From overseas investors looking for a swift exit from a prime London pad to institutions like Columbia Threadneedle divesting smaller retail assets, Knight Frank has identified a timely opportunity to begin offering its global client base a route to cash-rich buyers in the auctions market.
The top-tier agency has hired former Allsop partner Richard Watson to spearhead the initiative and further hires are expected to follow.
Watson says he began talking to Knight Frank at the beginning of the year. This followed a brief stint in 2019 as head of UK residential auctions in the fast-growth environment of private equity-backed BidX1, where he learnt a huge amount about digital auctions.
Prior to that, he had spent 17 years at Allsop, latterly becoming a partner in its residential auctions division. While he has not walked straight into partnership at Knight Frank, he clearly feels more at home in a partnership culture and sees it as a natural fit for auctions. Growth will be “organic”. “We’re not going out there all guns blazing,” Watson insists.
“As a dynamic partnership, Knight Frank has always had its eye on auctions,” he says. “And as the auctions industry has evolved, there have been more and more opportunities where Knight Frank could have done that work.”
Existing client Columbia Threadneedle, which has been using Allsop and Acuitus to divest high street assets from its funds, is a case in point. Auctions also adds a string to Knight Frank’s bow when it comes to retailer sale-and-leasebacks, for example, portfolio break-ups and of course its LPA receivership work. “People who have suffered because of Brexit pausing housing schemes and then Covid-19 need speed and certainty,” Watson adds.
Catalyst for innovation
His own initial discussions with Knight Frank were also paused due to Covid-19, but as the private treaty market faltered, the pandemic subsequently proved to be a catalyst for quietly conducting a pilot sale with the firm in July. No doubt the appointment of a new head of Knight Frank’s UK residential business – Tim Hyatt took over a week after lockdown began – also spurred things on. “There’s nothing like a new broom,” as one auction house observer puts it.
Hyatt described the auctions launch as “the latest in a series of innovations from Knight Frank that aim to better inform and service our diverse range of clients”.
Watson recalls how there was a “recognition that there was a groundswell of people saying: ‘We need a solution. We’ve had our capital growth over the past five years. We can forgo a little bit of that to get speed and certainty of sale.’”
He adds: “With potential pressures for pricing to go down, the upside [of waiting to sell] is very limited and the downside is significant.”
Knight Frank’s pilot auction was a live-streamed sale. As a result, six lots sold under auction contract with an average capital value of £910,000 and two remain unsold. Each lot was an existing Knight Frank residential instruction, with sellers including a charity, a probate sale, an owner-occupier and a landowner.
“The pilot has given us comfort that we can do this competently. We are now open, but we are not pushing out into the wider market because there is enough going on internally to support this service line,” Watson explains. The wider auctions market, he says, “is serviced and it’s brilliant”. Indeed, he hopes Knight Frank will be “a feather in the cap” of the auctions sector and will help to mature the market further. Any potential client overlap is likely to be at the higher end of the lot sizes Knight Frank hopes to handle in the future, he adds.
Knight Frank’s first “official” sale on 22 October will be offering a catalogue of residential properties from across its new homes, London sales and country house businesses. Indeed, the firm sees residential as the “easier in” to the auctions market, with commercial lots coming on stream as opportunities arise.
Watson is excited about the future possibilities: “If we are selling a hotel or former hotel, we can work with our dedicated hotels team. The same applies to care homes or residential development. We have all those people in-house already, with a depth of market penetration. I can tap into that as the agent controlling the sale. That’s really where the thought is.
“Knight Frank has historically dealt with the core market, which is larger capital value, and offered a greater degree of service level… That’s the arena we are pushing ourselves into.”
Challenging misconceptions
So what then are the challenges? One is the need to educate colleagues and clients about the common misconception that auctions are all about low-value, poor-quality assets at bargain prices. “There are certain connotations, which are inaccurate,” Watson says. “The reality is that if you want to achieve the best price for a £2m-£3m sale and leaseback, you can make more at auction.”
Another will be growing the team if the division takes off. Watson himself is not a rostrum auctioneer, so for its July pilot Knight Frank entrusted the job to Andrew Parker, managing director of regional firm SDL Auctions. This is perhaps not as strange as it first sounds given that SDL has for several years been building an additional service line operating auctions on behalf of hundreds of estate agents – including high-end London specialist Chestertons. And the sale – hosted on Essential Information Group’s platform – was given full Knight Frank branding.
But having its own auctioneer on the rostrum is a longer-term ambition for Knight Frank. “Looking to the future, we will build the team and we will look for more people with auctions experience – including on the rostrum,” Watson says. He would also like to see in-room auctions trialled under the Knight Frank banner – when they are allowed.
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