar with the term "stalking-horse contract," as mentioned in Sheila Muto's Wall Street Journal article, "How Hilco Helps MCI Unload Properties." (July 16, 2003) Hilco Real Estate working with local service providers -- NAI KLNB, Spaulding & Slye Colliers, and Trammell Crow -- has positioned a surplus 540,000 square foot MCI (WorldCom) facility in Arlington, VA, for auction.

In order to create meaningful competition at the auction, Hilco recommended the selection of a stalking horse. Hilco solicited informal bids from likely buyers and determined that Jamestown TSA had made the "highest bid, factoring in which bidder would most likely have the capacity and financial wherewithal to close a deal." So Jamestown became the stalking horse, and the minimum bid became $165 million (Jamestown's offer of $162.3 million plus a $2.6 million breakup fee).

The auction, to be held this Wednesday, July 23, will be limited to bidders with a "qualified contract agreement" from Hilco. Presumably these are mostly the informal bidders originally solicited by Hilco. If the stalking horse bidder, Jamestown, is outbid, MCI will pay Jamestown the "breakup" fee of $2.6 million.

My sense is that real estate auctions are growing in popularity. Is this the result of new technology or a cultural change in the real estate industry? Do you like the idea of a stalking horse? ... For a fun look back at the recent past, check out the Nov 29, 2001, PikeNet Dispatch, Will Online Property Auctions Become a Hit?

--Peter Pike

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