Just over a decade ago, the UK’s largest building society had more than 1,000 branches. Today, it has 650.
Like its high-street competitors, Nationwide has been scaling back its branch network to manage costs and keep pace as customers increasingly use mobile and online banking.
Divestment has also focused on overlap with historic acquisitions such as the 154-branch Portman Building Society in 2007.
Further reductions are planned – although in November it extended its pledge to leave no town or city currently served by Nationwide Building Society without a branch until at least 2023.
When it does make disposals, achieving best value for its members is vital.
Taking the auction road
The auction route was not initially on the agenda as a means of disposal, says head of real estate Mark Sayers, who has been on secondment from Lambert Smith Hampton since 2013.
“In recent years, we’ve been selling around 15 to 20 sites a year. And we always thought we were doing absolutely fine,” Sayers explains. “Looking at the data since 2013, our receipts are something like £85m just from the surplus branch estate, 121 sites. And that’s a 25% improvement over book value. And so we hadn’t really considered the auction process at all until Lambert Smith Hampton invited us to examine it.”
LSH is Nationwide’s incumbent supplier on a five-year bundled service contract. Colliers provides book valuations, which gives the building society a good guide as to how successful LSH is – or isn’t – in effecting disposals.
Meanwhile, LSH had moved its auctions business exclusively online following the departure of its team to BidX1 in 2018. LSH rebranded its auctions business as 574 and embarked on a new strategy focusing solely on offering clients bespoke auctions on a date of their choice, rather than doing this alongside a fixed calendar of auctions of multiple lots.
Max Mason, head of sales at 574, says: “What we say to our clients is, ‘look, if you need this on the market now, we can get it on the market now’. There are lots of different ways that you can apply a more flexible model.”
The listing fee remains £1,000 per property, with “every penny” pumped into online advertising. As before, a success fee is then charged at a percentage of the sale price achieved.
Nationwide initially decided to trial the bespoke online auction method for a small number of properties that had failed to sell for a couple of years. In Sutton-in-Ashfield, a market town in Nottinghamshire, an institutional investor was keen to buy the surplus branch but hadn’t managed to bring the purchase to fruition.
“We just felt we had to introduce an element of tension,” Sayers explains. “We couldn’t identify another bidder. But the LSH team suggested we try an online auction approach just to see whether we could galvanise some interest and whether or not that interest was crystallised. It was a sufficient leverage to induce the purchaser to actually commit to it. So from that perspective, it was actually very successful.”
Maximising exposure
Mason recalls that the team made full use of the ability to control the length of the marketing period – extending it by two weeks once the buyer was “making decent progress”. If the property had been listed in a traditional catalogue, this extension wouldn’t have been possible and the property would have been withdrawn from the sale.
Instead, the buyer went ahead with the deal under auction contract in a prior sale at a price around 20% in excess of book value.
“The data feedback of having an online platform really helped because you could see that the rest of the market wasn’t quite in the [pricing] area that this buyer was,” Mason says.
In another example, a surplus branch in Hanley, Staffordshire, had failed to attract sufficient interest for a couple of years. Again, the auction team used the “flex” in the marketing period to allow for a second push which would not have been possible in a traditional auction.
The property achieved a sale price 10% over the guide. “Some of the historic offers that we had received were around a third to a half of what the end result was, so it was really encouraging,” Sayers explains.
After these two examples, Sayers felt confident enough to use the new approach for a property that would have “traditionally flown off our books”. The branch in a suburb of Wolverhampton sold for almost three times its book value.
Exposing the property to a much wider audience than it would have done before created a “feeding frenzy”, he says. Mason says that reaching local buyers through the marketing process was crucial: nine bidders placed more than 221 bids – all of them local.
For Nationwide, there are other attractions to the process too. Sayers said he had previously assumed that the auction process would not allow enough time to vet prospective purchasers.
“We would never want to sell to someone who has a questionable financial record or some kind of sanction related issue,” he says. “And we thought that this would be a barrier to using the auction process when in fact, it hasn’t been. We’ve been able to cope with that and satisfy a pretty robust regime of checking.”
Sayers also values the opportunity to be more “collaboratively involved” in the online auction process – whether that is discussions about the number of downloads of the legal documents or the level of offers received ahead of the auction for a property in good demand.
Sayers explains: “We’re able to have a discussion as to what tactically we should do: do we take that bird in the hand or should we actually proceed to the auction? And does the auction period need to be extended? There is this kind of dance between client and partner as to how to get the most out of each individual circumstance and the online process seems to facilitate that in a way that perhaps isn’t always there with the more traditional means.”
Generating competition
A recent example would be in Cliftonville, Margate, where Nationwide had anticipated possibly making a loss on the asset’s £80,000 book value. In fact, it achieved almost £140,000 by going ahead with the auction instead of accepting what turned out to be a number of “low ball” offers in the region of £80-90,000. That decision to press ahead with the auction was based on the number of legal document downloads relative to registered interested parties, which in turn predicts the number of bidders.
“We had 31 registered interested parties and 30 of them downloaded the legal pack – that’s a very high rate of download compared to the average, which is about 75%. So we ended up thinking to ourselves, well, actually, we’re in for a very competitive day here,” Mason explains.
By sticking to frequent, small-scale auctions tailored to individual clients, Mason believes he can offer a more personal approach. But he also plans to launch a new online dashboard later this year to make information sharing with each client fully integrated.
For Sayers, the next step will be to try putting some of its offices or industrial sites through the online auction process. “We have a duty, a mandate, to get best value in every case,” Sayers says. “And this is a fantastic way of proving it, providing a great audit trail and giving us the flexibility and, most importantly, the results that we need to see.”
To send feedback, e-mail julia.cahill@eg.co.uk or tweet @EGJuliaC or @EGPropertyNews
