John Johnson for Property Line's PL Member Spotlight:
What lured you into commercial real estate to begin with?
One of my consulting clients made me an “offer I couldn’t refuse” to quote Don Corelone. He hired me to be president of his company: development, management, and commercial brokerage. And my first assignment was to set up a new real estate auction subsidiary.
Tell us about your first deal...
A very successful auction of high-end residential condominiums and large, river-front lots in a prestigious development.
How many deals have you done in your career?
Thousands, in almost every state.
Describe your dream deal for the PL Membership.
We were hired to sell a retail center in Las Vegas-144,000 square feet, fully leased, but the property was encumbered not only with a conduit loan, but also a second lien as additional collateral on an unrelated project. The second lien holder initiated foreclosure proceedings, but the owner filed Chapter 11 bankruptcy to buy time. It was the very end of August, and the property had to be sold and closed before mid-December. We signed the auction listing agreement in early September, and began our marketing. About two weeks into the marketing period, I received a call from a prospective buyer who wanted to know if we would sell before the auction. Of course, I replied “make an offer”. He did, we put the property under contract over the weekend, and it closed two weeks before the scheduled auction date (including assuming a $9.5MM conduit loan).
What was your toughest deal?
There have been a lot of those—land auctions, generally. In today’s market, no one wants to buy development land to begin development any time soon, and there are few users wanting to buy land. We hear expected internal rates of return desired in the 30–35% range, so even a few years of hold time equals a very low price. Land sellers have to be very realistic in their expectations, and put themselves in the shoes of prospective buyers.
Do you have any thoughts about the current state of the real estate marketplace or economy?
I wish I had the proverbial crystal ball. We are definitely seeing more activity, as buyers are aggressively looking for “good deals”, and many sellers are taking a realistic posture regarding their expectations. But we frequently hear comments such as “I’m waiting until after the November elections” and “I’m really worried about what will happen in Europe”.
Who (or what) is most played on your iPod?
I like all kinds of music. Classical when I’m reading, rock and pop, country when I’m in the mood.
What are you reading?
I’m almost through with Stieg Larsson’s “Girl…” trilogy. Also reading a book on body language.
Is there anything else you’d like to share with the Property Line membership?
Look at auction properties as good potential buying opportunities. You have to be very careful during due diligence to make sure that you are not also buying “problems” that might go along with the property, such as tax liens, environmental issues, etc. But sellers are much more realistic in their expectations today. A great example is the auction we will be conducting on June 19 in Williamsburg, Virginia—a 247 room hotel with 20,000 square foot conference center. The property needed to be foreclosed to eliminate over $1,000,000 of liens, but we are now offering a prospective buyer the opportunity to buy a “clean” property at his price. The property will sell to the highest bidder, regardless of price, with a nominal minimum of $785,000. Approximately $4,000,000 has been spent on renovations on the property since 2007. The property is owned by a consortium of Credit Unions who have no desire to own and operate the property, so we also have a very highly motivated seller.
About John Johnson, CCIM, ALC
John L. Johnson, CCIM, ALC, CPA (not presently practicing), owns and manages Sperry Van Ness/Interstate Aucton Company, a real estate auction and commercial brokerage firm based in Atlanta, Georgia. He has also served, for the past five years, as president for Sperry Van Ness Accelerated Marketing Co., the auction arm for Sperry Van Ness. With over 30 years of real estate brokerage, auction, loan and troubled asset experience, Johnson has sold properties in 39 states. Click here to read John Jonson's complete biography)
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