COMMENT One might have thought the timing of the final sales of the year of the two main commercial auctioneers could have been better planned, writes Harold Benjamin consultant John Townsend.
Both of the auctions fell the week before MPs are due to vote on Theresa May’s Brexit deal on 11 December. But few could have predicted the chaos that seems to have engulfed the whole process or the continuing banking crisis in Italy, which the Bank of England is predicting could affect Britain’s future financial security.
On the other hand, the wave of relief from the temporary truce in the trade war between the US and China injected some much-needed confidence into the markets the day before Allsop’s sale on Tuesday 4 December.
While one might have expected the investment market to take a temporary step back, investors proved to be as keen as ever to chase the better-quality stock.
Offering 133 lots, Allsop sold 105 properties for a total of £65.73m, a success rate of 81%, with an average lot size of £494,000. This compares with the £93.3m raised this time last year from the sale of 121 lots, when a success rate of 81% and average lot size of £771,000 were achieved.
The 2018 catalogue included what presumably will be the last of charity the Gosling Foundation’s HSBC bank investments. This selection of nine are all still let to the bank until 2023 with annual RPI rent reviews but not in occupation. All sold for a total of just under £3.2m, an average gross return of 9.7%.
High achievers
The two highest prices achieved under the hammer were Lot 26 in Eastbourne and Lot 86 in Stoke Newington, N5.
Eastbourne was a freehold shop in Terminus Road, let to Arcadia Group until 2024 at £138,250 pa. Sublet to Hotel Chocolat and Pavers, it sold for £1.91m – a gross yield of 7.23% – from a guide of £1.7m-plus.
Stoke Newington was a freehold and residential investment with seven flats above, one vacant and six let on assured shorthold tenancies. Total income was £108,158 pa and it sold for £1.95m – a gross yield of 5.54% – from a guide of £1.8m-plus.
A total of 34 lots were priced at £1m-plus, with 23 selling (seven prior, one after and 15 under the hammer) and 11 remaining unsold.
One that caught my eye was a freehold shop in Skipton, North Yorkshire. This was being offered on behalf of the Trustees of BAE Systems Executive Pension Scheme and was situated in a prime pedestrianised position in Sheep Street. Guided at £1.1m-plus, it was let to WH Smith until 2024 at £82,000 pa and sold for £1.15m – a gross yield of 7.13% – from a guide of £1.1m-plus.
The following day, on 5 December, Acuitus took centre stage, offering 75 lots from which they sold 59, with 11 properties selling prior, 47 under the hammer and one immediately afterwards. They realised a total of £34.9m, with a success rate only just shy of 80%. This compares with the 2017 result of £42.5m from 59 properties and a success rate of 80%.
Acuitus too had a selection of the last HSBCs from the Gosling portfolio, again still let but not in occupation. It offered and sold all seven for a total of £2.12m, with an average yield of 9.8% – not a bad return, with a bit of active management to come.
The largest lot by price, to be sold under the hammer, was Lot 33, a freehold office in Pudsey, near Leeds, let to the secretary of state for communities and local government until 2027 without break at a rent of £121,800 pa. It was guided at £1.5m/£1.6m and sold for £1.7m – a gross return of 7.16%.
One of my favourite towns is Northallerton in North Yorkshire, and Lot 30 was a freehold shop in the high street. Let to AG Retail Cards and trading as Clintons until 2023 on a lease renewal at £100,000 pa, the previous rent was £95,000 pa. Guided at £1.35m, it sold for £1,515,000 – a gross return of 6.6%.
And another to catch my eye was Lot 62, a modern freehold office park investment in Middlesbrough. Comprising eight office buildings, it was let to a number of tenants including Svenska Handelsbanken at a current rent of £124,810 pa but with three buildings vacant. Guided at £650,000, it sold after protracted bidding for £1,041,000 – a gross yield of a shade under 12% on just the rent passing and with real potential with some active estate management.
A good year
Both houses have had a good year in spite of everything going on in the economy. Allsop, according to Essential Information Group, has raised a total of just over £489m from the sale of 813 properties, with an overall success rate of 81% and an average lot size of £601,000.
This compares with last year’s £610.2m from the sale of 921 properties, with an overall success rate of 86% and an average lot size of £662,000.
Acuitus this year has realised £222m from the sale of 373 properties, with an overall success rate of 80% and an average lot size of £595,000.
Last year, it realised £304.5m from the sale of 388 properties, with a success rate overall of 85% and an average lot size of £785,000.
The two auction houses combined this year realised £711m compared with £914.8m in 2017, a fall of £203.8m. This year they collectively offered 1,482 properties, of which they sold 1,186 – an overall success rate of 80%. Last year, they offered 1,534 properties, of which they sold 1,309 – a success rate of 85%.
The new year will undoubtedly bring fresh challenges, when at last we know the outcome of Brexit.
I suspect, however, that investor confidence will continue to gain momentum, and the challenge then will be to continue to source sensibly priced buying opportunities to offer investors in the next round of auctions in 2019.
John Townsend is head of the auction advisory service at Harold Benjamin
