Auctions: Bid For Success

Bidding On Structures

Everything goes in a liquidation auction, and that includes the greenhouse structures themselves. But unless you’re also buying the real estate underneath the greenhouse, you’re going to have to pick it up and move it. When you consider the additional costs of tearing down, relocating, and rebuilding, does it make bottom-line sense to bid on someone else’s greenhouses?

“Sure, especially if you’re talking about hoop houses. They are easy to dismantle, move, and install,” says Daniel West of West Auctions. Bidding on these structures, he says, is usually very competitive and brings a good price for the seller.

Bigger greenhouse structures, however, tend to be a different story. They typically bring lower returns for sellers, but that doesn’t necessarily mean buyers are champing at the bit to pick up a bargain, either. “It’s often a lot more comforting to your board of directors to hear you’re going to buy a greenhouse from the manufacturer and have them install it exactly to your specifications. It’s easier to justify than saying, ‘I’m going to get a heck of a deal on a used structure.’ Not everybody is that type of buyer.”

Still, if the situation is right, you might just find that buying a used greenhouse is a deal that’s too good to turn down.
“It’s a matter of dollars and cents. If it costs you 10 cents on the dollar to purchase and another 20 cents to dismantle, move and install, then you are still looking at considerable savings, sometimes in the hundreds of thousands of dollars,” West says.

The phrase “greenhouse auction” might not bring happy thoughts to mind. It is, after all, often the final option for growers who find themselves financially over their heads.

There are some positive aspects to the process, however. An auction can provide opportunities for growers – big or small – looking to add or upgrade equipment they might not be able to afford new. Auctions can also be used in situations where a grower is expanding the business and looking to liquidate old facilities or equipment to make room for new growth.

No matter what reason you’re considering the auction process, there are a few things sellers – and buyers – should keep in mind.

Know What To Expect
For a grower who finds himself in a position where he needs to sell quickly, there are some advantages to using an auction to move facilities, equipment and real estate, says Daniel West, general manager of West Auctions in Woodbridge, Calif.

“It’s a speedy process with a quick turnaround,” he says. “You receive comprehensive marketing of your property. There are no negotiations. You know all of your property will be sold. There are no leftovers and little cleanup.”

Jason Whalen, auctioneer with Whalen Realty & Auctions in Wauseon, Ohio, agrees speed is a big plus, particularly considering the stress and emotions involved in selling a business. “The best thing about liquidating through auction is it’s over and done with in one day,” he says.

It’s important that sellers have realistic expectations of the process, West says. “Growers should be prepared for what is about to happen. You won’t be the one in charge of deciding the selling price. That job is left to the market, which can be fickle and no one can predict the outcome.”

However, Whalen and West agree that when a sale is advertised properly and a grower isn’t simply trying to unload an inventory of undesirable items, sellers often receive higher prices across the board than they expected going in.

What Sells And What Doesn’t
An auction will liquidate everything in the business, but not all items are equally attractive. Some equipment – older planters and seeders, for example – simply has a limited universe of potential buyers. That limits the return you can expect. Property like trucks or carts, on the other hand, can be used in businesses outside the greenhouse industry. Those will draw interest from more buyers and tend to bring good prices at auction.

“I see better returns on some of the newer greenhouse technology that not everyone has yet,” Whalen says. “Things like rolling benches have a great return. Maybe a smaller grower who could never afford to buy them new will bid. Big operations are looking too, because they might be able to save a couple thousand dollars versus buying them new.”

Sellers can take steps to ensure they’re getting the best return for their items. For example, West says a grower is typically better off moving live goods through his own channels if possible. “Even if you have to cut prices by 70 percent to sell to a regular customer, you’re probably still going to do better than you would at an auction,” he says. “But, it’s foolish to do that with your equipment, in my opinion.”

Indeed, both West and Whalen say one of the factors that limits the success of an auction most is when growers have already begun selling equipment before they go to auction.

“A lot of times, what’s happened by the time they come to us is they’ve already sold off a few good items to whomever might come along and make what seems like a good offer,” West says.

In reality, those pieces are the drawing card to an auction, Whalen says. “It’s very easy to have a piece of equipment you know is worth $10,000, so you offer it to someone for $7500. If it’s good equipment, it could have brought $12,000 at auction.”

“That’s very common,” adds West. “We call it cherry picking. Nice items get picked off right away and there’s nothing left to auction but leftovers. And nobody wants to go to an auction of leftovers.”

Buyer’s Market
Still, that doesn’t mean buyers can’t expect to find good deals at auction. The changing economy has meant more items are available for sale, and fewer people are lining up to buy. “When we first started auctioning for commercial growers, it was a seller’s market,” West says. “Competition for assets was fierce and prices were high. I don’t think the same can be said about today’s market. It seems like buyers will get much greater bargains than they did two or three years ago.”

But while they may be getting a good deal, buyers should have a clear understanding about what they’re bidding on, Whalen says.
“They should understand they’re buying something used,” he says. “Auctioneers represent things to the best of their knowledge, but you might get home and find out something you bought needs a little tweaking.”

Therefore, it’s a good idea to know as much about what you’re bidding on as possible, especially considering that all sales are final in an auction. “That’s the industry rule. No warranties are expressed or implied,” Whalen says.

In the end, with a good plan in place and realistic expectations, an auction can be a success for everyone involved.

“We work with the grower to make sure they know what they can expect to get out of a sale. We don’t want to do an auction if they think what they have is going to bring in a million dollars and we look at it and think it might only bring half that,” Whalen says. “We want the buyers and the sellers to go home happy.”

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