How auctions can be the best route to market for some higher education assets

Over the last few years, many university estate directors have been busy undertaking data-driven reviews of their estates to better understand how their assets are used and operate. As a result, many are setting their short and long-term estate objectives, and deciding what comes next for buildings or land identified as underutilised or surplus to requirements. 

Auctions work best for granular assets

While some of these assets can be repurposed and future-proofed, there’s often a proportion that just aren’t needed any more. This often applies to those that were acquired in a more piecemeal fashion; inherited or gifted, for instance, or ‘awkward’ – perhaps slithers of land that aren’t big enough to suit the needs of the university. Estate directors and their executive committees may therefore decide to sell these assets.

While traditional sales methods continue to suit certain property types, the auction process is becoming an increasingly popular option for unique or granular assets. Auctions have evolved significantly in the last decade and, as well as being increasingly digitalised, now attract rising numbers of professional buyers and investors. This, alongside many other advantages, are making them an attractive route to market for the higher education sector, as well as other comparable estate owners, such as local authorities and housing associations. 

Fast, unconditional, sales offer institutions guarantees

The first benefit, and something that hasn’t changed about the auction process, is that contracts are unconditional and timescales are quick and definitive: once the ‘gavel’ falls exchange takes place with a 10% non-refundable deposit, with many sales going on to complete within four weeks. Institutions will receive funds quickly and there’s no possibility for a buyer to renegotiate the price, as can be the case during a more traditional sale, particularly in a challenging property market. Secondly, an auction gives full exposure to assets, with sales taking place publicly at levels set by the market – with competitive tension often leading to strong pricing – delivering maximum value and transparency.

The option of a two-stage bidding process

However, while an auction brings many benefits, in some cases a university may want to retain an element of control over who they sell to; after all they play a crucial role in their communities and often want to forge a good relationship with future owners. Still bringing the benefits above, a two-stage auction process has therefore evolved to introduce additional controls: a private treaty initial stage with an auction backstop. Effectively, this is a slightly more strategic route: private treaty bids are invited at the first stage (underpinned by an auction contract bringing all its advantages) but with the prospect of going to a full auction if no parties reach the university’s requirements; the latter possibility can sharpen minds and bring out the strongest offers. It also enables the university to set disposal timeframes, with completion potentially timed to their academic term or financial year end. 

The success of this approach is illustrated by two university assets sold last year for £8.3 million and £13.5 million respectively, underlining how auction processes can successfully accommodate larger lot sizes while maximising competition and value.

With the broader auction market expanding and growing more sophisticated, we anticipate more universities will follow in their footsteps as they implement their divestment strategies.  

Further information

Contact Olivia Haslam or Nicholson Boyd

Auctioning a Property