Watkin Jones chief executive Alex Pease is upbeat that a projected fall in interest rates this year will drive forward funding activity and help turn the developer’s fortunes around.
The listed build-to-rent and student accommodation developer has cancelled its dividend after plunging to a £42.5m loss in the year ending 30 September.
Its share price fell by nearly 8% to 48.6p during afternoon trading.
Pease told EG that the developer has been dealing with the impact of a “hostile economic climate”, but that both the economy and Watkin Jones are in recovery mode.
The developer is starting the year with £400m of sites – in Bristol, London, Guildford and Belfast – on the market for forward funding.
Pease said: “We are seeing early signs that the market is becoming more liquid. We know the demand for residential is there, and supply has been constrained for a few years due to economic viability but also due to the joys of the UK planning system.
“There were approximately 12,000 PBSA beds delivered in 2023 which is half the normal run rate. [It illustrates] that the supply is not coming through and it’s not keeping up with demand. We know that is fuelling rental growth and good occupation within schemes.”
Pease expects interest rates to fall later in the year, which will result in “stability in the sector”, with pent-up demand to buy stock, which is in limited supply.
He added that all of those factors lead him to a strong conviction that the forward-funding market is the avenue that the developer needs to pursue.
Watkin Jones will also seek more partnerships this year. Previous partnership deals include one with L&G, which is slated to deliver 715 BTR homes in Central Quay, Cardiff.
Pease said: “We are seeing more land opportunities for consented land and we are looking to partner with capital to access those sites, so it does not touch our balance sheet but generates revenue and margins quicker.”
In addition, the developer is also looking to launch its “Re-Fresh” strategy, which involves redeveloping, refurbishing and repurposing existing BTR, PRS and PBSA assets.
Pease said: “It is a timely strategy and is built, in its first instance, by building safety and ESG requirements for the larger scale institutional capital – the firms owning these sites.”
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