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G15 landlord sees number of unsold homes hit 855 amid COVID-related delays
L&Q has reported it had 855 unsold homes at the end of quarter three in 2021 due to construction delays caused by the pandemic and strong competition from Help to Buy for shared ownership sales.
The G15 landlord estimated that the unsold stock is worth £148m when using a projected revenue for shared ownership homes assuming a first tranche sale of 25%.
Nearly four-fifths of those 855 homes have been held as stock for more than one month.
The association told Inside Housing that it had nothing to do with sales demand, which it insisted “remains very strong”, but many of its projects were delayed because of the coronavirus pandemic.
A spokesperson for L&Q explained: “After experiencing delays to many of our projects as a result of coronavirus, we’ve recently completed a significant number of homes within a short period of time. This has led to an increase in the level of unsold stock held by L&Q.”
A trading update issued this week covering the nine-month period up to 31 December 2021 showed a turnover of £828m, an increase of £139m on the same quarter in 2020, and an improved operating surplus of £276m, up from £270m.
Its earnings before interest, taxes, depreciation and amortization (EBIDTA) was £287m, around a 5% decrease on the £301m in the previous year.
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L&Q is one of the largest associations in the country, and the number of homes it manages increased slightly to 118,519 after it completed 2,852 new residential properties over the reporting period.
Of those, social housing completions more than doubled to 2,057 and market tenure completions remained stable at 795 homes.
In its development pipeline, L&Q has approved an additional 634 residential properties during the financial year, bringing the number of homes in its approval pipeline to 31,274.
Nearly 70% of those homes are currently on site, with 59% earmarked for social housing and 41% for market tenures.
L&Q sold 1,500 homes to resident-led Phoenix Community Housing for an undisclosed fee in December through a stock transfer and pledged to use the funds to build more homes.
The number of strategic land plots the landlord holds has increased by more than 2,000 in quarter three of 2021 to 74,864.
The association projected EBITDA to be in the range of £330m to £350m. It has also assigned £30m to fire safety works for the year end 31 March 2022.
L&Q’s surplus after tax is expected to be in the range of £220m to £240m for the full financial year, up from £208m for 2020/21. Net debt is expected to be in the range of £5.6bn to £5.7bn.
Waqar Ahmed, group director of finance at L&Q, said the unaudited quarter three trading results were in line with expectations.
He added: “Financial performance on non-sales activities continues to reflect our stated objectives to increase investment in residents’ homes and services as we deliver against our priorities of safety and quality and gross and net sales margins continue to show improvement.”
In December 2021, L&Q pledged to cover the remediation costs for all blocks built by its in-house construction arm regardless of height, with 11 blocks identified so far as needing work.
In January, the association completed the issuance of a £300m bond that is directly linked to the landlord achieving a number of sustainability-linked targets.
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