Branching out
Hoping to expand in 2012? There are funds out there, says Andrea Kirkby – for some!
T
he residential property market may not be booming, but nonetheless, some agents are finding it a good time to expand. Others’ problems
have created an opportunity for agents like Countrywide and LSL, recent buyers of Marsh & Parsons, to expand by acquisition. The amount of money involved is not small – LSL paid £50m for Marsh & Parsons, and Hamptons cost Countrywide £75m. Countrywide has been on a binge, acquiring Blundells, Durham-based Cathedral Lettings, Spencers, Cryers, Ashley & Peck, and Hootons, spending £18m on acquisitions so far this year. Such large companies, of course, have
access to sources of finance that aren’t available to smaller players; private equity- owned Countrywide issued loan notes to finance the purchase of Hamptons, and has a £100m revolving credit facility. Obviously such resources are beyond the
means of smaller estate agents. But it’s not just the gorillas of the agency sector that are expanding; a number of smaller but equally nimble agents also manage to finance acquisitions and new openings.
Finding the Funds
What finances are they using? In most cases, it seems, their own – using retained profits to plough back into the business. For instance Ed Meade says of Douglas & Gordon that it has expanded organically, using its own profits as the source of funds. “I think most estate agents will be doing that,” he says, “but there aren’t that many estate agents who are making good profits right now, except at the top end of the market.” He admits that funding from banks
might be cheaper, but it comes with strings attached, and over-reliance on bank debt would increase the business’s risk. “From our point of view, using our own funds means that our bottom line doesn’t look that good,” he says, “but it makes us a safe haven.” Lettings agency Edmund Cude has also
expanded throughout the recession, acquiring West End Estates and now operating from six offices. Robert Nichols, director, says “pretty much we’ve done it from our own resources. We have had injections of outside equity and debt, but that’s quite expensive.” He describes the business strategy as
a virtuous circle. By running an efficient business, he says, “we’ve been able to generate good amounts of cash. Then we used that cash generation to acquire businesses, and that’s become self-
46 JANUARY 2012 PROPERTYdrum
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68