Auction.com in Irvine has positioned itself to take advantage of the current boom in the hotel industry, with a focus on middle-market transactions in the $1 million to $15 million range.
The online real estate marketplace matches buyers and sellers of commercial and residential properties. It works with brokers and doesn’t participate in transactions. Buyers pay 1% to 5% of a sales price to Auction.com when transactions close, usually within about 45 days, said Jeffrey Frieden, cofounder and chief executive.
Frieden and cofounder and Chairman Robert Friedman said the speed and transparency of sales on their site have made Auction.com successful.
“Before this, it was impossible to buy online,” Frieden said. “Now people can invest from anywhere.”
About 800 transactions worth $2.8 billion happened through the site last year, the company said.
Hotels have always been in the mix. Three years ago, Auction.com bought real estate broker Rock-wood Real Estate Advisors, which also marketed hotels.
There’s been significant growth in the number of hotel deals lately, with “hospitality assets” accounting for 81 transactions for a total of $265.5 million last year, up from 66 deals and $245.1 million in 2013.
In January, the company created a hospitality division to focus on the niche and hired 25-year industry veteran Anthony Falor to run it.
“This is more efficient,” Falor said of the new unit.
Auction.com followed that move in March by naming six regional heads of the hospitality division.
Hires
In April and again this month, it buttressed its technology backbone, hiring two senior engineering executives.
Lawrence Yuan joined as senior director of engineering in April after stints with LinkedIn and Yahoo!
Bin Xu came on board this month as vice president of engineering, bringing 20 years of experience that includes work at Acxiom Corp. and Angie’s List.
Both are based in Auction.com’s Belmont office between San Francisco and San Jose.
The company said Yuan’s work in mobile customer experience and Xu’s in software-as-a-service will strengthen the company’s commercial real estate work, including in hotels.
“You can’t have enough smart people on staff thinking about [these areas],” Frieden said.
Sweet Spot
Auction.com wants to take advantage of the strengthening hotel industry.
The new division can capitalize on the sweet spot in the middle ground of a rising market.
“We have a core competency based on our execution, and more [buyers]” in that price range, Falor said.
He also alluded to “strategies and opportunities” on the higher end of the market.
“We’re moving into parts of the market you haven’t seen us in,” he said.
He said the move upscale comes as some sellers—institutional owners and REITs among them—grow familiar with the site, which launched in 2007 marketing distressed real estate and has in recent years grown its general commercial sales.
“We’re doing [more] to mimic the process they know,” Falor said, to include working with brokers earlier, “introducing properties to the market [and] establishing pricing” for assets.
Employees, Ownership
Auction.com has about 1,500 full- and part-time workers. About 650 are in Orange County and about 125 are in the Belmont offices in Silicon Valley.
Employees got 15% of company ownership in 2011, Frieden said.
Frieden and Friedman cofounded Auction.com in 2007 with Monte Koch, vice chairman.
The cofounders still own a slice of the pie.
In March 2014, Mountain View-based Google Capital, the tech company’s venture arm, invested $50 million at a $1.2 billion valuation, Frieden said, which was a 4.2% ownership stake at the time.
In 2008, Auction.com had sold what was then a 50% stake to Greenwich, Conn.-based Stone Point Capital LLC through that private equity firm’s $2.25 billion Trident IV fund.
Hospitality magnate Barry Sternlicht’s Greenwich, Conn.-based Starwood Capital Group also holds a stake, which it took in 2013.
Frieden and Friedman met in high school, and Auction.com has its roots in the 1990s real estate auction business. Friedman is a licensed auctioneer and author of a book on the topic, “The Auction Revolution.”
The business partners added the technology element, and during the 2008 recession Auction.com picked up speed.
The economic recovery has dried up much of the inventory of distressed commercial real estate, prompting the company to shift gears on the site.
Frieden said that more than half the site’s volume now comes from nondistressed commercial properties, including much of the hotel unit’s business.
