Aliant Bank held a real estate auction for the Lake Martin waterfront neighborhood called Water’s Edge on Saturday, March 10, 2012. Since I have written a lot about this auction in the past, and have many inquires about it, I thought I would write this post to summarize my thoughts and the results of the auction.
Before I begin, please be clear that I am in no way affiliated with Aliant Bank, though I am a retail customer of theirs. Neither am I affiliated with the auction company J.P. King, Water’s Edge subdivision, or any party whatsoever. I am merely an independent Licensed Real Estate Broker in the State of Alabama. I was once the Listing Agent for only the homes at lots 1 and 2 of Water’s Edge. I stress that it was for those two homes only, and that agency relationship ended Memorial Day Weekend of 2011. I have no inside information. I gathered information used for my below observations by simply attending the event and writing down what happened, just like any person in America could have. To get any sort of official results or comment on the auction, the best source is either the seller, Aliant Bank, or the auction company, J.P. King.
If you are merely wondering what happened and what sold, the short answer is: Nothing.
We all knew, and it was fairly and clearly disclosed by Aliant and J.P. King, that this was not an absolute auction. The bank had reserve prices for everything and they were not under compulsion to sell. Apparently none of the winning bids for the waterfront homes, waterfront lot, nor off water lots were high enough to meet reserve prices. So if that’s all you want to know, you can stop reading here.
Readers of this blog know that I am a big believer in real estate video. Pictures are great and I take plenty of them, but video is a category killer, especially for our waterfront, rural, second home market. My heavy use of video to market homes, lots, and the area in general has been huge blessing. I can’t really take credit for this phenomenon, because I owe it mostly to my clients’ questions like “what does the view look like from the dock?” or “what does the neighborhood look like from the water?”
I made no secret about my intention to video the Water’s Edge auction. I think it was the most significant real estate event for Lake Martin this winter. Why wouldn’t I video it? I studied the auction rules and found no prohibition. So there I was, about 45 minutes before the bidding started, with my trusty camera in hand. People were milling about, chatting, and enjoying the complimentary cookies and cokes. I stood back and panned once about the crowd.
I was immediately approached by a lady in J.P. King garb. She stuck out her hand to me as if to shake and introduce, but she didn’t offer up her name. I believe “Beverly” was on her name tag, but I could be mistaken. Once I introduced myself, she wagged a finger at me and said, “No video. You will have to turn that off.”
Me: “Don’t worry, if you don’t want me to tape the bidding, I won’t. When it starts at 1:00, I will turn it off.”
Beverly: “No, you can’t video right now either.”
Me: “Not even before the auction starts?”
Me: “I’m sorry, I didn’t see that prohibition in the auction rules.”
Beverly: “Well, it’s in there.”
Then I walked over to the registration table and carefully read through the rules again. I didn’t see any such prohibition in the rules, so I walked back over to Beverly.
Me: “Excuse me. I don’t mean to be a pest, but I can’t find anywhere in the rules that says I can’t video.”
Beverly: “Hang on.” She turns and beckons to another lady that’s standing near the front table. As the lady come near, Beverly turns to me and says “This is Christie King.” I assume by Beverly’s verbal emphasis on “King” and the lilt of her eyebrows as she said it that Ms. King is of relation to the company ownership. This is only an assumption as our introduction was brief and Ms. King’s title was not offered to me.
Ms. King: “You have to put that away. No videoing. It’s not negotiable.”
Me: “I’m sorry, I would have never brought my camera if I knew it was against the rules, but I didn’t see anything prohibiting it in the auction rules.”
Ms. King: “It’s not in the rules. It’s our company policy. We don’t allow it.”
Me: “Why not?”
Ms. King: “It just isn’t. We are videoing and we don’t allow anyone else. Period. You can’t video.”
Me: “Not even the pre-auction festivities?”
Ms. King: “No. Why would you want to video anyway?”
Me: “I’ve been promoting this a lot on my blog. I am in the Lake Martin real estate business and I film big events here at the lake. I think it’s a big event for the lake, don’t you?”
Ms. King: “Yes, it’s a big event.”
Me: “I think a lot of people would want to watch a video about a big event like this.”
Ms. King: “Well, you can’t video anything. What would you do with the video, anyway?”
Me: “I would put it on my YouTube Channel and on my blog.”
Ms. King: “Well, you can’t. Our policy.”
Me: “Yes ma’am.”
I turned and went back to my truck and put up all of my video equipment. Fast forward 45 minutes to 1:00, auction time. The auctioneer takes the podium and asks everyone to gather under the tent. Everyone sat down and got quiet as the auctioneer read through the red tape and disclosures. That took about five minutes.
Then he said, “okay ladies and gentlemen, we are now ready to auction, err… hold on.”
This same Ms. King was talking with him and apparently asked him to stop. She got up from her position next to him at the head table and started walking determinedly in my direction. Please keep in mind that I am standing outside the tent behind a buyer that I helped register. Also keep in mind that I had my iPhone in one hand and the bid sheet in the other. I am pretty sure that 90% of the other 100 people there had smart phones as well, but Ms. King walked directly up to me, and only to me.
Ms. King: “Are you audio taping this?”
Me, kind of incredulously: “What?”
Ms. King: “Are you audio taping this?”
Me: “No ma’am.”
Ms. King: “Audio taping is against the rules, too.”
Me: “I’m not taping anything.”
Ms. King: “Because if you are audio taping this…”
Me, interrupting: “Ms. King, I am a rule follower. I am not here to disrupt anything. I give you my word I am not recording in any way. I don’t recognize your right to ask to see my phone, but I do volunteer to let you look at it to assure yourself I am not taping.”
Ms. King, flicks a hand up in the air and walks away: “OK, well, that’s fine, if you say you’re not taping…”
Me: “I’m not.”
Again, I stress, she didn’t talk to anyone else. Neither did the auctioneer make a public announcement against taping anything. Ms. King sat down at the table, nodded to the auctioneer, and he began, “OK, ladies and gentlemen, at this time we will start to receive bids….” and away he went.
Many of you readers have asked me exactly how the auction was conducted. There was lots of curiosity out there on how it would happen, like, would they try to auction the entire thing first? Or break it into parcels? Would you get to pick your lot? In general, the auction order was:
1. The “Island” portion, they marketed this as Narrow’s Point at Water’s Edge – but most people know it as the end of Coosa 20. It had 2 older waterfront homes and 9 waterfront lots.
2. The Cottages portion – this is where the 2 new homes were built. Only one of the new homes was in the auction, but 8 other waterfront lots were included in the bidding.
3. Off water lots
First up, they auctioned the older but fixed up and woodsy waterfront home on the end of the point. They called it Lot 1. The high bidder there was $300,000. Next was Lot 2, an older and less craftsman home, and the high bidder was at $215,000. After those two were completed, I felt there was only a small chance that the bank would take bids that low. I also felt this did not bode well as an indicator for the rest of the auction.
Next, they auctioned the rest of the waterfront lots on the island, but here they did it as “buyer’s choice.” They explained that they would auction in general, and the high bidder could buy which ever or how many lots he or she desired at that price. The highest bid first was $85,000, and the buyer picked Lot 11, or the one right next door to the home on Lot 1. The second and third bidders were at $85,000 also, and chose lots 10 and 8, respectively. The other six waterfront lots went from a low of $67,500 to a high of $70,000.
The next phase was extremely, extremely, curious to me. They announced that they would “re-bid” any parcel that anyone wanted. The auction company said that there was “great demand” to re-bid some parcels and they would put them back on the block. If you were the winning bidder the first time around, don’t worry, they said, because you will have a fair chance to “defend your original bid” aka bid higher. Perhaps this is normal, but it struck me as odd. Why not re-bid 4 more times? I was anxious to see how the crowd would respond, and if this would spur prices more acceptable to the bank. In the end, by my count, they only re-bid 4 lots. The bids were higher the second time around by an average of about $9,000. For example, Lot 9 bid for $70k the first time and $79k the second.
Next, the auctioneer announced that the bank has decided to offer a “once in a lifetime, unique opportunity” to buy the entire Island portion, unfinished, as is. The high bidder for the entire parcel, if acceptable to the bank, would take precedence over the individual lot high bidders. The bidding began, and the high bidder was $1,350,000. Since that was only slightly higher than (by my unofficial count) the $1,183,000 sum of all the individual bids, I thought it inconsequential. After this, the auctioneer announced that they would take a short break to let the bank consider all of the bids.
About five minutes passed. The auctioneer came back to the podium, thanked everyone profusely for bidding, but said something like “at this time, Aliant has selected to keep these pristine lots rather than sell them for too low a price.” This caused a great degree of grumbling in the crowd. Ten or fifteen people abruptly left. A few asked questions like, “so the bids weren’t above their reserve price?” And he answered, “no.” I can’t imagine that anyone thought the bids were absolute. Aliant and J.P. King did a good job of disclosing the there were reserve prices on everything, so if anyone was mistaken about that it’s certainly not Aliant or King’s fault, in my opinion.
The auctioneer didn’t hesitate for long, but flowed right into bidding the Cottages area. This consisted of the one remaining new home, and 8 waterfront lots. He talked briefly about the unique opportunity to own such a pristine place on Lake Martin, and started the bidding on the home at lot 2. Here’s where I got nervous.
I was concerned because I had a friendly “loser buys lunch” wager with fellow Lake Martin Voice Realty agent John Christenberry. He thought that the older home on lot 1 on the island would bid within 10% of the new home on lot 2 of the Cottages portion. I disagreed, and came out the winner, as lot 2 of the Cottages’ high bid was $390k, or a comfortable 30% above lot 1 on the Narrows. Confident in my win, I settled back to watch the rest of the auction, dreaming of a Gulf Shrimp Po Boy and wine lunch at Springhouse. Appetizer. Dessert. I plan to stick it to him.
Back at the auction, J.P. King then moved on to the waterfront lots of the Cottages section. Since no more waterfront homes were available, and (I guess) since many buyers realized the bank had high reserve prices, most all of the bidders got up and left. Maybe 20 bidders were left under the tent. There were still plenty of people around, mind you, but they were lake realtors like myself, Aliant Bank folks, auction staff, and neighbors walking their dogs. J.P. King auctioned these waterfront lots just like the ones before, or buyer’s choice. The high bidder selected the lots.
Lot 10 was selected first by a bidder at $75k. Lot 7 followed at the same price, then lot 3 went at $72.5k. The rest went for decreasing increments with the last at $67.5k.
The off water lots of Water’s Edge were the last to be auctioned. I will admit a bit of confusion on this portion. I was paying attention very carefully but I had a hard time keeping track of which lots were selling. They bid this as a buyer’s choice also, so sometimes the bidders would shout out their desired lot by the lot number, and then sometimes it was by the parcel number designated by the auction sheet.
It seemed to me that only 9 or 10 people were left that were really bidding. Each high bidder had to announce their bid number and I wrote that down on the form provided. The highest off water lot went at $6,500 and the lowest at $1,250. By that point in the day, the bidding was loose and casual. One guy was even letting his kid bid by going “yeeeeeep” like they do on Storage Wars. It was funny.
After all the bidding was completed, the auctioneer asked for more patience as they talked with the bank to see if they would accept the bids received on the Cottages portion and the off water portion. After about 10 minutes the auctioneer came back and said they haven’t decided yet, but all high bidders would be contacted by noon, Monday, March 12, by the bank. He thanked us all, and that was that. It was over.
I have since talked to some winning bidders, and they were eventually contacted by Aliant. They were told that the bank has a buyer for the entire project, that they were currently negotiating with them, and they would let the bidders know what happens. I don’t really know what to make of this. Did Aliant have a large buyer in their pocket the entire time? If so, why the auction? Was it an attempt to demonstrate value, or just a grand negotiating tactic? Mine is not to reason why. One thing is clear – the auction on March 10 did not produce one single real sale at Water’s Edge. I can’t know if this accomplished Aliant’s goals or justified the cost of the auction, because I don’t know their goals. I also don’t know how much it cost them to hire J.P. King to do this. I have talked to people familiar with auctions of this size, and they said it can cost anywhere from $100,000 to $300,000, depending on things like advertising, signage, and entertainment.
Lack of real sales aside, the Water’s Edge auction to me was always much more interesting as a study in consumer preferences. By consumer preferences, I mean, are Lake Martin real estate buyers desiring an auction format rather than dealing with realtors? Would they be swept up in a fever pitch to pay at or above market values? You never know. Music industry execs didn’t think that consumers would want to buy one song at a time, either. Boy were they wrong about iTunes.
My general opinion was that the bidders were unfazed by the pace or the presentation of the auction format. Occasionally, the auctioneer would pause and describe what a pristine opportunity this was. This didn’t seem to increase bids. Also occasionally the fellows working the crowd for J.P. King would take part in the excitement. Their official job seemed to be to help the auctioneer spot bids, but sometimes they would holler out something like “woo-hoo!” or “that’s what I’m talkin bout!” when someone would bid. They would mill about the crowd, offering to lighten the mood with jokes like “at these prices, I’d give em for Christmas presents!” which drew chuckles the first time but not the second. They also tried well meaning picture painting by saying, “hey folks, can’t you imagine waking up to that nice view every morning, ya-hoo!” Still other times they would pause the action and ask a procedural question like, “Mr. Auctioneer, is it true that there is no buyer’s premium if these good people purchased today?” whereas the auctioneer would respond with, “that’s right, ladies and gentlemen, with no buyer’s premium, what you bid is what you pay. What do you say, folks, let’s ….”
This whole process fascinated me. People bid, it is true, and occasionally the above encouragement led to a few more additional bids from where it had stalled before. But those additional bids were, for example, from $65k to $66k, not to $120k like I think the seller had hoped.
Maybe other auctions are different, I sure am not an expert. But I can say that at Lake Martin, on that day, for Water’s Edge, buyers did not seem to be swept up into a mindless, piranha feeding frenzy of buying. In other words, they did not check their brain at the door, they had a good idea of what they wanted, and stuck to it.
Obviously, I am biased as I am a real estate agent. But the whole thing confirmed for me what I hear from my buyers: second home and lot purchases are a big deal. Quite often my buyers have been thinking or dreaming for years about this, and dedicate many months to research and consider all of their options while they are actively looking. They don’t like pressure, and they don’t like to feel rushed.
Many people have asked me what I think Aliant will do with Water’s Edge. I have no idea. Is it true that they have a buyer for the entire development? You had better ask them. I still say, after all of these years, that Water’s Edge, Eagle Point, whatever you want to call it, has tremendous potential. It has had some snags in the past, it is true. But I have seen what someone with talent can do with it. Bryan Jones looked intensely at Water’s Edge and drew up one of the coolest master plans I have ever seen. Can someone buy it all and flip it and become rich? I doubt it. But I still like it, and will be watching just like everyone else.
I’m sorry this post is so long, but I didn’t want to break it up. If you actually read the entire thing, I thank you. Come by my office and I will buy you a Slim Jim as a reward. I’m exhausted.