Online auctioneer nets big sales

REC 10.14 p46Ken Rivkin joined in 2009, two years after its launch, to spearhead the company’s commercial division, having previously held senior roles at Credit Suisse and Bank of America during a 25-year stint on Wall Street. In 2013, sold 35,000 homes and $3.8bn of commercial real estate assets, $1.2bn of which was debt. He spoke to Al Barbarino.

What are the advantages of over traditional loan sales?

Before we came along it was impractical for special servicers to sell loans individually. Because our platform is internet-based and efficient, we’re very happy to take assignments for individual loans that are $750,000, $1m, $5m or $10m, and selling these loans individually often results in a higher sales price.

We have two auctions a month, so a buyer doesn’t have to wait for the next time a huge number of loans are aggregated for a sale. You can buy only the loans you want – if you go to the supermarket for an apple or an orange, do you really want a whole basket of fruit?

Another unique feature is that we allow continuous last looks, so we don’t give our “best customers” a last look or preferential treatment. Everybody’s money is green and this lets smaller investors participate on a level playing field with the big guys.

How much traffic do you get?

On the overall website we get about one million visitors a month and on the commercial side we average more than 300,000. Whereas a traditional broker will go to their regular customers, we go out to everyone.

Who are your typical debt sellers?

We have more than 300 institutional sellers, including the top 20 banks, basically all of the servicers and a good number of insurance companies.  We also have good traction with opportunity funds and REITs.

What are the most memorable loan sales?

The single largest note we did was in Las Vegas and that was a $50m note; the second largest single property note was in Hayward, California, and that was $42m; the largest hotel note we did was $40m; and then we did a pool of loans that was a bit over $550m.

We had one asset where we had 861 bids. Unlike most auctions, which end at a prescribed time, ours only end when there are no additional bids. If there are two parties left bidding at the end and one bids, we add an extra three minutes. This  auction was extended an extra 14 hours because there were hundreds and hundreds of overtime bids.

Tell us about the bidding process.

There’s a 14-day uploading process where we accumulate information. Then we have a roughly 45-day marketing period. When investors visit an asset on the website there’s an asset adviser online to help walk them through the process.

After the marketing period we conduct a two-day internet auction. It’s very similar to what you have on eBay. If the reserve is reached the asset sells; if it’s below reserve it’s a ‘let’ and the seller decides whether or not to accept the bid.

After the hammer goes down the buyer has two hours to sign the purchase and sale agreement. They  have to put up a 10% deposit within a day, then it is a 10-day cash close.

Our agreements are not negotiable. The price is the price, so everything is set in advance – other than the price. It’s pure capitalism.

How much do your investors – including Stone Point Capital, Google Capital, LNR and Fortress – own?And are there any conflicts of interest?

They are all strategic investors with a minority stake in the company.

When Starwood bought LNR it was erroneously reported that LNR owned 50% of LNR has no involvement in the company and it does not get any preferential treatment. We charge it the same as we charge everyone else. It doesn’t get a discount and doesn’t get an inflated fee.

We’re a service provider, we’re a vendor and every client gets the same treatment, whether they are an investor in the company or not.

Did you launch in Europe?

We were active in Germany. We had a successful launch and had a lot of interest, but we decided that for the time being it made the most sense for us to focus our efforts on the biggest opportunity, which is the US market.■