Editor’s note: Republished with permission from TheRealDeal.com. Click here to view original article.
By C.J. HUGHES
On Sept. 21, Lofts 881, a new condominium located in downtown Bridgeport, Conn., auctioned off 13 of 19 unsold apartments in the building, which has 38 total residential units.
The hour-long auction, which is believed to be the first of its kind in the state, took place in a conference room in a Marriott Hotel in the town of Trumbull, Conn., amid candy bowls and a two-piece jazz band.
The 60 people there bid on one- and two-bedroom units that range in size from 540 square feet to 1,452 square feet, with granite counters, bamboo floors and stainless-steel appliances. The red-brick, five-story Lofts 881, which is named for its address on Lafayette Boulevard, features a 1,000-square-foot basement gym and a 2,000-square-foot roof deck in a building that formerly contained doctor’s offices.
Winning bidders likely went home happy. Their bids, between $125,000 and $190,000, were up to 50 percent lower than what buyers paid for units in the building two years ago, when they first hit the market.
A typical two-bedroom sold for $300,000 in 2007 but just $150,000 on Sunday, said Jason Epstein, a principal with E/N Properties of White Plains, N.Y., the developer. In fact, Epstein pulled the last six units off the auction block because the prices were starting to come in way too low; they will be marketed, although not exclusively, in the next few weeks to the losing bidders on Sunday, he explained.
Epstein said he was disappointed by yesterday’s bids. It’s been a struggle to keep up with the $8 million project’s carrying costs of $50,000 a month, he said, and on a preliminary crunching Sunday’s numbers don’t provide much relief.
"We need to hit much higher numbers to have breathing room," he said. "There’s not a great deal of upside."
Epstein, though, can reject most of the bids but four that were guaranteed to sell if the minimum was met, and has until Friday to do so after consulting with his lenders, which are Community Preservation Corp. and the New Boston Fund.
While half-off discounts may be tough to swallow, prices in Bridgeport — a former industrial powerhouse that’s labored to reinvent itself in the past few years — are down by as much as 30 percent since the market’s peak, said Paul Yasutake, a broker with Park Avenue Realty. …CONTINUED
And moving any product before the traditionally slow winter season is savvy, he said.
"They were astute," because things could get worse, he said. "It was a good move."
But because Lofts 881 sits near an area with many aged multifamily homes, comparables are few and far between, which means auctions can be the best determiners of price, said Michel Fine, who ran the auction for Sheldon Good & Co., which is based in New York City.
"It’s a very effective way of finding the market and stimulating it," he said, adding that there will be a surge of luxury condo properties in New York City to hit the auction block. "What buyers want to know today is they’re getting a good deal."
Besides, Fine added, many lenders are reluctant to write mortgages in new buildings unless it’s 60 percent sold, a threshold that Lofts 881 now seems likely to cross. (This dovetails with what Fannie Mae said last March that the government-sponsored entity would only back loans on buildings where more than 70 percent of units were sold.)
"It improves financing opportunities," he said.
Among the bidders who turned out yesterday, all of whom brought along either a $4,000 or $6,000 certified check, was Matthew Barber, 23, a marketing associate currently living with his parents in Bridgeport’s Black Rock neighborhood.
But not for much longer, he hopes. At the auction, Barber scored a ground-floor, corner one-bedroom for $127,500, after it was bid up from $120,000, he said.
For Barber, whose father, David, was the project’s architect, the auction put a once-unattainable building within reach.
"It was out of my price range before," he says. "I’m excited to get a place nearby that’s so nice."
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