Hackney Council is scrambling to appoint a new agent to find buyers for up to £110m of unsold homes in a Hoxton development after an “unexpected” business decision by its real estate firm.
Incumbent agent Cushman & Wakefield (C&W) was appointed to sell the 175 homes in the council’s Makers development on Nile Street in 2016, but a change in strategy to move away from residential sales by the firm has left the Town Hall searching for a new contractor “in the shortest possible time”.
Council figures reveal that 96 homes of the Nile Street project remain unreserved, with Town Hall officers stressing that it is “imperative” that sales of the remaining flats proceed so that the Town Hall can recover its capital investment in the development and reduce void costs on vacant units.
The Town Hall acted as its own developer in bringing forward developments on Nile Street and Tiger Way, with money from the sale of the private flats earmarked for on-site facilities for Nightingale Primary school and New Regent’s College, a £12m contribution to affordable housing elsewhere in the borough, and on “other council priorities”.
Cllr Rebecca Rennison said: “A key success factor in these developments for the Council is to maximise its capital receipts from the sale of the private residential element of the developments (to help meet the cost of building the new schools) and to utilise ‘help to buy’ schemes for local residents to buy property. To ensure this success, the services of professional property agents are needed to achieve the highest sales values.
“In June of 2020, C&W’s board of directors made a corporate business decision that they will no longer operate in the UK/Global marketplace for residential sales, giving the council notice to terminate their contract.
“The council needs to urgently re-procure the services of a sales agent for the remaining units left at the Makers development to ensure the sales revenue is returned to the council as soon as possible.”
Council planners gave the go-ahead four years ago for 264 new homes across both the 29-storey tower block on Nile Street, and its 14-storey partner on Tiger Way, now named the Makers and Otto developments respectively, as well as the two new schools.
While all flats were sold in the Tiger Way development within a year of its completion, over half of Nile Street’s remain unshifted, according to a council report, with officers warning that the remaining high value properties will need to be sold by the new agent in “a difficult market place”, and at the base prices necessary to accomplish the funding and investment in the school buildings.
The termination of the contract with C&W, who were appointed in 2016 as offering the council best value for money, now sees Town Hall officers recommending a new agent, unnamed for reasons of commercial confidentiality, in order to maintain continuity.
When the news was first reported of C&W’s decision back in May, the company said that its move away from the residential market was not as a result of any one specific event, though reports at the time cited the impact of coronavirus on the housing market, and its potential to hit sales volumes and house prices.
It is understood the Town Hall looked at selling the homes itself through its own in-house branch, Hackney Sales, which declined the opportunity to do so as, according to the council’s report, “they do not currently have the experience, resources or database of clients to sell the type of residential units at the Makers”.
The new agent’s fees are said to be “marginally higher” than C&W’s, according to council officers, reflecting the change in the market since 2016, though these fees remain in-budget for the scheme.
While C&W initially gave notice to terminate their services from the end of September, the report reveals that the council was able to negotiate them into extending their position until the end of December, in order that the council is not left with a gap in provision.
The new agent will then hold the contract until 2023 or until the homes are sold.
Hackney Society chair Nick Perry criticised the Tiger Way and Nile Street developments four years ago, accusing the council of “epic hubris” in acting as developer, applicant and decision-maker without making public the viability information on why the scale of the developments needed to be so large with no on-site affordable housing.
A council statement on Nile Street and Tiger Way reads: “To fund [the two new facilities for the schools] the council is also building residential accommodation above the schools, for private sale. This will ensure that the education facilities will be built to the same high quality as our award-winning Building Schools for the Future projects, and will also fund the expansion of Nightingale Primary by one form of entry.
“The council is acting as the developer on both these schemes, ensuring that all of the income generated by selling housing can be reinvested in the schools and other council priorities.
“We also retain the freehold on both sites, and plan to make a £12m contribution towards affordable housing elsewhere in the borough from the proceeds of the sale of private homes. Any additional surplus will be reinvested by the council in other services.”