ApexHi's move to sell office buildings on auction pays off

Listed property loan stock company ApexHi Properties said on Tuesday that it had sold six Gauteng office buildings on auction for a total of R25m, a handsome profit of more than R7m compared with book value.

Selling off small properties on auction is a relatively new trend and property firms wanting to dispose of small properties are expected to follow suit.

Executive director Deon Feinblum said that when ApexHi bought Prima Property Trust's entire property portfolio, a lot of buildings in the Prima portfolio no longer suited ApexHi's overall portfolio.

"A lot of them were too small, or we didn't like the area, so we decided to sell. They didn't fit our investment criteria," he said.

The buildings were auctioned by Auction Alliance last month.

Feinblum said the stigma of a fire sale that used to be attached to auctions was gone. "Most people putting their buildings on auction are getting good prices."

It was easier and much quicker to sell a portfolio of buildings by auction because the seller only dealt with one company. "There is one standard agreement that they use."

If ApexHi had tried to find buyers conventionally through the marketplace, it would have had to market each property separately and deal with a "myriad agents and then have to structure separate agreements, taking into consideration each of the purchaser's various criteria".

"Whereas here, you're presented with an agreement, you pay a deposit and sign this agreement," he said.

The six buildings were ApexHi's first foray into the auction world. "We now have to assess our portfolio to see what other buildings do not fit our portfolio. We have learnt from this auction and we know what type of properties are going sell."

A few other listed property companies had tried the auction route. "I think it will be a trend for the disposal of smaller properties. It works for smaller properties," Feinblum said.

Mariette Warner, head of property funds at Stanlib Asset Management, said that when there was high demand for premises, especially in the smaller end of the market, auctions worked "very well".

"It is a very efficient way of selling smaller buildings out of a big portfolio, and the prices that are being achieved are good," said Warner. "Some of the listed property companies have started selling smaller buildings on auctions over the past year or so."

Though auctions were a new trend in the small end of the market, Warner said, it was doubtful whether they would become a trend in larger property sales.

Source: eProp - www.eprop.co.za

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