COMMENT Faced with the government’s directive of self-isolating and lockdown, all of the main residential and commercial auctioneers had a dilemma with imminent ballroom sales a few days away.
If ever there was a time to test online auctions, this was it.
On the residential side, Savills was the first to the virtual auction block on 26 March. Some 41 properties were withdrawn prior, but Savills sold 45 lots out of a total of the 67 remaining through a live-streamed auction, realising £18.45m and a 68% success rate.
Allsop’s residential sale was held exclusively online on 1 and 2 April and of the original catalogue of 285 lots, 199 lots were offered. Some 104 lots were sold in the virtual auction room, as well as 26 prior and 21 post, equating to a 76% success rate. The total raised was in excess of £29m.
On the commercial side, Acuitus should have been the first to hold its sale of 47 properties on 26 March, but having sold three lots prior for £445,000, it took the decision to cancel the sale. It has since sold another four properties for an additional £1.4m
Allsop then held its commercial sale on 31 March and utilised the online facilities of the Essential Information Group and a system called BidNow.
Of the 164 properties that were in its catalogue to start with, 82 were offered. Of those lots offered, 26 were sold prior and 26 during the auction, a 69% success rate raising £27m. A total of £9.2m was raised “under the virtual hammer”. A further 12 lots have old post auction, taking the total to more than £30m and a 78% success rate, a remarkable result in the circumstances.
I sat through the entire auction and apart from the process being painfully slow (it took nearly five hours to offer 78 lots), it did provide an opportunity for bidders, who were patient enough, to continue to acquire the better quality investments.
The largest lot to sell “under the hammer” was lot 87 in Hayes, Middlesex. A prominent freehold bank investment let to Lloyds Bank until 2021 at a rent of £40,000 pa, it sold, after spirited bidding, for £801,000 from a guide of £700,000-£750,000 – a gross re-turn of 4.9%.
Another two to sell well were the first two lots.
Lot 1 was a freehold long-let pharmacy investment in High Street, Halstead, let to Boots until 2063 without break with rent reviews in 2027 and 2048 at a rent of £35,000 pa. It sold for £730,000 – a gross return of 4.79% from a guide price of £700,000-£720,000.
Lot 2 was another freehold pharmacy investment in Central Road, Worcester Park. Let to Boots until 2025 at a rent of £32,506 pa, it was guided at £525,000-plus and sold for £592,000 – a gross return of 5.49%.
It was certainly a difficult day for the auctioneers, but I commend them for trying their best to offer their clients’ properties in very difficult circumstances to an audience that is still keen to buy.
No substitute for the ballroom
But for me, while online auctions are certainly an alternative to be able to offer to the market in uncertain times such as these, there is no real substitute for a ballroom auction for offering multi-lot sales.
Apart from the fact that online sales are conducted in complete silence, you lose all the atmosphere that a real-time auction can offer.
The bidding also starts with a minimum opening bid at a level close to the bottom end of the guide price. Without an auctioneer being present, there is no flexibility to start the bidding at a lower level and thus gain any momentum towards the final selling price.
The other real drawback is that auctioneers for online auctions require cleared funds before any interested parties can bid. This removes all the spontaneity that a live auction can offer, where bidders who fail to buy one particular lot could easily bid on another and quite a number of the regular investors bid blind for a multitude of properties.
But the most important thing online auctions cannot offer which a real-time auction can is being able to offer a meeting place for like-minded investors, many of whom know each other, where they can see the competition bidding across the room.
From an auctioneers’ perspective, prior to the sale they can perhaps see more clearly who is seriously looking at any particular property, especially having received their funds to bid, and they can then decide whether to offer a lot or advise their clients to withdraw it. However, they too like to mingle with their buyers and can use the room to sell these and other properties as well as their other services.
But at present, they have no choice but to offer properties online and, as the lockdown is likely to stretch beyond their May sale dates, they now at least know how to better prepare themselves for the next round of sales which will have to be held online.
Hopefully, by July, we will be able to return to the ballroom sales, we have all become so used to.
John Townsend is a consultant at Harold Benjamin Solicitors
