Selling Severn Trent’s redundant resevoirs via online auction attracted many local private investors who may not have attended a traditional auction – and the prices achieved smashed previous benchmarks.
When Lambert Smith Hampton set up its first online auction to sell five redundant reservoirs in February 2016, head auctioneer Oliver Childs’ phone did not stop ringing.
The five rural sites, owned by FTSE 100 utility firm Severn Trent Water, were reminiscent of “Teletubby hills”, with grassy mounds concealing underground water tanks.
The collective guide price was less than £100,000. Yet they captured the hearts – and wallets – of private buyers, offering them the possibility of Grand Design-type conversion projects. The level of media interest generated 95 separate press statements.
Some 500 legal packs were downloaded and the four sites were eventually sold (after one was withdrawn for further work to be done), with 116 people registering to bid in an eBay-style auction.
Over the course of the 24-hour sale, 318 bids were made and the auction raised £451,750, meaning the average price paid was more than £100,000 (see below). Similar sites had previously sold in ballroom auctions for an average of £40,000-£50,000 after perhaps 35 bids.
Childs believes the online model has transformed the market for these assets, opening them up to private, often local, buyers.
“When we were selling Severn Trent lots in the ballroom, we noticed that we were getting a lot of telephone and proxy bids and a lot of the adjoining owners found that it was a big effort to come to an auction room in London and perhaps felt it might be intimidating,” he says.
“With online auctions, the buyer is in control. We were able to reach the private investors, local individuals who perhaps didn’t even know a month earlier that they were going to buy a property. Then they saw something on their home territory and they felt protective – either they wanted to keep it for their own quiet enjoyment or they saw a planning angle and felt they knew their local area best – particularly the adjoining owners.”
Carter Jonas partner Andy Smith says the audience was around 80% different to the ballroom, where professional investors, developers and traders form the biggest group.
For Severn Trent, already a regular seller of surplus property through ballroom auctions, the online auction process met its need to demonstrate that it has achieved best value.
Gillian Bullimore, Severn Trent’s property and planning manager, says: “We want to be fair with people and we want to ensure we get best value. This is a good way to demonstrate that it is open, fair and accessible to people.”
Rather than being a leap of faith, putting its properties into the industry’s first online commercial property auction chimed with its own objectives to drive operational excellence and continual improvement and innovation.
At the time of going to press, seven more redundant underground reservoirs will have gone under the virtual hammer through LSH, located in rural Nottinghamshire, Leicestershire and Gloucestershire.
This time, drone footage of the sites – snapped by Severn Trent’s in-house drone operator – and internal 3D imaging of a reservoir tank were used to demonstrate the full potential.
“For us, it is an opportunity: we get the income in for our customers and shareholders and we are also giving people the chance to buy into a location that they would not otherwise be able to,” explains Bullimore.
“All of these sites have access off the road already so there are things that compel people to look at them. If you were buying a field versus something that already has access from a road, which is already built and fenced, you can start to think: ‘What would I do with this site?’
“You are buying into the hope and opportunity.”
Severn Trent does not seek planning permission before selling surplus sites, instead recouping some of the uplift in value once planning is agreed. Details of the overage are set out in the sales particulars and legal pack.
Eight larger redundant sites will go into LSH’s ballroom sale on 16 October and a further five are earmarked for an online auction due to open on 5 December.
Time to make your own Grand Design a reality?
Severn Trent Water’s property heritage
Totalling 55,000 acres – including the 23,000-acre Lake Vyrnwy estate in Wales – Severn Trent’s property holdings are the product of an important history.
During the 18th century, responsibility for water supply and waste water treatment was shared between local government and private companies.
In the 19th century, many councils acquired powers to purchase their local water company. Severn Trent’s most ornate infrastructure dates back to this period, when growing towns and cities were keen to demonstrate their wealth, philanthropy and investment in the latest technology.
The most elaborate is the Papplewick Pumping Station in Nottinghamshire, built in the Gothic Revival style in 1884. It is now a museum, leased from Severn Trent Water.
Extensive property holdings were built up to allow sewage to be treated by spreading sludge to land. Works managers lived on site and workers’ cottages were often built too.
Many of Severn Trent’s subterranean reservoirs were built at this time to store clean water for local districts.
In 1973, the Water Act brought together the many water and sewerage companies in England and Wales into 10 water authorities, each responsible for water supply, sewage treatment and river protection within its area. Severn Trent Water Authority was one of those.
However, by the mid 1980s, the government had decided to privatise the water industry and the water authorities were passed into private ownership in 1989.
This legacy of multiple, uniquely operating geographical areas, combined with investment in new technology, means a growing number of Severn Trent sites are becoming redundant.
Gillian Bullimore, property and planning manager at Severn Trent, said the company’s disposal strategy had become more focused and effective following the arrival of current chief executive Liv Garfield in 2014.
“We are focusing on putting our customers at the heart of all we do. We began to look at how we build a lasting legacy, which means that when we are treating clean water and waste we are doing that in an efficient way with modern technology.
“That inevitably means that some of the sites or infrastructure we have previously had becomes redundant or surplus.”
Capita was appointed in 2015 to advise on the surplus property portfolio and Carter Jonas is also closely involved in the process.
What could you do with a reservoir tank?
Posenhall Reservoir, Posenhall, Broseley, Shropshire
The new owner was granted permission in June to convert the Victorian, brick-vaulted, subterranean reservoir into a home. According to the council officer’s report, this will be achieved by removing the earth banks and front and rear walls of the reservoir. Glass panels and bi-folding doors will allow light in.
Inside, the brick vault shape will be retained as much as possible and the internal area will be transformed into a three-bedroom home.
Access to the interior is currently through a raised hatch in the top of the mound, then down a 3.5m metal wall ladder. “Once inside, the space is open, airy and clean and set out in vaults constructed in immaculate brickwork,” the report says. The plans also include construction of a garage.
Stonehall Reservoir, Stonehall Common, Kempsey, Worcestershire
Plans were approved in August for the reservoir to be levelled and horse-riding facilities built on the site. The proposal is for a riding arena, stable buildings and outdoor school.
Redundant reservoir and building, Melbourne, Derbyshire
Planning permission was granted in August for the former pump hall and water pressure balancing tank to be converted into a contemporary, two-storey family home with car port.
The pump hall and tank were built in the early 20th century. Designs by Justin Smith Architects retain the existing walls of the pump house. A new timber structure with a green roof will link it to the tank and form the main part of the living space. The walls of the buried tank will be partially exposed to create a terrace garden, but the mound will be retained on one side and feature carved out entrances to guest bedrooms.
The four- or five-bedroom home will include a boot room, snug, open-plan kitchen, living and dining space, second living room space and a studio.
What’s next from Severn Trent Water?
Severn Trent Water is constantly reviewing its estate. With redundant subterranean reservoirs proving popular with private investors, what will the next grouping of disposals be?
“At the moment, we are focusing on sites that are no longer needed, where it is costing our customer base for us to maintain them and keep them safe and we are not giving people the opportunity to put them to alternative use,” says Severn Trent property and planning manager Gillian Bullimore.
One possibility is to sell open reservoirs once they become redundant. Those looking for a slice of industrial history – perhaps for a hotel, restaurant or unusual home – should also keep tabs on Severn Trent’s disposal programme as Bullimore says the company could consider disposing of some of its heritage buildings in the future. “This would be more complex because they are part of operational sites,” she says.
Other opportunities for investors could be created in the future. One is telecoms sites in the portfolio, which would be income-producing. But these could only be released if the site itself became redundant.
As energy technologies advance, some sites could be leased or sold off for battery storage, with a connection to National Grid in place.
“You may be able to set up an online auction for these,” suggests Carter Jonas partner Andy Smith, who is part of the team assisting Severn Trent.
View land currently for sale at: www.stwproperty.co.uk/land-for-sale
This article appears in the latest edition of the Property Auction Buyers’ Guide, published by EG on 7 October. For free access to more content for private investors, click here to register for your free digital edition of the guide.
To send feedback, e-mail julia.cahill@egi.co.uk or tweet @egjuliac or @estatesgazette
