Property Review visited High Street Auctions and chatted to Joff van Reenen, a Director, founding partner and Lead Auctioneer, and to James Dall, Joint Managing Director and Founding Partner, about their high-profile successes in the fast world of virtual, multi-property auctions and how, as industry leaders they reach out to buyers and sellers anywhere and everywhere on the planet.
Interview by Mark Pettipher Written by Marguerite Lithgow
“We are the country’s first digital auction company, and 99% of what we do is online in terms of marketing and advertising, although that 1% that we do live on the auction floor is also incredibly important.
“We hold live, virtual auctions,” explains Joff van Reenen, Director and Lead Auctioneer of High Street Auctions (HSA). “Technology allows us to work from a central point in Johannesburg; selling a Cape Town property to a buyer in New York. All our auctions are streamed in real time on High Street TV, so we don’t have to be on site to sell real estate and nor do our buyers.”
Recent record breakers
The proof is in the pudding.
HSA currently holds the records for the highest auction prices ever achieved on both commercial and residential properties in South Africa – and both properties were bought via telephonic bids on the day.
“The two South African records are the Kyalami race track that sold for R205 million in less than 120 seconds, and most recently a villa at the top of Clifton in Cape Town that was knocked down for R96m. I have not previously met the bidders. Technically, as far as we, the auctioneers, are concerned they were online.
“It’s a matter of reputation, solid management experience and good governance. When our customers are comfortable and trust us enough to transact remotely, you can imagine how this increases our scope. Instead of just the city, the country, we now have people all over the world considering whether they should buy property in South Africa via a live auction.
“Two or three months ago somebody from New York bid for a property in Germiston, which he bought. What, you might think, does somebody sitting in New York know about a property in Germiston? Well, apparently quite a lot and certainly enough to make a sound investment.”
Much of that is down to HSA’s thorough pre-auction “homework”, explains James Dall, Joint Managing Director.
“Bidders have a thorough understanding of the lots for sale because we do extensive due diligence and prepare investor packs that are available on www.highstreetauctions.com for download. Due diligence is a two-way street, though, and bidders should always do their own investigation of a property before an auction, but we prepare an extensive amount of information and do everything humanly possible to ensure its veracity.
“Investor packs include information such as erf numbers, numerous photographs, current zoning and particulars of rezoning that might be pertinent, a description of the area in which the property is located, and – where applicable – details such as projected annual income and tenant leases.”
Dall says South Africa in its entirety is currently a buyer’s market, but the auction industry is to some extent immune to general market fluctuations because Property Funds and corporates – that comprise the bulk of HSA’s client base – are continuously adjusting their asset portfolios.
“We are still getting a very good response and I think it is like that with any big, well-branded, credible corporate; if you have a good reputation and a good following, you’ll get the stock regardless of the economic climate. In November 2017 alone, in the space of 23 days, we are doing nearly a hundred properties which we anticipate will come to just over a billion rand. This is almost unheard of, and it is good stock. We have found that where you get good stock, you get good buyers.”
Van Reenen adds: “I think it is relative; when times are tough people sell, and when times are good people buy. From our perspective it is a win-win situation. If you have a good record and you’re trusted in the marketplace, you’re more likely to achieve those prices for your seller that the market will dictate.
“Real estate auctions are certainly not an easy way to sell property. On the contrary, they are extremely difficult! You must have an exceptionally professional team backing you and a good brain for what you are doing to make it happen, which is why reputation and track record are so important to attract the right stock and the right bidders.
“The properties we sell are in South Africa, with occasional exceptions such as in Botswana, and we do get a lot of overseas inquiries for them. For example, most of the inquiries for the Clifton residence came from outside our borders although in the end a local person bought it.”
The real strength of an auction
Van Reenen says the real strength of an auction is that it establishes the true market value of a property. In a specific market such as Cape Town where residences are hard to come by, an auction is a particularly apt way to sell a property, which is a prime reason that auctions in specific markets are becoming more acceptable.
“As we say to our clients: ‘How do you sell a Picasso painting? You don’t. You auction it.’ Because there is no way you could ever ascertain the value of that painting unless you put it on an open, transparent, free and fair, willing buyer, willing seller, public market platform, and when we have competitive bidding in a roomful of people, they will determine the market value of the assets.
“I would go as far as to say that auctioneers not only create the market, they also maintain it. Who would have known that somebody would pay R205 million for a grand prix race track? No-one had any idea. A pragmatic answer might base the valuation on the square metres, the hectares, and the zoning, and work out the bulk, the coverage and the height, even consider the option of ripping up the track. Such calculations could not account for the unknown buying power that the auction revealed. The meaningful questions of the day were: ‘What would happen if a petrol head were to buy it? If he bids on it purely for racing purposes is it then worth more?’We discovered it was worth more because he was bidding with a far bigger plan, to bring the grand prix back, which I believe he is now one step away from doing.”
Van Reenen says auctioneers make the market because they are a true reflection of it.
“If someone is prepared to pay R10 for something, and no-one else will, then it is worth R10. You might prefer to sell it on Gumtree and wait a month and take 200 phone calls, but we will sell it for you with lightning speed and get the same result.”
Dall adds: “Nowadays, if you can’t do something online or with an app no-one does it, and the Americans are probably leading the way with E-bay. Incredibly, they have about 25 to 30 million online auctions a day. There will nonetheless always be a place for an expert, professional, licensed auctioneer; he is the one who, just on that day, with his entire team behind him, holds it all together, and without the auctioneer’s team behind him the auction will not work. Compare it to the relationship between a conductor and his orchestra: without the orchestra the conductor cannot produce any tune, likewise the orchestra without the conductor will not play the tune!
“Our team has between 50 and 60 members, and we are purely performance-based. Each team member counts. It’s true in our world that if you fail to plan, you plan to fail, and a huge amount of the ground work is a combination of back-end processing and admin: the planning and processing of properties, mountains of paperwork, and marketing. We give tremendous emphasis to pre-auction marketing. We must be proactive, go and find those buyers, and sell the properties to them. It’s not just about putting an ad in and waiting for the phone to ring. The most important part of the whole process is the marketing and the interaction with the buyers beforehand. That said, if you don’t get the admin and the paperwork right you can forget the auction, and forget the quality of your property asset, because it won’t sell. We work through a very fast cycle, between four and six weeks; then, every month we push the reset button and do it all again. We deal with a very fast, intense, accelerated process, and it’s vital to get all the little pieces right. As they say, ‘The devil is in the detail’.”
“What an agent does in 6 months, we will do in 60 seconds with a whole lot more buyers. Everything, such as due diligence, is pre-done, pre-approved, and there is no finance involved; it’s cash.”
According to Van Reenen, from a liquidity point of view, it explains why we do so much business with corporates and funds such as REITs: “We know, and they know, that we can turn a core non-performing asset into cash very, very quickly, if it’s done properly. There is nothing wrong with the traditional way; approaching a broker who negotiates. It has always been done that way and a lot of transactions will continue like that. What brokers can sell is not necessarily auction stock. For instance, find me a broker who could have sold the grand prix race track. Incredibly difficult, and it’s the really unique properties that stand out, that are different. From shopping malls that James has sold to Clifton houses that have been on the market for two years, it is just a very different method of selling your real estate, and it works if it is done by a professional.
“High Street started seven years ago, literally over a cup of coffee. Between the five founding partners we brought our own accumulated personal experience, acquired the hard way, and two fairly new other companies. As James said, ‘To be the best doesn’t come easy, you have to have stood the test of time’. We probably have over a hundred years of auction IP in High Street, which you simply cannot buy because it’s experience. We’ve also changed with the changing times. Ten years ago, 20% of our response came from online while today, it’s 100%. Our ad in Property Review would be the unique exception, and it’s a brand advertisement. Auction responses all come from our website, the Property24 and Private Property websites, and our mailers. We send out emails to our massive database every Thursday morning, and then watch for the responses; it’s always a big spike the day after.
“According to Clem Sunter: ‘You must have the mind of a fox. You just have to keep sniffing it out’. Five years ago, everyone thought it impossible to auction a property worth over R100 million; we then got in a property of over R100 million, a shopping mall, and we sat down, figured out how to do it, and we did it. We thought it probably wouldn’t be possible to do more than R130 million after that. We then got Kyalami; again, we sat down, figured out how we were going to do it, and it worked! We did the same again last December in the Clifton residential market and we now realise that anything can be achieved. There are no real problems, there are just challenges, and every challenge has a solution. We are always inclined to agree with Gary Player who maintains that the harder you work the luckier you get!”
