John Lewis wants to build 400 apartments above Waitrose in West Ealing. Photo: SEKKI SMITH
John Lewis faces 'extreme challenges' in making paper profits from his flagship housing scheme, her consultants warn.
The scheme to build more than 400 apartments above Waitrose in West Ealing risks costing significantly more expensive than it's worth on paper.< /p>
The project threatens to generate £57 million in negative profits, planning documents show.
An official preliminary analysis commissioned by the John Lewis Partnership raises new questions about the retailer's property expansion plans chaired by Dame Sharon White.
The Quod consultants who conducted the analysis warned that «the financial viability of the scheme is extremely difficult.» He highlighted the impact of rising costs due to new fire safety regulations that came into effect after the Grenfell Tower tragedy, as well as skyrocketing building prices and higher interest rates. The West Ealing project is one of the first major projects to be affected by all three headwinds, he said.
Current estimates put the project at around £240 million, but based on that , its cost will be only 183 million pounds. on today's values.
Clive Black, an analyst at Shore Capital, said: «In terms of net asset value, this is the type of development that is unlikely to go through the listing company's valuation process.»
Construction is part of Dame Sharon White's efforts to restore profits
The West Ealing development is one of three housing schemes John is working on Lewis as part of Chairman Dame Sharon White's efforts to diversify the company through retail.
The John Lewis Partnership, which also owns Waitrose, aims to generate two-fifths of its profits from non-retail sources by 2030. business over the next few years to rebuild profits.
West Ealing's projected development bill includes the cost of building 428 apartments, landscaping and refurbishing the Waitrose store at the development site.
While the project risks costing more than it could sell, executives have previously said that John Lewis will continue to own the building after completion and rent out apartments to local residents.
Katherine Russell, project lead for build-to-lease at John Lewis, said: “We're not doing this to flip the project and make more profit for developers. It will be a long-term investment.”
Quod's estimates, however, highlight the high risks involved in John Lewis's ambitious expansion into a market in which the company has little experience.
Mr. Black said that John Lewis is likely to view the project more positively, given that the newly refurbished Waitrose store is expected to attract more customers and therefore be more profitable.
Potential increase in income from the store is not taken into account. taken into account in Quod's Financial Viability Analysis, which was prepared as part of an assessment of how affordable housing is viable within the development.
The Quod report assumes that 20% of West Ealing properties will be classified as affordable level, which, according to John Lewis, will be minimal. The company aims to have 35% of apartments (about 150) affordable, although the company said this goal is dependent on grant funding.
A spokesman for the John Lewis Partnership said: “We want to make a long-term, long-term commitment to our communities through our stores and building much-needed new homes.
“We can look to the longer term and want to create as many affordable homes as possible for key workers such as nurses, teachers, police and healthcare providers” .
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