TIDMMCS
RNS Number : 7395D
McCarthy & Stone PLC
28 June 2019
27 June 2019
Statement on MHCLG's response to its October 2018 consultation
on leasehold reform
The Ministry of Housing, Communities and Local Government
(MHCLG) has today published its response to its October 2018
consultation on ground rents.
McCarthy & Stone (the 'Group'), the UK's leading developer
and manager of retirement communities, is pleased to note that
MHCLG has confirmed that the retirement community sector will be
given an exemption and permitted to charge an economic ground rent
after they are reduced to zero elsewhere. The Ministry continues to
recognise the unique way the sector uses ground rents to recover
much of the construction costs of the significant shared areas that
are integral to retirement living and which deliver direct benefit
to customers.
John Tonkiss, Chief Executive Officer for McCarthy & Stone,
said:
"Retirement communities make a real difference to the lives of
our customers by bringing older people together, addressing
loneliness and improving their overall wellbeing. The shared areas
in our developments are the key to providing these benefits, and
include communal lounges, restaurants and well-being suites.
However, these spaces cost between GBP1 million and GBP2 million
per development to build. Consequently, we require an additional
funding stream to cover this cost and ensure our apartments remain
affordable for our customers.
"We therefore fully support today's announcement from the
Government to exempt ground rents in retirement communities as it
ensures these shared areas remain viable to provide. It also means
the customer is in full control of how they pay for these costs, by
choosing to pay either an economic ground rent or a higher purchase
price. This option is aligned to our new strategy of providing
greater customer choice."
The Group will continue to discuss the detail of the exemption
with Government over the coming months. This announcement has no
impact on this financial year and reduces the need to take
mitigating action in future years.
-ends-
Background on ground rents:
Ground rents charged by McCarthy & Stone are on fair and
stable terms, averaging GBP466 per annum and are fixed for 15-year
periods, with increases linked to inflation and accumulated yearly.
The Group also remains as the landlord and managing agent on all
developments built since 2010. This means it retains full
operational responsibilities for these developments, ensures
customers are fully supported and protected, and helps to maintain
long-term value.
Capitalised ground rent income helps pay for the construction of
the extensive communal areas provided within the Group's
developments, which typically account for c.30% of total floorspace
and cost between GBP1-2 million per development. These areas are
unique and integral to retirement communities and include communal
lounges, restaurants, mobility scooter rooms, well-being suites,
guest suites and staff accommodation.
Within the Group's representations to Government, it has been
made clear that the loss of ground rent income would make many
schemes unviable and the sector less competitive in the land
market, resulting in fewer properties being built. In response to
the uncertainty resulting from the Government's initial
announcement on ground rents, the Group exercised additional
caution throughout FY18, exchanging on just 54 new sites compared
to 75 in FY17.
c.90% of the private retirement housing sector uses capitalised
ground rents to help pay for the construction costs of its shared
spaces. While some others do not use ground rents, they charge
customers large exit fees at the point of resale to recover part of
their capital costs, based on the resale value of apartments. These
exit fees total up to 30% of the resale price and can mean
consumers pay more overall.
The Group also supports MHCLG's proposal to provide new
customers in retirement communities with a choice between paying an
economic ground rent or the full purchase price. This puts the
consumer in control of how they pay for the costs of their purchase
and is aligned to the Group's new strategy of providing greater
customer choice.
McCarthy & Stone remains committed to the highest levels of
transparency on all costs and services for its customers. The
Group's focus on its customers is one reason why it is the only
developer of any type to have achieved a Five Star rating in the
Home Builders Federation (HBF) annual customer satisfaction survey
for the past 14 consecutive years, which is every year this survey
has been run. In 2018, 92.5% of customers would recommend the
business.
Download McCarthy & Stone's briefing note on its ground rent
position here.
For more information, please contact:
Powerscourt, 020 7250 1446 /
mccarthy-stone@powerscourt-group.com
Justin Griffiths
Nick Dibden
Notes to Editors:
McCarthy & Stone is the UK's leading developer and manager
of retirement communities, with a significant market share. The
Group buys land and then builds, sells and manages high-quality
retirement developments. It has built and sold more than 56,000
properties across more than 1,200 retirement developments since
1977 and is renowned for its focus on the needs of those in later
life.
There is growing demand for retirement communities. There are
currently 11.8 million people aged 65 or over, rising to 17.3m by
2037, representing a 47% increase(1) .[1] For those aged 85 or
over, the increase will be larger, from 1.6m to 3.0m, representing
an 87.5% increase. One in four over 60s are interested in
retirement living(2) , yet only c.162,000 units of specialist
retirement housing for homeowners have been built(3) .
McCarthy & Stone has two main product ranges - Retirement
Living and Retirement Living PLUS - which provide mainly one and
two-bedroom apartments across the country with varying levels of
support and care for older homeowners. Retirement Living
developments provide independence in private apartments designed
specifically for the over-60s, as well as facilities such as shared
lounges and guest suites that support companionship. Retirement
Living Plus developments, which are designed specifically for the
over-70s, offer all of this plus more on-site facilities such as
restaurants, well-being suites and function rooms. Importantly,
they also provide flexible care and support packages to assist
those needing additional help.
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. This commitment to quality and customer service
continues to be recognised by homeowners. In March 2019, the Group
received the full Five Star rating for customer satisfaction from
the Home Builders Federation for the fourteenth consecutive year -
making it the only UK housebuilder, of any size or type, to achieve
this accolade.
For further information, please visit
www.mccarthyandstone.co.uk
(1) ONS household projections: 2016-based (2018)
(2) ONS (2017, 2014 based figures)
(3) Knight Frank, Retirement Housing (2018)
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END
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