Foxtons’ naked ambition - it wants to buy more lettings books

Foxtons has made no bones about how it sees future growth - it wants to acquire lettings books from other agencies.

“There is strong strategic logic to acquiring lettings books at attractive valuations which, when combined with our existing business, provide attractive returns” says a note from the company to its shareholders.

It continues: “Lettings is a particular focus for the business because it provides greater protection against the sales cycle and our cash position allowed us to invest in high quality lettings businesses which we have successfully integrated into our operationally geared business model. In addition to the lettings acquisitions we completed in 2020, we recently announced the acquisition of [rival London agency] Douglas & Gordon, a well-respected brand with a strong lettings business.”

Over the course of the past 15 months Foxtons has acquired four lettings books - three in 2020 for a total of £4.6m and adding a combined 1,600 tenancies, and then Douglas & Gordon earlier this month for £14.25m adding a further 2,900 tenancies.

Lettings revenue for Foxtons in 2020 actually fell 13 per cent - partly because of the Coronavirus lockdowns and impact, and partly because of the fees ban.

The company says: “Covid-19 put pressure on rents as demand from new tenants faded and new rental properties came on to the market causing excess supply, particularly in Central London following the temporary closure of a number of short-let booking platforms. 

“Average rents fell by about six per cent over the course of the year, with a 12 per cent decrease in the final quarter.

“Covid-19 placed significant restrictions on our ability to let new properties during the spring lockdown and commission from new transactional activity was heavily constrained during that period. However, a significant proportion of our lettings revenues in terms of renewal and property management fees are recurring in nature, providing a level of underpin to our commissions. These non-transactional elements of our business held up well and helped partially alleviate the impact of Covid-19 on overall lettings revenue.”

The company, in a statement that was optimistic in tone, states: “Our premium service proposition in lettings and the strength of our IT systems, which enable landlords and tenants to transact online, helped us win significant market share during the spring and summer.  

“We have seen good growth in lettings applicants and listings, and revenues have now returned to pre-lockdown levels.  We ended the year with significantly more listings than at the same point in 2019 and with a record number of live tenancies.”