Abbey National sells estate agents for 8m pounds: Two entrepreneurs buy Cornerstone chain after bank's losses since 1987 mount to at least pounds 243m

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The Independent Online
ABBEY National has sold its Cornerstone estate agency chain for pounds 8m to two entrepreneurs backed by Provident Life, after losing at least pounds 243m on the business since it was launched in 1987.

Charles Toner, managing director of new business at Abbey National, admitted that building the 347-strong chain had been a mistake, but said the bank was pleased it had been sold as a going concern.

Cornerstone has been sold to Tony Snarey and Bill McClintock, former joint chief executives of Royal Life's own estate agency chain, who borrowed over half the purchase price from Provident Life at commercial rates.

Abbey National said it would be making a write-down of about pounds 30m. Abbey wrote off pounds 138m against the chain when it announced its last annual results in March, at the same time it decided to sell the business. Cornerstone's losses since 1989 have averaged roughly pounds 20m a year on top of that.

Mr Snarey said there would be no job losses or branch closures as Abbey had 'already done most of the pruning'. Cornerstone traded profitably in June and July, he said, which bode well for its 1,800 employees.

Provident will provide support services to Cornerstone and sell life and pensions products through it. The deal will increase Provident's estate agency outlets from 744 to 1,100 and make it Britain's biggest tied network.

Both the buyers and sellers of Cornerstone agreed that Abbey's original vision of a corporate approach to estate agency was flawed, and that selling houses required maximum independence at branch level.

Mr Toner said: 'The corporate approach to estate agency doesn't work for us.'

He said that financial deregulation in the mid-1980s, which allowed building societies to own estate agencies, convinced many in the industry that house buyers would also buy their mortgages and endowment policies from estate agents. 'In fact it hasn't worked out that way,' Mr Toner said. 'We haven't sold more than 5 per cent of our mortgages through estate agents. Most corporate estate agency chains say it hasn't been a success yet.'

The housing slump was also to blame, Mr Toner said. At the market's peak in 1988 there were 2 million property transactions in the UK. This figure halved by 1992, and analysts currently estimate 1.15 million in 1993. In 1991 the top 10 estate agency chains, which make up a third of Britain's 12,500 branches, lost a combined pounds 118m.

Gareth Davies, marketing manager at Provident Life, said that even if the housing market had not been badly hit the corporate chains would eventually have failed anyway. He pointed to the growing practice of small-scale estate agents buying offices at bargain prices from the big chains. In many cases the locals were buying back branches they sold originally for 1980s prices.

Mr Davies said Provident had tied up with three independents who had previously been part of big chains. Reeds Rains had been Prudential Property Services' northern region until 1991 when the Pru dumped its entire chain after incurring total losses of pounds 400m. Arun Estates had been the South-east region of PPS, and Maitland Selwyn used to be part of Birmingham Midshires.

Ashley Rolfe, whose firm Rolfe East runs half a dozen estate agencies in west London, said that his own business had bought branches from chains at knockdown prices: Rolfe East's Hanwell office was originally sold by an independent to the Pru for about pounds 200,000, and subsequently sold by the Pru to Mr Rolfe for just pounds 1.

'Running an estate agency is a local business,' Mr Rolfe said. 'You have to know where the schools and shops are.'

Mr Snarey is confident that Cornerstone, which will retain its name, will avoid the costs of bureaucracy by being more entrepreneurial. 'We mustn't leave the customer in the office just because we have to communicate some information to head office,' he said.

Bristol & West Building Society, TSB and Yorkshire Building Society are all understood to have put their estate agency chains up for sale. Royal Life, General Accident and Halifax have said they intend to persevere. Analysts expect the shake-up in the industry to continue.

View from City Road, page 22

----------------------------------------------------------------------- HOW MUCH THE BIG CHAINS ARE LOSING ----------------------------------------------------------------------- No of offices Change on Profit/loss 1992 end 1992 end 1991 pounds m(1991) Halifax Property Services 550 -30 -14.8 (-6.6) Royal Life Estates 517 -50 -33 (-20) Hambro Countrywide 473 -7 -13 (-8.3) Black Horse Agencies(1) 393 -4 -9 (-21.2) GA Property Services 390 -50 -18.6 (-17.3) Cornerstone (Abbey National)(2) 355 -39 -20 (-19) Nationwide(3) 303 -69 -15.4 (-11.8) Legal & General 264 -26 -6.6 (-6.2) Woolwich Property Services 257 -55 -11 (-22) Connell (Scottish Widows)(4) 172 -3 -1 (-6.9) ----------------------------------------------------------------------- Notes: 1.Adjusted figure as provided in 1991 accounts. 2.Excluded balance-sheet write-off due to impending sale. 3.Excluded pounds 30m write-off due to branch closures. 4.1991 loss figure inflated by purchase of former Prudential offices Source: Money Week -----------------------------------------------------------------

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