In today's ever-changing financial landscape, charities are increasingly recognising the importance of strategic asset management. As organisations dedicated to making a positive impact, it's crucial for charities to optimise their resources, including their property portfolios. We spoke with Tom Dennes, Associate Partner and Head of Auctions, to explore innovative approaches to managing charity assets, focusing on strategic reviews and disposal methods that can enhance financial sustainability while aligning with organisational goals.
Strategic Reviews
Conducting a comprehensive strategic review of property assets is a critical first step for charities looking to maximise their value. This process involves categorising assets as core or non-essential, identifying cost-saving and income-generating opportunities, planning for future regulatory changes, such as the planned changes to EPC energy efficiency targets for rented properties by 2030, and exploring alternative uses for underutilised properties.
Core property assets that need to be retained can often be reviewed to identify cost savings or income-making opportunities. This could involve improving the energy efficiency of a property or adding green energy solutions such as solar panels. While these improvements may require significant capital outlay and a long pay-back period, they can cut costs in the long term and positively impact the environment.
Additionally, identifying ways to better utilise assets to generate income, such as through rental opportunities when a building is not fully used, can be beneficial. A strategic review will consider all options and identify the most suitable solutions.
For non-core assets, strategic reviews can involve looking at whether a property can be utilised in other ways. For instance, a disused piece of land that a charity wishes to retain could be used for environmental schemes or have minerals underground that could generate income. Commercial or residential property may benefit from alterations or a change of use, which may require certain permissions. A large multi-disciplined firm such as Fisher German can provide in-house advice on these aspects.
A strategic review can also identify when a non-core asset should be disposed of. For instance, older assets that require costly work to bring them up to standards or those with no use and are proving a liability to retain. Selling these assets could open opportunities for charities to reinvest in more modern stock, future-proofing their investments.
Disposal of Assets
When considering the disposal of assets, various options are available depending on the motivations and the timescales involved. Our advice is always tailored to achieve the best outcome for the client within a timeframe that meets their needs.
The most common method of sale is by private treaty, which involves instructing a property professional to list a property on the market to secure a sale. At Fisher German, we will list the property on our website as well as platforms such as Rightmove. While popular, this method can involve uncertainty and lengthy sales processes, with the risk of deals falling through.
A newer method of disposing of an asset is via online auction. Unlike traditional, in-person auctions, this method benefits from incredible flexibility, and its success is not impacted by external factors such as the time of day it is being held, the weather, or location, which could hinder attendance. Properties are listed at a competitive price and attract competitive bidding, regularly achieving extremely strong results, selling for 20 or 30 per cent above the guide price.
How Do Online Auctions Work?
At Fisher German, we run our online auctions under the FG Auctions brand, partnering with a firm called Bamboo, which hosts our dynamic site. Ahead of the auction, the property is prepared for marketing. This includes sourcing photography and instructing a solicitor to prepare the legal pack containing information such as local authority searches. We also work with the vendor to decide on a guide and reserve price.
Each property is an individual sale, and the auction can begin as soon as the property is ready for marketing and the client is happy to begin. The property is listed online and includes the property details, legal pack, guide price, and the auction end time – with the reserve being kept confidential and not disclosed to the public.
Potential purchasers must register to place bids, and the IT behind the system means that we can see exactly who is registered and their level of engagement, which gives us strong statistics to discuss with the vendor.
It enables us to identify when properties are doing well and have strong interest, or conversely, we can identify properties that aren’t doing quite as well, which enables us to work with the vendor and plan the next steps well in advance of the end of the auction, such as adjusting the price and extending the end date to allow more time to attract new buyers.
The beauty of the system is that while we have an end time, once the reserve is met, any bids submitted in the last five minutes reset the timer for an additional five minutes. This means that if you have a number of people bidding, this can continue beyond the end time to ensure the vendor gets the best price. It provides a way of demonstrating it has achieved the best market price and ensures potential purchasers are not able to jump in at the last second to secure a cheaper price.
If a property does not quite achieve the reserve price, we can go back to the client and discuss if they would be willing to sell for less. If they are, we can then go back to the highest bidder and still sell it under the auction conditions within the same day if instructed to do so.
Once the auction has ended, it is a legally binding exchange of contracts, giving certainty of sale.
Legal Considerations
Property disposals by charitable organisations are governed by The Charities Act 2011 and The Charities (Dispositions of Land: Designated Advisers and Reports) Regulations 2023. Prior to any disposal, a report must be provided that confirms several factors leading to the conclusion that the disposal is in the best interests of the charity. We can provide such a report in advance of an auction, allowing a guide price to be set. In cases where the property does not perform as well as expected, an updated recommendation can be provided with the benefit of the sale process.
What Are the Timescales?
It typically takes around four to six weeks to prepare a property for marketing. When the property is ready, we generally advise that the auction itself lasts for 28 days. Once the auction ends and the reserve has been met, it is a legally binding contract, which means that if everything goes smoothly, the vendor could have the money in the bank within three to three-and-a-half months of starting the process, which is very appealing.
What Are the Benefits?
Timescales are the obvious benefit, and this method is perfect for those looking for certainty of sale or who have a specific accounting deadline and need to get some capital receipts in by a certain date. You can also extend the auction as many times as required to increase the amount of time people have to place their bids.
Online auctions are also a brilliant way of being completely transparent, something that can be particularly appealing for charities reporting to a board of trustees. It enables the vendor to report that the property has been fully exposed to the market, it has been marketed for a specific time period, and the resulting competitive bidding is a true test of market price.
Online auctions suit our modern lifestyles, enabling buyers to bid online wherever they are. In the past, when a property failed at an in-person auction, it would get flipped back into the private treaty market, putting vendors back to square one. Marketing properties by online auction can expose them to a pool of pre-qualified proceedable cash buyers, provide valuable statistics in relation to the level of interest in a property, and once the auction has ended, contracts are exchanged, which gives certainty to the vendor.
