August 19, 2022

Square Feet | The 30-Minute Interview: John J. Cuticelli Jr.

Mr. Cuticelli, 60, is the chief executive of Sheldon Good Company, one of the country’s oldest real estate auction houses. The company was acquired almost two years go by Racebrook Capital, a private equity firm that he controls.

Mr. Cuticelli has moved Sheldon Good’s headquarters to New York, and this year held residential auctions in Washington Heights and in Queens.

Q What changes have been made since the acquisition?

A The primary changes were to take the deep history of the company and figure out what that meant statistically — so that we can try to predict a relative range of value. The founders had cataloged in journals, by hand, every single auction, including how the property performed before it was auctioned, why it was auctioned, what happened, and then a postmortem. How do you take 40 years of data and put it into a formulaic computer program?

Q So how did you?

A We hired grad students, semester after semester for the last five semesters, to go through all the information. It was a very good learning experience for them. There was really no other way for us to do it without sending it to a service, and at that point we couldn’t maintain control.

Q And what have you learned?

A Until we prove true price discovery, things will just languish.

Q What about New York?

A In any down cycle, one of the beautiful things about New York is that it’s the last to leave and the first to come back. I hate to state the obvious, but this is the center for jobs and the financial universe. The closer you are to the center of Manhattan, the less distress and troubles you see.

Q Is that why there aren’t many auctions in Manhattan?

A When you look at the 13 auctions that we’ve conducted in the greater New York market in the last 18 months, you’ll see they’re nearly all in the boroughs and New Jersey. Because the cost of entry and of construction are so high in Manhattan, it’s just not as overbuilt as the boroughs. But there are a few buildings.

Q Can you elaborate?

A Yes, we are working with a number of fiduciaries — lenders or equity holders — in Manhattan. We’re the auction company for the mezzanine debt on the MAve Hotel, at 62 Madison. It’s supposed to be June 29.

Q In February you auctioned condos in Washington Heights and Long Island City. Were you satisfied with the results?

A In Washington Heights, 22 units were sold at auction; 20 closed, and we sold 2 or 3 post-auction. It was a good way to sell the building out with 75 percent of the former asking price.

Long Island City was a very interesting result in that the asking price on a never-before-sold unit was $600 a square foot and we sold it at auction at $474. We sold 18 units at auction. One of the things we’ve proven is that the auction has set a floor, not a ceiling. You’ll see today they’re going for $550 a square foot.

Q On average, how much savings can buying via auction bring?

A Nationwide, we’re seeing people buy things at about 65 percent of the former asking price. In the New York area it’s closer to 75 to 80 percent.

Q How important is the New York market to Sheldon Good?

A The actual sale of Manhattan real estate is not instrumental. But the ability to be near lenders and the financial markets and have easy access to them is important. I spend 10,000 miles a month in an airplane, and 90 percent of what I go and look at is what I’ve been able to mine here.

Q What synergies have been realized by placing Sheldon Good under the Racebrook umbrella?

A Racebrook, the fund, does a lot of debtor-in-possession financing, so when a real estate transaction goes into bankruptcy, Racebrook Capital provides the finances that a real estate entity needs to go into bankruptcy, then the court awards a disposition process, usually an auction. If we provide the financing, then Sheldon Good is the auction company.

Q What’s the breakdown between residential and commercial?

A Typically, 60 percent of what we do is commercial; 40 percent is residential. However, nationwide, in the last 18 months, 60 percent of the 73 auctions we conducted were residential-based and 40 percent were commercial. The statistics are a bit reversed, but that’s just a sign of the times.

Q Have you ever bought something from auction?

A I’ve bought things at auction and sold millions of dollars’ worth of art and real estate at auction that I personally own.

Q You often serve as the auctioneer during these auctions. Do you ever get tongue-tied?

A No. We all go to auction school.

“Tommy Atatamus took two T’s and tied them atop of two tall trees!”

Article source: http://feeds.nytimes.com/click.phdo?i=d02870385d311fa761f745389117f078

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