On a single day in April, more than £8m of UK property was sold through online auctions.
The largest single lot was the failed Angelgate residential development in Manchester, which was sold for £5.2m in an online auction managed by Lambert Smith Hampton on behalf of administrator Moore Stephens.
It was snapped up on Thursday 26 April by Far East Consortium, which owns the neighbouring £200m Meadowside development, after an enhanced marketing period to ensure the best price was paid in open competition.
LSH head of auctions Oliver Childs, who began using regular online auctions with client Severn Trent Water in 2015, says he has noticed a growing acceptance of online auctions over the past six to nine months.
“Companies want to adapt and look at new ways of doing business,” he says.
On the same day, online auctioneer BidX1 raised more than £2m in its second UK sale, achieving a 70% success rate, while Allsop raised more than £1m from a portfolio of Local Shopping REIT assets.
BidX1 offered 40 residential and commercial lots throughout the UK from multiple vendors, made up largely of private equity firms and hedge funds.
Successes included two adjoining semi-detached houses divided into 12 units in Clarendon Road, Liverpool, which made £489,000 against a reserve price of £360,000. The investment produces £19,000 pa.
The lot had been offered in BidX1’s debut UK auction in March at £415,000, but failed to sell. However, the lower reserve price fuelled a bidding war when it was reoffered, with 89 bids placed.
One of the other sought-after lots comprised three houses with a 0.37-hectare site in Londonderry, which sold for £265,000 against a guide of £200,000. A mid-terraced two-bedroom house in Middlesbrough, guided at £21,000, sold for £46,000.
BidX1 founder Stephen McCarthy says: “The online platform is bringing high-quality lots to a wider scope of buyers with successful results.
“We are continuing to break down barriers within the auction market as our model gains popularity, particularly among the private equity and fund management vendors who appreciate its benefits.”
Meanwhile, ballroom auctioneer Allsop sold six of the eight lots offered online on 26 April for the Local Shopping REIT.
The REIT has been disposing of its assets since 2013 in order to repay debt and return remaining capital to shareholders. Internos, now Principal Real Estate Europe, was appointed to liquidate its 600-plus portfolio. The latest properties were offered exclusively online, suggesting major sellers are increasingly comfortable with putting stock under the virtual hammer.
We are continuing to break down barriers within the auction market as our model gains popularity, particularly among the private equity and fund management vendors
A takeaway pizza shop and maisonette in Salford, Manchester, producing £17,000 pa, generated the most intensive bidding: 49 bids were placed by seven bidders. It sold for £211,000, having been listed with a “reserve not to exceed £150,000”.
The highest price achieved was for a Betfred bookmakers and residential ground rent in Lewes, East Sussex, listed at £235,000 and producing £21,100 pa.
It attracted 38 bids from five bidders and sold for £277,000.
Commenting on the auction, Rupert Wallman, fund manager at Principal Real Estate Europe, says: “Historically, the UK has been behind the curve compared with other major real estate markets such as the US, where online commercial real estate auctions are fairly mainstream.”
Wallman adds that, despite this being the first online commercial auction run by Allsop in the UK, Principal “felt that it was an appropriate platform for us to auction some of the Local Shopping REIT portfolio, and that it would help us lower transaction costs, particularly for smaller lots”.
“In time, we believe online auctions will grow into an important marketplace for UK commercial property,” he says.
Online auction trailblazers: Who is doing what?
Lambert Smith Hampton
Lambert Smith Hampton sold £73m of property in traditional ballroom sales last year, up 22% on 2016. At the same time, it continued to lead the field in online commercial auctions, selling stock for clients including Severn Trent Water, Newcastle City Council, Homes England, private equity firms and LPA receivers.
Earlier this year, LSH won a two-year online auction contract with the Ministry of Defence to dispose of surplus assets. It has just put the first tranche of these up for sale, with all eight lots selling.
Seven were houses sold with vacant possession; the eighth was a reversionary ground rent on a parade of shops with residential above in Southsea, Hampshire. The ground rent, with 38 years unexpired, attracted the highest number of bids (82). Four parties battled it out, pushing the sale price to £117,000 against a “reserve not to exceed £20,000”.
Online auctions allow for a wider variety of property to be offered, both in asset value and asset type. We have consistently proved above-market values
“Online auctions allow for a wider variety of property to be offered, both in asset value and asset type,” says LSH head of auctions Oliver Childs. “We have consistently proved above-market values.”
Buyer confidence in online auctions is also growing, he says, pointing to a recent £2m purchase by a major UK fund.
“Online is now part of our business, just like ballroom auctions, phone bidding and proxy bidding. Ultimately, we are just the agent and we want to give choice and flexibility,” Childs says.
With this in mind, LSH, which uses the Essential Information Group online auction platform, is also developing its online offer further to create a “hybrid” tender approach tailored to vendors who want the final say in selecting the successful bidder.
This has grown out of the online auction of a 6.7-acre former nurseries site in Jesmond Dene, Newcastle, on behalf of Newcastle City Council last year. The process was adapted so the council was able to select the most appropriate buyer from the five bids received, based not only on capital receipt but also key factors including their plans for the site and financial strength.
The hybrid model will come under the auction banner, so would-be buyers will be aware that the client is a motivated seller.
“We are looking to grow our market, rather than take business away from the ballroom,” says Childs.
BidX1
As Ireland’s biggest auctioneer, BidX1 is a purely online business in its home territory and has invested heavily in its own platform. Head of IT Mark Darcy, who had worked for a major bank, initially developed the platform four years ago. The firm continues to ramp up its investment in new technology to stay ahead of the game.
In January it bought ballroom auctioneer Andrews & Robertson to gain a foothold in the UK and is in talks with other UK firms. It has so far held two UK-wide online sales – raising £4.6m in March and £2m in April – and an online sale of Northern Irish lots in June, which raised £900,000. These will be followed by a UK online sale on 5 July.
One of its next steps will be to create a 4,000 sq ft London “trading floor” along the same lines as Dublin, where it has 35 staff.
During a visit on a busy sale day in May, it was striking that almost everyone on the main floor was on the phone as they tracked individual lots and overall auction performance on their screens: “We are property people using technology,” stresses managing director Stephen McCarthy. That means calls from potential bidders with any queries are eagerly taken and calls are routinely made to parties registered for a particular asset – particularly if the screen is showing that they are not logged in.
Underbidders who may be interested in transferring to a similar lot are also routinely called up, and from 2pm on a sale day staff start making welcome calls to successful bidders.
We are continually improving the experience. This includes investing in a vendor portal and developing a buyer app. We want to help the seller and the buyer. We want both to come back to our platform
The only hushed rooms are a boardroom used by the legal team and a room of IT developers who constantly monitor site performance – including server capacity and connectivity issues between registered parties and the bidding system.
The platform can usually detect these and will send on-screen prompts telling users what the problem is – such as slow speeds or complete loss of connectivity. Bidders can be logged in to multiple devices to mitigate this risk or set up automatic bids with a pre-set maximum that cannot be viewed publicly.
“We are continually improving the experience,” says McCarthy. This includes investing in a vendor portal and developing a buyer app.
“We want to help the seller and the buyer. We want both to come back to our platform,” adds chief financial officer Mike Murphy.
The company expects to invest hundreds of thousands in the buyer app, which could be used to push catalogues and market updates to registered buyers, for example, instead of email. “We are becoming more of a consumer brand as we go forward,” says McCarthy.
SDL Auctions
Online auctions is the fastest-growing part of the SDL Auctions business, which is also holding a record 40 in-room sales this year.
The regional auctioneer launched its online auction service in early 2017, using Essential Information Group’s online platform. It focused initially on selling residential lots on behalf of estate agent partners and now offers the service to its corporate clients as well. “We want to make auctions available to more sellers and buyers,” says Louise Jefferies, director of business development.
From January to April 2017, it raised £660,000 through online sales; for the same period this year, that figure rocketed to £8.7m. It has sold more than 350 lots online – 85% residential and 15% commercial. “Technology is a key part of what people expect now. It would be really silly of us not to realise that this is the way things are moving,” Jefferies says.
Interest in selling property online is now coming from clients including housing authorities, private banks, institutions and even the Anglican Church.
Back on the residential side, SDL is also using its online platform to offer clients a choice between unconditional and conditional sales. “We are offering a lot of conditional sales, which means we can open up the market of buyers beyond only those who have cash and can complete in 28 days,” says Jefferies. “It opens up the market to people who are not traders.”
Technology is a key part of what people expect now. It would be really silly of us not to realise that this is the way things are moving
For conditional sales (often described as the modern method of auction), SDL takes a 4% non-refundable deposit from the successful bidder, who then has 56 days to complete. “They have entered into a contract with some hurt money – if they pull out, they lose money,” Jefferies explains.
Less than 1% of those sales fall through. More than half of its online buyers are using bank debt – something it tends not to see in the auction room.
SDL also offers its estate agent partners a “no sale no fee” option, which, she says, is helping them combat competition from the likes of online estate agent Purple Bricks.
SDL works with more than 400 estate agents, with high-end London specialist Chestertons the latest to come onboard. Auctions are marketed under the estate agent’s own branding, but the whole process is supported by SDL’s auctioneers and infrastructure and sales are hosted on the EIG platform.
Essential Information Group
Auctions data specialist Essential Information Group will begin to add online and conditional auction lots to its listings this summer, in a move that mirrors the changing shape of the UK market.
The data will also be fed into its six-monthly auctioneer league tables.
Managing director David Sandeman says: “We will start to list all online auction catalogues on the proviso that the auctioneer is happy to give us the results – good or bad.”
Conditional lots, which are more prevalent in online sales than in in-room sales, will also be listed. The focus will be on UK auctions, but with the potential to grow outside that – particularly given the success of online auctions in Ireland, led by BidX1.
In-room auctions will be here as long as people want them. They’re great. But if vendors want to sell online, why not have both?
“We hope to go live this month,” Sandeman says. “All lots will be classified as in-room or online and conditional or unconditional.”
Sandeman adds: “The market has changed. Ten to 12 years ago, every sale was binding on the fall of the hammer and contracts signed and exchanged in the room. Then conditional sales started to come in – then online sales.
“In-room auctions will be here as long as people want them. They’re great. But if vendors want to sell online, why not have both?”
EIG provides an online auctions platform to a growing number of firms, including Allsop and Lambert Smith Hampton, with 120 online lots currently being offered by 22 auctioneers using its technology.
Fifty firms have been set up to use the EIG platform. Sandeman says the data portal’s listings will also include firms that have developed their own platform, such as IAM Sold and Pattinson.
To send feedback, e-mail julia.cahill@egi.co.uk or tweet @egjuliac or @estatesgazette
