It was a time when you felt that Foxtons, the London estate agency, owned London.
In the noughties its distinctive dark green Mini Coopers with yellow trim were a common sight, zipping through Notting Hill or Clapham, while passengers sat in the back. Opening a branch in an “up-and-coming” area such as Brixton was seen by many locals as a significant event and a sign of gentrification. Conversations at dinner parties could revolve around whether the high commission fees were worth it or if Foxtons’ aggressive selling tactics were bad manners. Other agencies did not seem to split opinions as strongly.
A shift occurred. Mini Coopers began to disappear and the number of sale boards decreased. Profit and revenue reports that were disappointing were released. In the estate agency sector, there were complaints about rivals eating Foxtons lunch, sales teams not feeling sufficiently rewarded and executives being overpaid. Share prices dropped. Foxtons seemed to have lost its mojo.
The company now has merger and acquisition bankers at NM Rothschild on its payroll as advisors. This is because some major shareholders are pushing for Foxtons’ removal from the stock exchange and sale. Opinions are mixed. Some big investors think the company is on the right track under its new CEO Guy Gittins who was appointed 2022. Foxtons, they argue, can once again become a major player in the UK’s property market while still remaining listed.
What went wrong, and can Foxtons gain an edge on its competitors?
In 1981, Jon Hunt was 28 years old and founded the company with his friend Anthony Pelligrinelli. The office was located in an old Pasta Bar in Notting Hill in west London, which at the time was still a burgeoning area. Hunt, a former military man, wanted to change the industry by working harder than anyone. Their office would remain open until 9pm, which was four hours later than most competitors. Foxtons’ culture was well-established by 1985 when the second branch, located on Fulham Broadway not far from the first, opened. It was a company that would do whatever it takes to make a sale.
Django Django, founder of Hosking Partners which owns 11% of Foxtons said: “It had a very English approach to selling. Up until then, estate agencies were dominated by the bumbling, diffident public schoolboys. Foxtons turned this on its head by celebrating sales in an American-style. It was very successful.”
Hunt guided the business through the crash in the early 1990s and expanded into lettings. Then, he rode the housing boom of the 2000s. The brand was soon known for its Minis, and the young, aggressive, and pushy agents it employed. They would promise their clients the highest rent and sale prices in exchange for a 2.5 percent commission.
Investors believe Foxtons is on the right track since Guy Gittins became chief executive in 2022
In 2003, Hunt instructed his employees to remove the For Sale signs from rival operators and replace with their own. In 2006, the BBC conducted an undercover operation where they revealed that employees had forged signatures while boasting about having misled clients regarding the value of their properties. The company gained market share despite the fact that sellers knew they would receive a fair price for their properties.
Hunt sold Foxtons to BC Partners in May 2007, when the market was at its peak, but just before the financial crash. The price was £360 million. He became one of Britain’s wealthiest people. Since then, his net worth has grown from £1.48 billion to £360 million.
In 2013, the company floated at the London Stock Exchange with a valuation of £753million. The company benefited from the property boom in London between 2012 and 2015. It expanded to 67 locations across London and its suburbs. Shares reached a high of £3.73 by 2014, and the business was valued at £1.1 billion. By last week, the shares had fallen to just 52p and valued the company at £155 million.
The decline was largely due to Nicbudden taking over as CEO in July 2014. He had previously worked at Foxtons since 2005, when he became chief operating officer. He previously worked for BT, Cable & Wireless, and Severn Trent.
Analysts and investors say Budden is not suited for the role. It was a mistake. Robin Paterson, a former chief executive at Hamptons International (a rival agency) and activist investor in Foxtons through Catalist Partners as well as a co-founder said that Paterson was not the CEO for Foxtons.
The business started to fail. Foxtons was dropped from the FTSE250 in December 2014, and its special dividend was canceled in 2016 as revenue and profit began to fall by double digits. The decline in demand was due partly to external factors, including higher stamp duty, declining interest from foreign buyers, and the affordability of London homes for most Londoners. Purplebricks, an online estate agent, started to offer a cheaper option for those on the opposite end of the market.
Critics say Budden did not get the most out of his teams. Instead, he focused on corporate governance and Foxtons’ very expensive expansion in the suburbs.
Greg Poulton is a research analyst with Singer Capital Markets. He said that the Foxtons float had been sold based on a strategy of branch expansion. The investment was huge, but the new branch didn’t work and the revenue per location dropped. “But central management was so focused in delivering this expansion strategy, even though the market was becoming more challenging, that Foxtons’ core culture got lost.”
Other rivals could then eat away at Foxtons’ dominance of central London. By 2020, Foxtons’ market share in London will be down to 2.7% from 5% in 2014. Budden reduced the fleet of Minis at the company from a huge number to only 20 cars, surprising the staff. They thought that it was a great way to advertise the brand.
Cory Bailey said that Foxtons had “lost their focus”. You had a manager who stopped investing in the processes and stopped investing in the people. It was this that led to the demise of Foxtons. During that period, competition gained market share.
Grumbles from the bottom were a result of problems at the top. Oliver Venn was an estate agent at Foxtons between 2007 and 2020. He said that incentives for top salespeople started to disappear.
Venn, a director and partner with the property adviser BHB private, says that “they removed the Mini keyrings upon completion, which I always thought was an excellent touch”. He also said that the benefits for successful employees began to diminish. The three-day trips that were once taken every quarter have now been reduced to two per year. In the meantime, targets were increased for a newer company car, and shares options were removed for those promoted to Operations Manager. Venn stated that the refusal to reduce the commission rate from 2.5 percent also led to a loss of business in prime markets.
Budden declined comment.
Gittins was appointed chief executive of the company in September 2022, after he had been ousted by disgruntled investors. Gittins is a former boss at rival London agency Chestertons. Gittins’ first move, after he began his career with Foxtons, involved ordering 350 Mini Coopers, some of which were electric, for the sales team.
Foxtons’ financial performance began to improve, as reflected by a rise of over 50 percent in the share price since Gittins arrived. The company’s 2023 final-year results showed a revenue increase of 5 percent to £147.1 millions, with lettings revenue accounting for 70 percent of total revenue. This revenue grew by 16 cents to £101.2million. Sales decreased by 14% to £37.2m, but still outperformed the market’s decline of 24%. The company’s first quarter results showed a 9 percent increase in revenue to £35.7 millions.
Gittins believes that Foxtons’ success comes from its 1,300 employees, spread across 58 branches throughout London and Surrey. He said that his predecessor’s “once unbeatable” sales culture was diluted, eroded and turned off. “We’d become just another grey estate agency on the high-street,” he added.
“Lettings are our top priority.” Gittins stated that they wanted to focus and grow on the recurring income from lettings. “We have refocused and are now primarily a lettings company. “We are the UK’s largest lettings company by volume of instruction.”
Investors such as 3G Capital Hosking Partners Milkwood Capital Converium Capital and Converium Capital started to press for the sale of the company towards the end Budden’s tenure. These calls have returned.
Investors were unhappy with Nic Budden’s branch expansion strategy. Analysts said that the core culture of Foxtons had been lost.
Michael Rapps said, “We believe now is the right time to sell”, as Converium Capital owns 6% of Foxtons. They’ve fixed all their mistakes and are in good shape. There are private equity-backed agencies who would like to have more and larger agencies. Foxtons does not have the necessary capital to compete with these private equity-backed agencies.
Rapps, along with some other shareholders, believe Foxtons can be sold up to £300,000,000 or 70p – £1 per share.
Platinum Equity is one of the firms that Rothschild has identified as potential buyers. Rothschild sold UK estate agency Leaders Romans to Platinum Equity. Oakley Capital, the owner of Dexters, and Emeria, an European private equity-owned real estate business, which last year acquired Chestertons, are also in the running, according to City sources.
Some say that these deals show private equity companies are willing to buy and invest estate agents. Therefore, London Stock Exchange investors need to keep faith and support Foxtons by providing capital for expansion.
Paterson, Catalist Partners, said: “We think that the business can grow organically but would need to make some major acquisitions.” You won’t get the premium you would want if the business were sold today.
Gittins declined to comment on any sale. However, he will focus on bringing the smaller elements back that were valued in the business. I’ve been looking for a nice Mini keyring. I’m going talk to my marketing team about it.”
He continued: “I spend lots of time talking to my staff in front offices, and pride is returning.” If pride is present, we’ll deliver better results. “We’re just at the beginning of our journey.”