BC Partners admits a costly acquisition

Bloomberg

BC Partners Ltd. said its 390 million-pound ($593 million) takeover of Foxtons Ltd., the British chain of real estate agents, was a "mistake with hindsight" after the London house price bubble burst.

Sales of homes in Britain’s capital city have slowed as much as 70 percent since the buyout firm acquired London-based Foxtons in May 2007, BC managing partner Andrew Newington said at a briefing in London Friday. The buyout firm had anticipated a 30 percent slowdown when it planned the takeover. "We made the wrong call," Newington said. "The market decline was way too steep and we didn’t anticipate it. We were wrong."

House prices fell 15 percent in London last year, according to Nationwide Building Society, the U.K.’s largest customer- owned mortgage lender. The capital was one of only four regions in the country where the rate of price falls accelerated in the fourth quarter.

Foxtons has breached its loan covenants and missed interest-cover and debt-to-earnings targets, he added. BC Partners is in talks with the company’s lenders, Mizuho and Bank of America Corp., and would invest more cash into the real estate chain "in the right circumstances," Newington said.

BC Partners used about 260 million pounds of loans to finance the acquisition, buying the company from Jon Hunt, who set up Foxtons in 1981.

Still profitable
The estate agent is still profitable, as growth in its letting business has offset a slowdown in property sales, the company said. Lettings now account for about half of Foxton’s revenue, compared with 20 percent.

The company, which is known for its fleet of green Mini Coopers used by employees to show houses and apartments, has about 40 branches in London and Surrey.

BC Partners said less than 1 percent of its 5.8 billion- euro leveraged buyout fund is invested in Foxtons.

"For us, it’s water under the bridge," Newington said. "If we’re lucky enough to see a recovery in the London housing market, this business will come roaring back."