Brokering Bulk Sales: What You Need to Know

In hard-hit South Florida, one company tries to pare down inventory with bulk sales.

February 1, 2009

When Adam Adache launched his brokerage, Adache Real Estate, in 2004, it was at the height of the boom in South Florida residential real estate. Developers were meeting a seemingly endless demand for housing by building high-end projects in neighborhoods that had never seen such condos and townhomes before.

Today, with some 50,000 units available for sale and prices down 50 percent from their peak, by some estimates, Adache is remaking his company into a specialist that helps bring together hard-pressed developers and banks with investment groups and other bulk buyers. About half of the brokerage's approximately 18 sales associates are now working on bulk deals.

"If you're not brokering these kinds of 'opportunity investments' in this market, you're going to be very slow for a while," says Adache.

Before the downturn, the company's specialization in preconstruction condo and townhome projects seemed a natural and a profitable fit. Adache cut his teeth in real estate years before starting his company at his father's architectural firm, Adache Group Architects, which specializes in resort properties. In mid-2006, the company's Web site listed more than 400 preconstruction projects.

But while the focus is still on newly constructed condos, the clientele looks significantly different. Adache says there are three types of bulk buyers in the market today: those looking to hold property with prime locations for a few years, those looking for units well-suited for producing income as rentals, and those seeking acquisitions at a major discount for immediate flipping.

The deals are very different for each type because of their differing financial situations. The buyers seeking prime-located properties expect to make their money when they sell in a few years, so they're not looking for as steep a discount. Buyers intending to rent out units, on the other hand, typically can't make projects work without a significant price discount, 60 percent to 70 percent off in some cases; otherwise, they can't cover their carrying costs. And, of course, flippers want it for even less.

"The challenge is getting sellers to face the fact that these prices are what properties are selling for," Adache says.

Adache has deals in the works involving as few as five units and has seen deals for as many as 500. By early December the company was working on seven transactions, each one months in the making. "That's the nature of this business," he says. "These deals take a long time; five to seven months is typical."

For brokerages thinking about remaking themselves into a company that can broker bulk sales, Adache has some words of advice: Unless you have associates who can slide seamlessly into commercial deal making, forget it. Bulk deals, in their essence, are commercial transactions.

"You have to understand cap rates, return on investment, and how to calculate a financial pro forma," he says. "In these deals, you're coming in and basing price not on individual units but on the buyer's business model. A buyer might come in and say he needs a minimum cap rate of 8 percent. You have to determine if the deal can deliver that."

A typical deal might involve a buyer seeking to acquire the remaining units in a partially sold condominium project. "There might be 30 units out of 100 left," says Adache. "Some investors will buy only if they can control the condo association. Some might be OK with just controlling 30 percent of the vote. Some will buy only if they don't take a hit on the association fee. They might not be able to make the numbers work if the existing owners of 50 of the units are in foreclosure and have stopped paying their association fee."

Adache says that on some deals his associates are working with brokerages that don't have bulk sales expertise. In these cases, the other brokerage agrees to share a portion of its commission with his company because of the value his associates bring. "An inexperienced brokerage could lose the buyer if it isn't able to perform and deliver the deal to closing," he says. "Other brokers feel like they have a partner in us, and they know they'll come out looking like a rock star to their client."

About half of Adache's associates continue to work on sales involving individual units. In virtually all of these transactions, the sellers are taking a financial hit, just as developers and banks are on the bulk side. "We have two groups of buyers looking for individual units," he says. One group is "people who wanted to buy before but couldn't afford it or didn't get around to it and are now seeing opportunity to get in at a tremendous discount." The second group is investors, although today they're long-term investors.

"Everything that's selling today is selling at distressed prices," he says.

Despite his current business focus, there's nothing distressed about Adache's outlook for South Florida. "Real estate will be appreciating again in four years," he predicts. "It'll be a normal market."

In the meantime, his brokerage is positioning itself as the go-to company for bulk buyers who recognize the opportunity for bargain buying. "We're pretty much riding everything in the company on that for the next year or so," he says.

For more on Adache Real Estate, visit

Robert Freedman

Robert Freedman is the former director of multimedia communications at NAR.