Case Studies

Located in Middleborough, Massachusetts, a suburb of Boston, this property was a gas station and convenience store sold at the foreclosure auction on Tuesday, March 23, 1999 at 11:00am, on-site. The property had been vacant for 6 - 9 months and only about 85% of the required work had been completed. The interior of the convenience store consisted of roughed-in pipes and drywall. There was no landscaping and the property was already branded as a Texaco. This meant that any buyers for the property that would not operate the gas station as a Texaco would have to re-brand the property. The Fire Suppression System had not been installed. The estimated cost to make the property operational was between $90,000 - $125,000.

In addition to the cost to finish the property, the local township had not approved any of the required permits. The buyer would need to obtain a Special Permit to operate the gas station/convenience store combination, obtain a Special Permit for the drive-up window, obtain approval and license for the underground storage tanks from the Middleborough Board of Selectmen (the license had expired since the tanks were not being used), approval of a Self Serve License in accordance with the Local Fire Department regulations and the State Fire Marshal's office, and apply for and obtain a Building Permit from the Building Department for all of the work completed so a Certificate of Occupancy would be granted. There was no guarantee that the buyer would be able to obtain these approvals from the respective government authorities, and there was no way to know in advance what would be required to obtain them. This led to a great amount of uncertainty among buyers about buying the property, completing somebody else's work, and taking on the risk of obtaining the required permits.

To market the property for the auction, Tranzon Fox focused the marketing on petroleum companies, individual gasoline station/convenience store owners, and commercial investors located in Massachusetts, New York, New Jersey, Connecticut, Rhode Island and Pennsylvania. We advertised the auction in the Boston Globe; prepared a direct mail postcard and sent it to (1) prospective buyers in our extensive database, (2) local commercial realtors, and (3) gas station and convenience store owners in New England; added the property to the Tranzon Fox webpage (www.tranzon.com ), installed a foreclosure auction sign on the property; and prepared a detailed property information package to assist buyers in their due diligence. Over the three weeks of advertising, we received 180 inquiries about the property from prospective buyers. This was an exceptional response for a special purpose property.

On auction day, we had approximately 70 people in attendance. We had 11 registered bidders of which 7 bidders were from regional or national petroleum companies. All bidders had a $50,000 certified check and were prepared to close within 30 days. The lender had the property recently appraised for $680,000 with all work being completed. Keeping in mind the property needed approximately $90,000 - $125,000 to be operable, we sold the property at the foreclosure auction for $670,000. Given the required work that needed to be done to the property, we estimated that the property sold for approximately 113% of appraised value.

The property settled within the required 30-day period.

This case study involved an industrial warehouse/office building with approximately 24,000 square feet on two levels. The property is situated on 25,000 square feet of land and has an adjacent parking lot with approximately 25 spaces and loading dock. The property is zoned CM-2, Commercial Light Manufacturing. The property was occupied at the time of the auction on one level by a tenant operating a printing company.

This property presented a unique challenge for the Borrower, Bank, and Auction Company. The property is located in an industrial area bordered to the rear by train tracks and surrounded by properties that had been identified as being recently removed from LUST (Leaking Underground Storage Tank) status by the District of Columbia. Due to the topography of the land surrounding the property, it was believed that there had been contamination from the surrounding properties. A former tenant of the building was recorded as receiving two violation citations for improper storage of chemicals at the property. Additionally, a leaking underground storage tank was found to exist in the parking lot of the property. Remediation estimates from local environmental companies ranged from $80,000 to $100,000.

The Bank holding the note secured by the Deed of Trust on the property was in the position to foreclose. In an effort to prevent the Bank from acquiring the property at the foreclosure sale, a minimum bid was set at $275,000 to be published in all legal notices and advertisements for the sale. The Bank did not plan to bid at the sale and the foreclosure would be canceled if the minimum bid was not reached at the auction.

The marketing campaign included a full color direct mail piece as well as advertisements in the Washington Post and Washington Business Journal. Through the cooperation of the tenant, we were able to place a 5'x10' banner on the exterior of the building and to schedule an inspection period prior to the sale. Directional signs were placed on a weekly basis directing traffic from main routes to the property. A property information package was prepared for prospective purchasers that included the executive summaries of the Phase I and II environmental reports. The full reports were also available for individual inspection in our Fairfax, VA office.

The foreclosure auction was held on site. On auction day, three registered bidders competed to purchase the property above the $275,000 disclosed minimum bid and a high bid was reached at $365,000. The Bank was pleased to recover many of their legal expenses associated with the property without any exposure to the potential environmental liability and by never having title to the property. The sale exceeded the expectations of the Bank in all respects.

Tranzon Fox managed the sale of two restaurants that were part of a national steak house chain. The property also included restaurant equipment and an adjacent parcel of land. Tranzon Fox developed a marketing campaign consisting of ads in local and regional newspapers, regional real estate journals; large signs on each restaurant site; and a full-color direct mail brochure targeting buyers from our firm's database. The target group included commercial real estate agents, investors, restaurant owners (particularly steak house owners), restaurant management companies, and restaurant equipment dealers.

The campaign attracted 93 inquiries, and the debtor allowed potential buyers to inspect one of the restaurants, which continued operating up until the day before the auction. Eleven bidders registered for the auction, all providing the $20,000 in certified funds required to participate. Tranzon Fox auctioned the combined properties to a third-party purchase for a total of $932,000, exceeding the lienholder's requirement. The sale closed within the specified 45 days.

The lienholder, a bank, had never used a professional auction company before. On previous occasions, a trustee had conducted such sales, and each time the bank was forced to buy back the property at foreclosure to protect its interests.