Triple losses incurred at property startup belonging to retail corporation John Lewis
John Lewis' Build-to-Rent Arm Faces Financial Challenges Amidst Expansion
John Lewis' build-to-rent (BTR) property arm, a relatively new venture that began operations in November 2023, has reported rising income but a significantly increased pre-tax loss in its latest financial year accounts.
The latest accounts show a pre-tax loss that grew by 75% compared to the previous year, alongside an increase in revenue. Moreover, net liabilities have increased, reflecting financial challenges as the company expands its BTR operations.
Despite these financial pressures, the company's first BTR scheme has been operational since late 2023, marking John Lewis' entry into this sector. While specific new project details or the scale of expansion have not been publicly disclosed, the ongoing losses alongside income growth suggest that the business is investing in developing its initial properties and potentially preparing for further growth.
BTR (Operating) Limited, the company handling John Lewis' build-to-rent operations, posted a pre-tax loss of £406,000 for the financial year ending 25 January, 2025. However, the company's operating income increased significantly from £32,000 to £260,000 for the same period. The accounts also show planned investment to scale the business.
The majority of the company's expenses are related to the recharge of partner costs for a team set up to support the operation of more sites in the future. The income comes primarily from management fees for its sites.
John Lewis has plans to transform one of its disused warehouses in Reading into an £80m residential complex with over 200 houses. The partnership's pre-tax profit increased from £42m to £126m over the 52 weeks to 25 January, and overall sales rose three percent year on year, up from £12.4bn to £12.8bn. The partnership's operating profit margin improved 0.9 percentage points to two percent.
In addition, John Lewis received planning permission in May to redevelop a Waitrose in London's West Ealing after a successful appeal. The redevelopment is part of John Lewis' long-term strategy to diversify its income streams via build-to-rent. The partnership will create 428 build-to-rent homes, including 83 affordable rented properties, as well as an updated Waitrose store and car park.
The spokesman for BTR (Operating) Limited stated that the home rental site management business is delivering strong results in line with expectations. John Lewis also has proposals for 350 homes in Bromley.
However, it's important to note that earlier this year, City AM reported that the John Lewis Partnership had scrapped its staff bonus for the third year in a row despite a near-tripling in profit.
In conclusion, John Lewis is actively pursuing growth in the build-to-rent sector but is still in a loss-making startup phase, investing to build its property portfolio. The company's expansion plans are at an early stage, with no detailed publicly disclosed pipeline beyond initial operations noted.
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