If ever there was an example of the traditional estate agency model crashing, it is that of Foxtons’.
Over recent years the Foxtons brand has dominated London. Not just its High Streets with its wine bar esque offices on Park Lane etc, but the streets too with its herd of signwritten cars that would put most Mini dealers’ stocks to shame.
The Foxtons machine grew and grew and soon labelled itself with the ever so slightly arrogant mantle of ‘London’s Estate Agent’. In 2007 owner Jon Hunt sold his 24 offices for £390 million to private equity firm BC Partners. A quite bonkers valuation and one born of turnover vanity rather than a profits multiple it seems.
Mr Hunt’s timing was perfect though. BC Partners’ timing? Not so much.
Within weeks of the sale the property market went into a tail spin with transaction volumes halving and prices dropping significantly. Consequently, to the year ending December 2008 Foxtons lost £218 million. ‘Only’ £13 million was trading losses as such with another £170 million as a one off write down in order to adjust the goodwill value of the firm, which had plummeted along with its sales.
The downturn resulted in BC Partners’ banks taking over the Foxton business last year due to its debts of £376 million and interest of £36 million going unserviced. That interest charge is more than half of Foxton’s entire turnover in the good days!
The rumours are that Foxtons now want to expand. How on earth it can do such a thing with its current debt millstone wrapped around its neck, God only knows.
Coupled with Foxtons’ decline in financial standing, to open more offices when the clever money is now so focussed upon an online future, is verging on the insane.
‘High Street/High fees’ estate egency needing the investment and cost that the big players have previously chucked at it just will not add up any more.
Just wait and see…. The future for tradtional estate agency will bring more than a mini drama or two.