McCarthy & Stone in market return as retirement homes sector booms

McCarthy hopes to float at least a quarter of its equity on the main market next month as part of a drive to invest £2.5bn in land and homes in the next four financial years.
McCarthy & Stone in market return as retirement homes sector booms
The company builds retirement communities.
Specialist housebuilder McCarthy & Stone is planning a £70mln flotation to cash in on the UK’s shortage of retirement housing.
McCarthy hopes to float at least a quarter of its equity on the main market next month as part of a drive to invest £2.5bn in land and homes in the next four financial years.
TPG Capital, Anchorage Capital, Goldman Sachs and Strategic Value Partners hold 57% of the company and 26 other investors own the rest.
McCarthy said it expects certain of the investors to sell part of their stakes in the global offer.
The housebuilder was listed for more than twenty years prior to being acquired for £1bn in 2006 in a debt-funded deal that foundered and eventually saw the business sold to its current owners.
Clive Fenton, chief executive, said: “There is a structural under-supply of specialist retirement housing in the UK and McCarthy & Stone has the expertise, track record and financial strength to address this.
“Listing on the London Stock Exchange will provide the ideal foundation for the group to move to the next stage of its development.”
Britain is facing a chronic housing shortfall, which has sparked concerns about a potential price bubble as supply fails to match demand.
Much attention has focused on the difficulties that first-time buyers face in finding homes, particularly in the last few years as the financial crisis has hit mortgage availability.
But McCarthy has highlighted the UK’s shortage of retirement housing and the problems that older people also encounter.
The company says 3.5mln people are interested in buying a retirement property in the UK, but only 128,000 such homes had been built by April last year.
It says it is ideally placed to address that shortage, having pioneered the concept of owner-occupied retirement housing in the UK in 1977.
Since then, it has sold about 50,000 homes on more than 1,000 sites in the UK and built up a 70% share of the owner-occupied market.
The group offers three distinct products aimed at customers aged over 55, 60 and 70, typically on central brownfield sites with access to local amenities and featuring a range of facilities, shared areas and management services.
As advances in healthcare enable people to live longer, McCarthy says its customer base is the fastest-growing demographic in the UK.
It says it remains on track to achieve its target of selling more than 3,000 units per annum in the medium term.
The company’s current land bank of 10,087 units represents 5.2 years of supply, including 3.1 years with detailed planning consent.
It launched three new regions last month covering north-west and south-west England and the East Midlands and says its forward sales are strongly ahead at £177mln compared to £129mln last year.
The group’s underlying pre-tax profit in the year to August 31 increased 40% to £88.4m against the same time last year on a 25% rise in revenue to £485.7mln.
Legal completions rose 15% to 1,923, its net average selling price lifted 12% to £239,000 and its net asset value rose to £469mln at the end of August this year from £358mln at the same time in 2013.
Chairman John White said: “As the industry leader, McCarthy & Stone is in a unique position to address the unprecedented market opportunity we see before us.”
McCarthy intends to make available an over-allotment option of up to 15% of the base offer size in the flotation.
Deutsche Bank and Goldman Sachs are acting as joint global co-ordinators and joint book-runners, Jefferies International is also a joint book-runner and Peel Hunt is co-lead manager. Rothschild is financial adviser.
Phil Waller
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