TIDMMCS
RNS Number : 0419A
McCarthy & Stone PLC
21 December 2017
21 December 2017
McCarthy & Stone plc
Response to media commentary on ground rents
McCarthy & Stone (the Group) notes the media commentary this
morning regarding the proposal by the Department for Communities
and Local Government (DCLG) to reduce ground rents on new long
leases to zero. McCarthy & Stone has made a strong case to DCLG
for the exemption of retirement housing providers from such action
and will be requesting further details of DCLG's acknowledgement
that certain exemptions are being explored.
McCarthy & Stone does not build leasehold houses and does
not employ the types of escalating ground rents which have been the
cause of DCLG's review. Its retirement apartment model incorporates
an annual leasehold ground rent charge to ensure that the long term
maintenance of the development is effectively managed on behalf of
elderly homeowners who have less desire to be directly involved in
this activity. These ground rents have been long-established on
fair and consistent terms, with rental growth linked to the higher
of 2% or RPI.
McCarthy & Stone has fully disclosed its practice of
aggregating and selling forward its freehold reversions. This is a
profit stream which is recognised in the price at which the Group
bids for land; funds the communal areas and facilities so critical
in a retirement development; and enables the pricing of its
apartments to remain affordable. In FY18, the profit to be
generated by the Group's freehold reversion sales is expected to be
c.GBP33m, of which GBP13.4m was already held on the balance sheet
at 31 August 2017 to be recognised in line with FY18 unit sales.
This profit stream is expected to increase in line with volumes in
future years.
This potential change to the structure of ground rents will be
immediately reflected in the cost of land secured for development
by McCarthy & Stone with a margin-neutral impact for
shareholders in the medium term. However, in the short term, if the
Group is unable to secure exemption from the measures announced, it
will seek to employ a combination of strategies in order to
mitigate the impact of such a disruption on the profitability of
its current land bank, including land price renegotiation, S.106
contribution renegotiation, pricing reviews, and management fee
reviews.
McCarthy & Stone understands that DCLG are considering
limited exemptions from their proposed changes to leasehold
practices and will continue to make its strong case for
exemption.
Clive Fenton, Chief Executive of McCarthy & Stone said:
"The proposal to set all ground rents to zero will result in a
disruption of housing supply and contradicts the Government's
stated objective of seeking new sources of housing. We understand
and support the need for action to address leasehold housing and
aggressive escalation clauses for ground rents, however this
blanket approach will result in reduced housing delivery as well as
choice for ordinary people.
"We are disappointed that our representations on this topic and
those submitted by others within our sector have not been directly
reflected in the Government's response. However, this is the first
in a number of steps and we will continue to work positively with
DCLG to ensure they recognise the importance of retirement housing
in the face of an ageing population."
- ENDS -
For more information, please contact:
McCarthy & Stone, 01202 292480
Paul Teverson, Director of Communications
Powerscourt, 020 7250 1446 /
mccarthy-stone@powerscourt-group.com
Nick Dibden / Mazar Masud / Victoria Heslop
Notes to Editors
About McCarthy & Stone
McCarthy & Stone is the UK's leading retirement housebuilder
with a c.70% share of the owner-occupied market. The Group has sold
over 54,000 properties across c.1,200 retirement developments since
1977 and is renowned for its focus on the needs of those in later
life. It re-joined the Main Market of the London Stock Exchange in
November 2015 and re-entered the FTSE 250 following its quarterly
review on 21 March 2016.
There is a growing need for retirement housing. There are
currently 12 million people aged 65 or over, rising to 18.2m by
2037, representing a 52% increase. For those aged 85 or over, the
increase will be larger, from 1.6m to 3.7m, representing a 131%
increase. According to research by Demos, one in four over 60s are
interested in retirement living, yet only c.157,000 units of
specialist retirement housing for homeowners have been built.
The Group has two established product ranges - Retirement Living
and Retirement Living Plus (formerly known as Assisted Living) -
which provide mainly one and two bedroom apartments across the
country with varying levels of support and care for older
homeowners. In late 2014, McCarthy & Stone launched its
Lifestyle Living (formerly Ortus Homes) product, which is
exclusively for the over 55s and those in the earlier stages of
retirement who are seeking to downsize for their leisure years.
The first Lifestyle Living development at Scarlet Oak in
Solihull won the Best Retirement Scheme at the annual Housebuilder
Awards in November 2015. At the same awards in November 2016, we
were pleased to again receive Best Retirement Scheme for Ramsay
Grange and Lyle Court, our combined Retirement Living Plus and
Lifestyle Living development in Barnton, Edinburgh, as well as Best
Customer Satisfaction Initiative for our approach to ensuring that
we deliver a Five Star service for our homeowners.
The Group was also pleased to win 15 awards at the 2017 NHBC
Pride in the Job awards and seven Seals of Excellence, marking a
50% increase in awards from 2016. The scheme is dedicated to
recognising construction site managers who achieve the highest
standards in housebuilding and has been instrumental in driving up
standards in the sector for 37 years.
McCarthy & Stone's commitment to quality and customer
service continues to be recognised by homeowners. In March 2017,
the Group received the full Five Star rating for customer
satisfaction from the Home Builders Federation for the twelfth
consecutive year - making it the only UK housebuilder, of any size
or type, to achieve this accolade.
All developments built since 2010 are managed by the company's
in-house management services team, providing peace of mind that it
will look after customers and their properties over the long term.
This is a key part of how McCarthy & Stone seeks to enrich its
customers' lives. McCarthy & Stone Management Services (MSMS)
provides management services in Retirement Living and Lifestyle
Living developments. YourLife Management Services (YLMS), which is
owned 50/50 by MSMS and Somerset Care Group, a leading
not-for-profit care provider, provides management services,
domestic assistance, catering, personal care and additional support
in Retirement Living Plus developments, and each development is run
by an Estate Manager and a team of staff delivering services 24
hours a day, 365 days a year.
www.mccarthyandstonegroup.co.uk
Forward-looking statements
Some of the information in this document may contain
forward-looking statements regarding McCarthy & Stone plc and
its subsidiaries (the Group). You may be able to identify
forward-looking statements by terms such as "expect", "believe",
"anticipate", "estimate", "intend", "will", "could", "may" or
"might", the negative of such terms or other similar expressions or
by discussions of strategy, plans, objectives, goals, future events
or intentions. These forward-looking statements include all matters
that are not historical facts. McCarthy & Stone plc (the
Company) wishes to caution you that actual events or results may
differ materially from those anticipated. The forward-looking
statements reflect knowledge and information available at the date
of preparation of this document and the Company undertakes no
obligation to update these statements to reflect events and
circumstances occurring after the date hereof or to reflect the
occurrence of unanticipated events. Many factors could cause the
actual results to differ materially from those contained in
forward-looking statements of the Group, including among others,
general economic conditions, the competitive environment as well as
many other risks specifically related to the Group and its
operations. Past performance of the Group cannot be relied on as a
guide to future performance. Nothing in this document should be
construed as a profit forecast.
(1) Based on 4,778 registrations of cross-tenure properties
specifically designed for the elderly with the NHBC during 18 month
period ended 30 June 2017, of which 3,684 were registered by
McCarthy & Stone
2 ONS (2017)
3 ONS (2017, 2014 based figures)
4 EAC (2017)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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