Some name it the Waitrose Effect. Within the UK, the presence of the upmarket grocery chain plumps up costs of close by properties. Maybe Waitrose proprietor John Lewis Partnership hopes the identical halo will hover over 1,000 rental properties it plans to construct in a £500mn undertaking with fund supervisor Abrdn.
John Lewis hopes to construct 10,000 properties over the following decade. The purpose is to assist scale back a scarcity of inexpensive housing within the UK. That chimes with the communitarian spirit of the employee-owned enterprise. It additionally displays John Lewis’s want to seek out new revenue sources whereas repurposing redundant property.
Insurer Authorized & Basic already has a £264mn portfolio of inexpensive housing. Different asset managers reminiscent of Blackstone have been charging into rental housing too, although with much less of an specific social mission.
The timing is nice. Rents have soared, up practically 12 per cent 12 months on 12 months in August. Purchase-to-let landlords, squeezed by increased prices, are quitting the market. Within the 12 months to August, 76,000 buy-to-let mortgages had been redeemed, says Savills. Rental listings on on-line website Rightmove dropped 29 per cent.
For Abrdn, which manages £52bn of actual property in its portfolios, this three way partnership is sensible. It already has about 30,000 rental properties on its books in Europe. These are primarily in Germany, with comparatively few in Britain. UK property solely makes up about 3 per cent of Abrdn’s sum-of-the-parts group valuation, says Numis.
Abrdn is wrestling with the issue that it’s a medium-sized fund supervisor in a world of giants. It believes institutional purchasers will clamour for reliable single-digit yields on supply from leases. Presumably, these will climb over time. Affiliation with the trusted John Lewis model ought to assist.
John Lewis wants some assist of its personal. Poor footfall at Waitrose introduced a first-half pre-tax lack of £99mn, a reversal from a revenue the 12 months earlier than.
The companions discuss doing good issues. They’re additionally searching for a medium-term enterprise alternative. John Lewis ought to keep in mind that renting out UK dwellings is a completely completely different enterprise to promoting saucepans.
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