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McCarthy & Stone chief outlines £1.5bn development plans

McCarthy & Stone chief executive Mark Elliott has set out £1.5bn in development plans and a plan to boost volumes to their pre-recession peak, as the firm celebrated its 1,000th development.

The UK’s largest retirement homebuilder sold 1,300 units last year, but in peak trading conditions before 2007 the figure was around the 2,500 mark.

The firm today announced a £1.5bn development pipeline in land acquisition and build costs coming on stream in the next five years, and said it expected sales to increase in all regions, adding around 200 units this year.

Mr Elliott told Construction News he believes the UK’s ageing population and the lack of meaningful competition from mainstream housebuilders can propel the firm back to those heights.

“The effect on us [of recent government policy] is absolutely zero”

Mark Elliott, McCarthy and Stone

He added that current growth of 12 per cent in turnover will “certainly” be maintained and that he expected to see an escalation in the growth rate.

“I would like to think that we’re moving back up towards those [pre-2007 sales] numbers. I believe we can,” he said.

“A number of housebuilders have dabbled in this area in the past, but have tended to withdraw from it. I’m astonished by the level of expertise [needed] in this industry.”

Government incentives

Mr Elliott said recent government initiatives such as Help to Buy have given the volume housebuilders plenty to chew on in their core markets, but have done little to boost the retirement market.

“The effect on us [of recent government policy] is absolutely zero,” he said, pointing to moves to stimulate mortgages, new-build and shared equity for mortgage holders.

“All those government initiatives are helping the mainstream housebuilders, and I think that’s fantastic, but our business is not seeing any boom from that.”

These initiatives have little impact in the retirement market, where most buyers struggle to obtain long-term mortgages – and in many cases don’t want them.

Instead, reforming elements such as the Community Infrastructure Levy, which disproportionately impact retirement developments, would have the potential to unlock unviable schemes, according to Mr Elliott.

Going forward, McCarthy & Stone is moving toward a more customised offering, for a baby boomer generation demanding a more bespoke range of products, and with greater car ownership opening up sites outside of the core town centres.

“We’ve probably tended towards a more standardised product; now we have to be more flexible in our offerings,” Mr Elliott said.

Part of this is building less “age-defined” projects, he added, with buyers less willing to live in homes that show obvious signs of being tailored towards the older generations.

“[It’s] quite a departure… I think you’ve got people with a younger mentality coming through that may be more likely to reject obvious physical signs of their ageing,” Mr Elliott said.

And this means a more flexible land requirement – the firm currently purchases about 50 sites each year, but wants to step this up to around 65 annually, potentially including some smaller blocks.

The growth plans, Mr Elliott insisted, would go ahead regardless of the refinancing option settled on by the firm.

Moelis & Co were appointed in November 2012 to look at a number of financing options including flotation, refinancing or trade sale of the firm.

Mr Elliott said much work had been done in this direction, but that the board was working with a “very supportive shareholder base” to find “the best solution for the business”.

Lloyd’s Bank, which held a 24 per cent stake in the firm, recently sold its stake to Goldman Sachs and US buyout firm TPG.

“The debt position we have is a legacy issue from a previous acquisition. The company didn’t generate it. In reality it has no impact on the business,” Mr Elliott said.

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