Business Analysis: Is it time to sell up?

When the director of a public company sells a large block of shares in his business, the stock market usually takes fright. As any City trader will tell you, no one knows more about the health of the business than the men and women who sit in the boardroom. So it is little wonder the property world has been thrown into some sort of turmoil over the news that Jon Hunt, multimillionaire founder and owner of the controversial Foxtons estate agency chain, is selling out for an estimated £390m.

If Hunt is getting out, then is the over-cooked housing market on the brink of a collapse, people are asking? And with good reason.

After apparently flirting with a stock-market listing, Foxtons is going down the now familiar route of a sale to a private equity house, BC Partners.

Foxtons, like its much larger rival Countrywide, which has just been snapped up by the private equity group Apollo, generates a lot of cash, although expansion into the US has been expensive. So the offer from BC would have been pitched at the top end of the price range, and attractive to Hunt - especially if he felt the bid had come at the top of the UK property market.

But experts have been predicting a crash for the last couple of years - and although house price inflation has been slowing, there are still no indications of an imminent collapse.

If Foxtons had set out to become public enemy number one in the bitchy, ethically challenged bearpit of the estate agency world, then it could scarcely have dreamt it would be so successful in achieving its aims. Identified with expensive café-style high street branches dominated by giant plasma televisions and eager young salespersons beetling around in green and yellow branded Mini Coopers, Foxtons seems to terrify the opposition.

The beginnings were modest enough. Hunt, now 54, opened his first branch in west London in 1981, and quickly adopted a more aggressive approach than his competitors. Instead of under-cutting commissions he began charging more - typically 3 per cent on sales - and promising sellers he could get a better price for their property than his rivals. Hunt is reported to have said he would "go to war" for a client. He denied saying it, but wished he had, adding: "I will do anything to get the best price. I am not shy about it at all."

Foxtons has been hauled before the court of public opinion for various alleged breaches of acceptable behaviour, not all proven , but such is the firm's reputation that everyone seems inclined to believe a rumour if its name is involved.

But then, there was a job to be done, the housing market was still on fire, and who better to help fan the flames than Foxtons?

So as property prices carried on climbing, Foxtons almost certainly chalked up another record year - the latest available figures are for 2005, when it posted profits of £12.6m, up 50 per cent. Hunt paid himself £3.5m.

So why the decision to cash in his chips? Hunt is already enormously wealthy, ranked 182 in the Sunday Times Rich List. Foxtons has grown to 40 UK branches, 19 in London and one in Guildford, and has begun to expand in the United States.

The US operation is being stripped out of the sale, and will continue to be run by Hunt.

Foxtons' profits have largely been generated out of the London house price boom, fuelled by City bonuses, foreign buyers, and an acute shortage of properties for sale. Last week the chartered surveyor Knight Frank said London prices rose by over 33 per cent in the 12 months to the end of April - the fastest rate of growth since mid-1979. A house worth £100,000 in 1976 would now be worth over £4.1m.

Data from Knight Frank reveals that the supply of available property fell by more than 50 per cent in the first quarter of the year, while the number of prospective new purchasers increased by 17 per cent.

But many experts say that the relentless rise in values cannot go on. Interest rates have been nudged up, and could soon rise again to 5.75 per cent, while the impact on the market of Home Information Packs remains uncertain. In one brutally frank assessment, the head of Countrywide, the country's leading estate agency, admitted that its fortunes were completely "at the whim of the people who run our economic affairs in the Bank of England".

Not that Foxtons is demonstrating any lack of faith in the health of the market. On the firm's website, Ian Brownridge, sales manager for the Sloane Square branch, says he remains "incredibly busy" as demand for properties in Chelsea, Belgravia and Knightsbridge continues to outstrip supply.

Foxtons has even come up with another jolly wheeze, called Foxtons Fresh, where "new to market properties are launched to a select group of serious buyers at a special preview". One apartment which came on the market at £725,000, was viewed by 18 potential buyers, and is expected to change hands for up to 20 per cent over the asking price.

What's more, buyers are told quite bluntly - in this sort of market don't haggle, be prepared to offer the asking price, you are buying in a strengthening market.

Phew! Which, as Jon Hunt prepares to hand over the keys to that fleet of Minis to the private equity group BC Partners, begs the question - why now, Jon?

The Foxtons story

* Jon Hunt's first property deal, aged 19, was to borrow £100 to buy a flat in Woking for £4,500. He sold it two years later for £7,750.

* In 1981 Hunt opened his first Foxtons branch, on the site of an Italian restaurant in Notting Hill. He admits he had no idea the area would become so expensive.

* In March 1999 Foxtons opened a real estate agency in New Jersey, US, and then branches in New York and Connecticut.

* In 2001 Foxtons launched its fleet of branded Mini Coopers. It is not known if Hunt drives one - as he owns half a dozen Ferraris, it is unlikely.

* Foxtons trades from 40 UK branches: 22 in London, the rest spread around the Home Counties.

* In 2005 pre-tax profits rose 50 per cent to £12.6m. Hunt was paid £3.5m.

* Hunt makes 182 in the Sunday Times Rich List, with a fortune of £347m.

* Hunt is said to have paid £14m for a house in Kensington Palace Gardens.

He also has a grade I-listed 18th-country house, Heveningham Hall in Suffolk, which has 25 bedrooms and a vaulted hall which has been described as the most beautiful room in England.

'Compared with others we are Daz white'

Foxtons' forceful approach to selling houses has made Jon Hunt rich, but it has also made him an easy target for his critics. The company has found itself in trouble for flyboarding - erecting boards outside houses irrespective of whether it had instructions to sell.

It compounded the practice by pulling down rivals' "For sale" boards and replacing them with its own. It was fined for this in 2003. There were claims that a rival hired private detectives to catch Foxtons' staff in the act. It is alleged that the detectives involved later resigned after intimidation by Foxtons, which Hunt has strenuously denied.

The most serious setback came in the BBC documentary Whistleblower, which put undercover reporters in five Foxtons agencies and filmed what happened. The results made compelling viewing, exposing Foxtons' irregular selling techniques. The programme focused on the use of faked documents to support inflated prices and false offers put forward to sellers.

But perhaps the most serious in view of possible regulatory breaches came with the allegation that its mortgage broking arm, Alexander Hall, would pass details of potential buyers' financial circumstances to Foxtons agents so they would know how far they could push the buyer towards a sale. Although Foxtons was the prime target, two competitors were also named.

If Foxtons had been a public company, the impact on its share price could have been devastating.

Hunt dismissed the allegations concerning Alexander Hall as "total nonsense", but conceded breaches in the way members of his company had behaved. He said that three members of staff who featured in the programme had left the company while a fourth had been retrained.

He said Foxtons staff receive 60 hours of classroom training before they are allowed to pick up a phone and deal with a client. After four months they receive another 10 hours' training.

"Compare us to anyone in the industry and we are Daz white," Hunt said.

There have been no reported complaints concerning the company's US operations.