Bidder's Choice Cap Rate Auctions: A New Strategy for Selling Real Estate Portfolios

Margot Weinstein, Steven Good and Jeffrey Fisher

Journal of Real Estate Practice and Education, 2009, vol. 12, issue 1, 57-79

Abstract: An extension of the bidder's choice method of auctioning real estate was recently introduced by Sheldon Good & Company to sell a portfolio of 71 income-producing manufactured homes communities located across 15 states in the United States by Affordable Residential Communities, a publicly traded real estate investment trust. In this auction, rather than bidding a dollar amount for a specific property, bidders indicated what capitalization (cap) rate that they were willing to pay. Then, if they were the winner of the round, they could chose one or more properties to purchase at that cap rate. This case study describes the first use of cap rates as an auction strategy and explains why this method was chosen to sell a real estate portfolio.

Date: 2009
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DOI: 10.1080/10835547.2009.12091657

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