Monday marked the completion of developer unit sales at Broadluxe, which represents one of the shortest building sales cycles in some time.   We had the chance to catch up with Brecht Palombo, Broker and Auctioneer of Tranzon Auction Properties, who played an integral role in the auction of Broadluxe, and post auction sales coordination. Broadluxe, a 44-unit loft-style condo development in the heart of the Financial District, was brought to auction on June 21, 2008 after a short marketing blitz.  The event was the most significant Boston condo auction of 2008, and was considered a success by many after Tranzon was able to sell 60%+ of the property on auction day, as well as making quick work of the remaining units for sale in the building post auction.

Can you tell us a little about Tranzon and your role with the firm?

Brecht Palombo: Tranzon is the premier national network of independently operated real estate auction firms. Tranzon Auction Properties operates throughout New England with a headquarters in Portland Maine and with my offices in Lexington Massachusetts. My team in Lexington is responsible for driving new business relationships in Massachusetts, Rhode Island and Connecticut and we service all of the southern New England auction business that’s written out of our headquarters.

How were you involved in the Broadluxe auction process?

Brecht Palombo: I was intimately involved with every aspect of the Broadluxe auction process starting with communicating with the developer when he was in default back before any real foreclosure proceedings began, through every aspect of the foreclosure auction, then through every aspect of the REO auction and finally I handled all of the negotiated sales of the remaining units after the auction. I worked with the lender, debtor, and lender’s counsel at Riemer and Braunstein etc. I was deeply involved.

What were some of the main factors that contributed to deciding when the auction took place, how long the property was open to the public before the auction, and the mechanisms by which you marketed and promoted the sale?

Brecht Palombo: The client determines when an auction takes place based on their business needs. The campaign lasted 27 days. The auction process is about controlling time and terms. The auction marketing process involves a broad, deep, and rapid exposure to the market on a very condensed time frame. In this case we relied heavily on technology, specifically a variety of online marketing initiatives, to promote the sale.

Was the auction considered a success, and if so, why?

Brecht Palombo: Absolutely. An auction is about a rapid recovery of capital. This campaign recovered two-thirds of appraised value in the first 30 days and recovered a total of 93% of the appraised value in 180 days according to the lender’s own internal documents. I’d point out that the appraisals we are working from were done in April/May of 2008, and Boston condo prices in this area have fallen during that time.

What was the biggest surprise that you ran into on auction day?

Brecht Palombo: There weren’t too many surprises but I guess I would say that what we saw was a number of successful bidders decided on the spot that they wanted to buy more than one unit and they weren’t prepared. We had to work with our client to accommodate them but I don’t think our flat-footedness on this item was apparent to bidders and it did allow us to sell several more units at the auction.

You’ve had listing experience (for individual homes), how much faster do you think the auction process and ensuing post-auction sales process sold these units versus the sales center approach we typically see in Boston?

Brecht Palombo: You folks may be better at answering that question than I am. How long would it take to bring a 44-unit building to market from zero to sold out in 2008? We sold 66% in 30 days, 80% in 90 days, and finished them off in less than 180 days. Have you seen any other new projects sell out in 6 months?

What was the reaction of the broker and agent community to the auction, and how do you think that those constituencies helped or hurt the auction?

Brecht Palombo: The reaction was mixed. I think some agents chose to ignore the project for whatever reason but there were a small number of agents who were very active and sold a number of units . MLS rules and regulations forbid us from entering every auction we conduct in the system but we almost always encourage broker participation unless our client forbids it, even then we’ll push back. We believe that embracing the brokerage community is in the best interest of our sellers. Brokers definitely contributed to our success.

What was one of the biggest lessons learned from the Broadluxe sales process?

Brecht Palombo: When we were first going to bring these units to market there was a lot of internal debate about how to get people there. There are a variety of methods at an auctioneer’s disposal. In the end we decided to go with guaranteed-sold published minimum bids. This meant that if you showed up and bid you were guaranteed a sale unless you were outbid. Our numbers were good for that day only. As I look at the success and failure rates of the various condo auctions over the last year, I think it’s pretty clear the bidding public approves of this message.

Do you foresee further development-level auctions (in Boston) similar to Broadluxe in 2009?

Brecht Palombo: Well we sure hope so… but if you’re asking if I see more lenders and developers embracing the auction process to eliminate inventory in 2009 the answer is a resounding yes.

Situated in the heart of Boston’s Financial District, the Broadluxe loft-style condo development is, after several months, now down to its final two developer units. The final two units, both studios, and essentially the same floor plan, are approximately 540 square feet, have the same finishes that other units in the building contain, including granite countertops, exposed brick and beam, washer / dryer hookup, and extra storage in the basement.

The two units, 4F and 5F, are both listed at $299,000, however, this price comes on the heels of several price reductions in an effort to move the last of the remaining inventory off the books of owner Apex, Inc. (a subsidiary of TD Banknorth).  The developer has appraisals in hand for the units at approximately $340,000, and are being aggressive about closing out the remaining two studio lofts.

• 544 square foot studio – 4F Floorplan
• 539 square foot studio – 5F Floorplan

Condo fees for these units are approximately $320 per month, and include hot water, water, sewer, master insurance, security (including concierge Monday through Friday), elevator, exterior maintenance, snow removal, refuse removal.  For more information, use the contact us link at the top of this page.

Not more than two months following the condo auction at Broadluxe in Boston’s Financial District, there are three resale units available for sale – all of which sold at the auction on June 21, 2008 to a single bidder. If you’re at all close to the Boston MLS, you may have even seen these units hit the market in July, however, they were removed because the auction bidder did not actually own the units at the time. Closings on auction units at Broadluxe began on July 28, 2008.

These three Broadluxe flips of Financial District Boston condos and lofts have steep price increases from the prices paid at auction less than two months ago (unit number – price paid at auction / new list price):

• 5A – $482,500 / $688,500 ($635 per square foot)
• 7A – $375,000 / $750,000 ($739 per square foot)
• 8B – $595,000 / $1,075,000 ($809 per square foot)

Bear in mind that Broadluxe had two overarching unit types, finished units, and what were called shell units. The former are move-in ready, while the latter need to be finished by the Buyer (i.e. unfinished concrete floors, sheetrock on the walls, and rough plumbing and electrical installed, that’s it).  Terms were written into the Purchase and Sale Agreement for the shell units that construction to finish the units needed to commence no later than 6 months following purchase, and finish no later than 18 months following purchase.

Unit 5A will remain as is, it’s a corner unit that came finished. Units 7A and 8B appear to have plans to be finished by the current owner (i.e. in addition to the price paid at auction, an investment will be made into finishing the unit to make it move in ready) . All in (including finishing units 7A and 8B), the current owner is attempting to make, as they say on the Flip This House TV show, an “expected profit” of at least $200K on each unit. 15 units remained for sale following the June auction, and most of those sold rather quickly in the month following the auction, but while post-auction units have not been selling at (minimum bid) auction prices (i.e. they have been selling for more than auction minimum bid prices), tremendous value has still been available for most Buyers.

While the Broadluxe auction presented downtown Boston Buyers with one of the best bargains available in 2008, time will tell if such flips as the three described above will command anything close to their asking prices.

Following the successful Broadluxe condo auction on June 21, 2008, and multiple post-auction (accepted) offers, there are currently six (6) of the original 44 units left for sale. Details of what remains at the Broad Street Financial District development are below.

• 2F – $456,875 – 755 square foot studio
• 3G – $361,250 – 541 square foot studio
• 4F – $361,250 – 544 square foot studio
• 5F – $361,250 – 539 square foot studio
• 7C – $690,000 – 1,312 square foot duplex
• 7D – $640,000 – 1,220 square foot duplex

Note the reduced list prices on the duplex units (each with 2.5 baths). Contact us to discuss the property further and get a tour.

Note: As of July 23, 2008, the penthouse units (priced at $1,018,500 and $1,023,750) fell out of agreement, and are now available again.

Following the Broadluxe auction that took place on June 21, 2008, where 29 out of 44 units were sold (66%), unit prices were raised to be more in line with resale market prices for other Financial District condos. Some were surprised to see that prices were raised on units that did not sell at the auction, however, it came as no surprise, as Tranzon (the auction company representing the Seller) announced that prices would be raised following the completion of the auction.

It was on Tuesday, June 24, 2008, that the updated pricing was released. Since that time, interest in the Broadluxe has not dimmed, and according to sources, units 2E, 6G, and 7F have all gone Under Agreement, and interest and offers are in on other remaining units.

Before the auction began, we assembled an exclusive comparable market analysis for Buyers that we were representing. This analysis provided a comprehensive look at comparable Financial District properties and Boston condo developments – armed with this information, logical conclusions can be drawn about what price per square foot values are reasonable and realistic for Broadluxe, both before and after the auction. This information is still available for clients with which we have a Buyer representation agreement.

The exclusive photos below are of Broadluxe kitchens in units 2A and 2E respectively – cooking is gas, self-closing-drawers are in all units (except for shell units obviously), and many units offer the island you see in the first panoramic photo (click on the image to enlarge).

With Bruce Willis filming his new movie called Surrogates outside, the Langham Hotel adjacent to Post Office Square played host to the much anticipated Broadluxe auction. The staff at Tranzon Auction Properties had run a very professional ship leading up to the auction, and they did not disappoint on the big day. At approximately 10:15 am in the morning, the auction got underway in front of a 100+ person capacity crowd, with the first several units selling at minimum bid prices. As more popular floorplans were introduced to the crowd, prices began to rise as high as $39,000 over minimum bid pricing.

Some of the interesting data points from the auction are as follows:

• Number of units sold: 29 out of 44 units were sold (66%)
• Average Sales Price per Square Foot: $494
• Neither of the two (finished) duplexes sold
• Neither of the two (unfinished) penthouse units sold

15 units do remain for sale (see auction details 118 KB PDF, those not highlighted in gray are still available), and they will eventually be listed in the Boston MLS. Note that on Tuesday, June 24, 2008, updated pricing was released for remaining units. For more information about submitting a post-auction offer on one of the remaining units, please contact us.