The auction of an iconic California office campus entered its fifth month due to an odd selling process that essentially gives participants control of the deadline.
The federal government’s exit from the eye-catching Chet Holifield Federal Building – better known as the “Ziggurat” – began June 5. The initial auction deadline for the building plus 89 acres in Laguna Niguel was July 31, but it came with a big “but” in the rules.
You see, this auction run by the General Services Administration has a “soft close” – if the high price is topped in a 24-hour period, the auction is extended for another 24 hours.
And on July 31 – and for every business day through Thursday, Oct. 3 – that extra bidding threshold was met.
Consider the math of this curious auction technique: On July 31, the first deadline, the Ziggurat price tag was $136.8 million. The 45 added days of bidding increased that to $169.2 million as of Thursday.
That’s $32.4 million-plus above July 31. And that’s $99.2 million above the original ask of $70 million for this prime Orange County land.
Yes, sellers win by basically letting buyers run the show.
People power
The soft close uses its open-ended timing to act like a human auctioneer, explains auction expert Peter Cramton of Del Mar.
- 38 QUESTIONS: What can fix California’s housing mess? CLICK HERE!
The professor emeritus from the University of Maryland says the approaching deadline for a soft close – what’s known as the inactivity period – “is exactly what the auctioneer does – looks for the raised hand with a new bid.”
Cramton adds, “the ‘Going once! Going twice!’ is the inactivity period.”
Now, most people’s initial reaction to the soft-close concept is, “this is ridiculous. “It could go on forever,” Cramton acknowledges.
But the professor notes that research shows soft close auctions are “quite sensible” with almost no way bidders can game the system.
“The person who values…
Read the full article here
