Auctions

MANSION --- Auction King Under Attack --- Concierge Auctions, a leader in luxury properties, fights accusations it drums up fake bidders Clarke, Katherine . Wall Street Journal , Eastern edition; New York, N.Y. [New York, N.Y]08 Feb 2019: M.1.

ProQuest document link

FULL TEXT In the competitive world of luxury real estate, Concierge Auctions is the dominant force in the rapidly growing

business of selling pricey properties to the highest bidder. Billing itself as the leading marketplace for the world's

most distinguished properties, Concierge in just 10 years has attracted clients like former basketball star Michael

Jordan, advisers like real estate maven Barbara Corcoran and partnerships with Sotheby's International Realty and

Engel &Volkers, two of the world's most prestigious real-estate brokerage firms.

Over that same period, Concierge has also attracted something else: litigation. The New York and Austin-based

firm was named as a defendant in 10 lawsuits filed by clients since the start of 2014, according to a search of

Courthouse News, a nationwide news service for lawyers and the media. Five of those suits accused Concierge of

using some form of dummy or fake bidder, either to artificially drive up the price of homes, or to make it appear to

sellers that there was more interest in their homes than there was in reality.

Concierge denied the allegations in all of the lawsuits and said many of them were dismissed after the clients

agreed to settle out of court. It added that four of the lawsuits resulted in payments to Concierge. None of the shill-

bidding allegations have ever been decided by a judge. Four of the lawsuits are ongoing.

The company strongly denies it drummed up fake bids. Concierge attorney Robert S. Wolf described the

allegations generally as "bad-faith efforts to avoid meeting financial obligations to Concierge." He added that some

of the cases against the firm were filed after Concierge already commenced an arbitration against the same client.

Ms. Corcoran, who serves Concierge in an advisory capacity, said she doesn't believe the allegations.

"Concierge Auctions does not and has never used shill or fake bidders. Any accusation to the contrary is false,"

said Laura Brady, president of Concierge. "The bidding for our auctions can be viewed online in real time, and our

software maintains records of every bid placed and by whom."

She continued: "Every buyer and seller who participates in our auctions is required to honor their contract

obligations, and it is our policy to take legal action against any party who fails to perform. From time to time, such

actions have caused the party at fault to retaliate with false allegations in attempt to push blame for their

nonperformance."

While lawsuits are nothing new in the rough-and-tumble real-estate business, real-estate attorneys said the

quantity of lawsuits faced by Concierge, and the nature of their allegations, are a departure in terms of volume

from those usually faced by nationally known real-estate sales firms. Rivals DeCaro Auctions International and

Paramount Realty USA were each sued once by clients since the beginning of 2014, according to Courthouse

News. Both are significantly smaller companies in terms of volume of sales. Concierge disputes the notion it is

sued more often.

The fracas clouds broader efforts by Concierge to rebrand the auction business -- traditionally viewed as a last-

ditch refuge for homeowners in distress -- as an alternative means of selling luxury properties.

"People are getting hurt," said Howard Appel, who with another real-estate investor sued Concierge in 2017 in a

federal court in California alleging the company improperly kept their $285,000 deposit after the seller reneged on

selling a Fiji home they won at auction. They accused Concierge of using phony bidders to drive up the price of the

home. The suit is ongoing. Concierge has denied its claims but declined to comment further, citing pending

litigation.

Five of the 10 lawsuits filed against Concierge since the start of 2014 alleged that Concierge either failed to

disclose registered bidders who had proffered lowball bids, or used some kind of phony or shill bidder to lure

clients to entrust their properties to the firm's auction process. The suits define shill bidders in different ways. In

some, they are defined as a nonexistent buyer allegedly fabricated by Concierge. Others allegedly were buyers who

didn't intend to buy the home but agreed to bid.

In 2017, Joanne Brown alleged in a New York state court that she had agreed to let Concierge auction her

apartment in Telluride, Colo., and was advised by executives from the company that it would likely trade for

between $10 million and $14 million. A buyer ultimately won the auction at roughly $7 million, though the deal

never closed.

Ms. Brown alleged that Concierge failed to inform her of the two lowest registered bids, which were in the $2

million to $3 million range, thereby giving her a false impression of the average price buyers were willing to pay.

She also alleged that Concierge Chairman Chad Roffers told her there was a $7 million bid from a buyer named

Chris Shelton; Ms. Brown accused Mr. Shelton of being a "shill bidder" enlisted to drive up the price of homes at

Concierge's auctions without intending to actually buy.

Mr. Shelton, a real-estate investor based in Nevada, said his bid on Ms. Brown's property was legitimate. "Any

asset that I bid on, I have intention to buy," he said.

An attorney for Concierge denied the allegations in the suit, and said the suit was dismissed after Ms. Brown paid

to settle the case. Neither party would comment further on the terms of the settlement.

Seattle businessman Rodger May sued Concierge in 2015, alleging that the company recruited him to act as a

stalking-horse bidder in an auction for former Lehman Brothers CEO Dick Fuld's Sun Valley, Idaho, estate.

Having done business with Concierge in the past, Mr. May said Concierge offered him a $450,000 breakup fee for

his bid, meaning he would receive a payment in return for his bid when the property went to another buyer. In the

lawsuit, he alleged he was given repeated assurances by Concierge executives that he would not actually win the

auction, since at least six other bidders were willing to pay more than the $19 million bid he registered. However,

on the day of the auction, those bidders didn't materialize, Mr. May alleged, and he was on the hook for the

purchase of a property he didn't actually want. Mr. Fuld's estate had originally been on the market for $59 million.

In response to questions about the lawsuit, Mr. Wolf, Concierge's lawyer, sent a redacted copy of a settlement

agreement with Mr. May, showing that Mr. May had paid Concierge $700,000 to settle the suit. He added that the

suit was filed in response to an arbitration started by Concierge. The suit was dismissed. Mr. May declined to

comment through his attorney.

In 2017, a Texas state court granted the company a temporary restraining order against recently fired employee

Frank Kivo. Concierge alleged he was seeking to extort it with claims the company had engaged in fraudulent

bidding activity.

In response, Mr. Kivo, who worked in the company's video department, sought to have the case dismissed on the

basis that it was intended to censor him. He alleged he had witnessed Concierge employees placing false bids and

pretending to represent phony bidders on the phone to drive up the price of homes.

Mr. Kivo also alleged he had attended a company dinner during which Concierge's executives openly discussed the

practice. Rob Hourmont, a former real-estate investor who said he was in negotiations to take a job at Concierge at

the time, said he attended the same dinner, during which he observed Concierge executives, including Mr. Roffers,

"joking and laughing" about fabricating bidders during an auction. Concierge said there was no such dinner

conversation, adding that Mr. Hourmont didn't get the job at Concierge.

In an audio recording anonymously sent to The Wall Street Journal, Mr. Kivo is heard speaking to Jacqueline

Moldawer, a former Concierge employee. "There are some cases where like a seller feels like . . . five bidders is

going to be, like, for whatever reason, the magic number to get the house sold, even though we know we've got two

or three people that are end users and love the house and are going to bid aggressively," Ms. Moldawer said in the

recording. "If we have to shove a f------ registration in there (just like a f------ piece of paper), then so be it . . . It gives

our sellers peace of mind because it's a business they don't understand."

Ms. Moldawer didn't respond to requests for comment. Concierge didn't dispute the authenticity of the recording,

but said Ms. Moldawer's comments were part of a longer conversation that was selectively edited. Concierge

provided a lengthier version of the tape in which Ms. Moldawer said one particular bidder was legitimate. Mr. Kivo

also appears to be seeking negative information about the company.

Concierge denies Mr. Kivo's allegations. Court papers show that the case was settled out of court. Mr. Kivo paid

Concierge $5,500 in costs, and Concierge agreed to say that Mr. Kivo had resigned rather than being terminated,

according to the settlement agreement.

In court papers, the company described Mr. Kivo as a "rogue" employee who played fast and loose with budgets

and scared his colleagues at a company party, leading the company to put him in a performance-review program

as a disciplinary action. In a statement, Mr. Kivo said the case's dismissal didn't negate the merits of his

allegations. He said he has since gone on to run his own successful production company.

No one disputes that Concierge's business has ballooned in recent years. Ms. Brady said the company closed

$390 million worth of deals from 96 sales in 2018, up from $340 million across 81 sales in 2017. She said the

company processed more than $8 billion in bids through its online platform last year. Concierge is paid by the

buyer in the form of a 12% fee on top of their high bid, which is customary in high-end asset auctions, Ms. Brady

said. Concierge Auctions has a business sponsorship arrangement with Dow Jones, the parent company of the

The Wall Street Journal.

A number of high-profile properties have produced less-than-spectacular auction results.

In December 2017, billionaire Andy Beal's sprawling Dallas estate -- once listed by a prior owner for as much as

$135 million -- sold for $36.2 million through the auction house to Texas developer Mehrdad Moayedi. Last year,

Mr. Moayedi also purchased via Concierge the Woody Creek ranch of one-time billionaire Sam Wyly for slightly

more than $14 million, or 75% off its original $60 million asking price. Last month, Hall of Fame pitcher Randy

Johnson got $7.3 million for his Paradise Valley, Ariz. home, far short of its original $25 million price tag.

In January, Concierge set a record, selling the most expensive U.S. home ever sold at auction -- a massive

Versailles-themed estate in Hillsboro Beach, Fla. -- to Teavana creators Andrew and Nancy Mack. The home sold

for $42.5 million; it was originally on the market for $159 million, according to Concierge, which said that the home

was still the priciest ever sold in Broward County.

Ms. Brady said many of the properties Concierge represents have spent a long period on the market and

experienced several price cuts. In other words, the properties could be considered stale, or overpriced. She said

that the Wyly property had endured several price cuts and had been on the market for around eight years before it

was auctioned, for instance. She also noted that the Beal property had been listed for as low as $48.9 million

before the auction.

Appraiser Jonathan Miller noted that auctions can sometimes produce disappointing results, since the sellers are

trying to condense a marketing process that can take years into just six or eight weeks.

"One thing that we do pride ourselves on is providing as much data and statistics around our past sales, and

making the client aware of all the data driven decisions that are being made," Ms. Brady said. "Ultimately, it's not

worth what we think its worth or what they think it's worth. It's worth what the buyers are willing to pay."

She pointed to several success stories, including a Lake Tahoe mansion that sold for its asking price of $17.5

million last August, and an Austin, Texas, property that sold for $4.8 million, more than its $4.5 million asking price,

in 2017.

In 2015, after trying unsuccessfully to sell a Deer Valley, Utah home, real-estate agent Steve Jury advised his client

to try Concierge, which said it would deliver a snazzy global marketing campaign, Mr. Jury said. Concierge

executives convinced Mr. Jury and his client, an executive at a large technology company, not to place a reserve --

or minimum sales price -- on the property, he said, arguing that doing so would attract a wider audience of

potential buyers.

Yet, despite repeated reassurances from Concierge executives in the hours leading up the auction -- including an

email vowing that the seller was "in one of the best positions" the company had seen for a coming auction -- just a

few people showed up to the event, Mr. Jury said. (In some cases, the online portion culminates in an in-person

auction.) On Nov. 28, 2015, the property, which had been on the market for almost $13 million, sold for roughly $6.5

million.

"The gavel came down with a thud, and I was in total shock at what had transpired,'" Mr. Jury said. "I couldn't

believe it. There were literally more people from Concierge there that day than there were bidders."

Concierge's Ms. Brady defended the practice of "no-reserve" auctions, saying they attract a wider pool of

prospective buyers. Sellers can typically cancel the auction 24 hours before the bidding opens if they're not

confident that the interest generated will produce an acceptable market price, Ms. Brady said. In 2013, for

instance, an auction of Mr. Jordan's palatial Chicago mansion didn't result in a sale after no bidder offered above

his reserve price of $13 million.

Concierge was founded a decade ago by Ms. Brady and Mr. Roffers. Mr Roffers previously owned a franchise

office of Sotheby's in Sarasota, Fla., where Ms. Brady ran a team of real-estate agents. Together, they cut their

teeth in the auction business by selling large groups of homes in the run up to the last real-estate crash. The

company has a satellite office in New York, but is mainly based in Austin, Texas, where it has more than 60

employees. The company doesn't disclose revenue and profits.

Mr. Roffers said he and Ms. Brady identified auctions as a growing category. They believed that auctions,

traditionally used to dispense with distressed properties, could also be used as an attractive tool to sell luxury

properties, which with their high price tags can often take longer to sell.

Concierge grew quickly off the bat. Homeowners were looking to unload listings amid a tough economic climate.

Also boosting business was a partnership with Sotheby's, which recommended Concierge to agents. Mr. Roffers

said the company has grown at an average rate of about 38% each year, as measured by the total dollar value of its

transactions, regardless of market conditions. A spokeswoman for Sotheby's declined to comment for this article.

"The price transparency we bring to expensive properties combined with the speed in which we do so can be

jarring, but often the results we deliver are record-setting," Mr. Roffers said.

---

SOLD! / A FEW RECENT RESULTS FROM CONCIERGE AUCTIONS

The home: Randy Johnson's Paradise Valley home

Address: 8055 North Mummy Mountain Road

Highest known listing price: $25 million

Lowest asking price: $14.5 million

Sales price at auction: $7.3 million.

Address: 26 Cala Neva Drive, Lake Tahoe, Nev.

Highest known listing price: $19.5 million

Lowest asking price: $14.5 million

Sales price at auction: $17.5 million

Address: 511 Barton Boulevard, Austin, Texas

Highest known asking price: $4.5 million

Sales price at auction: $4.816 million

The home: Playa Vista Isle

Address: 935 &939 Hillsboro Mile

Location: Hillsboro Beach, Fla.

Highest known listing price: $159 million

Sales price at auction: $42.5 million.

Credit: By Katherine Clarke

DETAILS

LINKS Check Full Text Finder for Full Text

Subject: Auctions; Luxury homes; Bids; Homeowners

Location: New York

Company / organization: Name: Concierge Auctions LLC; NAICS: 453998, 531210

Lexile score: 1560 L

Publication title: Wall Street Journal, Eastern edition; New York, N.Y.

First page: M.1

Publication year: 2019

Publication date: Feb 8, 2019

Publisher: Dow Jones &Company Inc

Place of publication: New York, N.Y.

Country of publication: United States, New York, N.Y.

Publication subject: Business And Economics--Banking And Finance

ISSN: 00999660

Source type: Newspapers

Language of publication: English

Document type: News

ProQuest document ID: 2177059601

Document URL: https://search.proquest.com/docview/2177059601?accountid=30530

Copyright: Copyright 2019 Dow Jones &Company, Inc. All Rights Reserved.

Last updated: 2019-03-03

Database: eLibrary,US Newsstream

Database copyright  2019 ProQuest LLC. All rights reserved. Terms and Conditions Contact ProQuest