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ARE TWO BROKERS BETTER THAN ONE? SELLERS SAY YES

By Donna Mitchell

With cap rates hovering in the low 7 percent range, sellers are often the winners in today’s shopping center transactions. Yet many of them are missing opportunities to juice more dollars out of their deals, observers say. A key element is missing: representation of sellers and buyers by separate brokers.

This is especially true in the most active segment, which is shopping centers that sell for $20 million or less, says David Frosh, president of commercial real estate brokerage Sperry Van Ness. In this segment, the buyers are usually small, private investors that do not use their own brokers.

These buyers are not hearing about many properties outside their own areas. That means sellers also lose out, because there are fewer bidders, Frosh says. “The fundamental mistake is they [investors] are missing an opportunity to buy well, manage well and sell well.”

Unfortunately, “there is no efficient system for disseminating information to these investors, since no technology provider has developed a commercial real estate equivalent to the residential Multiple Listing Service,” said Frosh, referring to the national database of homes for sale. Brokers end up marketing available properties almost exclusively to buyers within their company’s pool of investor clients.

Steve Fields, managing member of Brookville, N.Y.-based Fields Realty, which invests in open-air shopping centers, is all too familiar with the pitfalls of properties being marketed for sale only by the seller’s broker. The company missed out on buying an open-air center on New York’s Long Island because the seller’s broker accepted an offer without marketing the property extensively, says Fields. After a little sleuthing, Fields’ broker found that the property was being sold (undersold, in Fields’ opinion) for slightly less than $10 million. “That property was severely under-marketed.”

But Web sites for commercial real estate listings, such as LoopNet, are among the ways to improve information flow between sellers and buyers, says Philip D. Voorhees, first vice president of the CB Richard Ellis private client group, which focuses on retail investments. “This is leveling the playing field across the country and contributing to the trend of investors exploring opportunities in other parts of the U.S.,” Voorhees said.

When CB Richard Ellis set out to sell the 79,675-square-foot Artesia (Calif.) Oasis Plaza, a grocery-anchored neighborhood center, it mailed some 900 marketing packages but got a mere 10 offers, none of which appealed to the seller, says Voorhees. A second attempt, this time sharing the information with other brokers, yielded a private investor from South Korea who lives part time in Southern California. He bought Artesia Oasis Plaza for $30 million — $1 million over the original asking price, and the deal bore a cap rate in the low 6 percent range, says Voorhees.

“The likelihood that we would have found this gentleman in the first place without the assistance of his broker would have been one in a hundred thousand,” said Voorhees.

LoopNet and other listing services are helpful, agrees Frosh. But most firms, including some national ones, will not use such tools for the first 90 days of a listing, potentially costing the seller precious time to find the right buyer, he says.

In any case, says Fields, Sperry Van Ness faces an uphill battle convincing buyers, who prefer to ferret out good deals without alerting competitors and who avoid deals that are extensively marketed.