BY NICK GRANGER
When last August Legal & General announced its establishment of Inspired Villages Group, formed out of English Care Villages, a developer of later living accommodation, business people everywhere could see the logic in the fit. L&G’s life business is already heavily targeted at the third generation. Why not close off the loop and claw back great chunks of pension and annuity pay-outs in the form of care village fees and costs?
Following the acquisition of the assets of two joint ventures between English Care Villages and Places for People for around £40m, L&G then announced in November the acquisition of a later living business called Renaissance Villages (RV) for a net purchase price of around £51m from Helical Plc.
Arranged over four village schemes, located in Warwickshire, West Sussex, Devon and Hampshire, the RV business comprises of around 700 homes, of which over half are already sold and occupied, with the remainder ready for sale or under construction. Now combined, this brings Inspired Villages Group’s development portfolio to around 1,000 homes. Inspired Villages Group, it was reported at the time, will continue to seek to acquire several land sites per year.
But are Legal & General aware of the baggage that came with English Care Villages? We hope their shareholders and management have seen the previous article on Country Squire Magazine, ‘No Walk in the Park for L&G’.
Dr Nigel Wilson, CEO of Legal & General, claimed back in November: “This acquisition is another terrific example of Legal & General using its long-term capital to address chronic market failures, by investing in a sector that delivers high social and economic impact to our society. The UK is under increasing economic strain as populations expand and demand for housing increases. Later Living offers industrial scale reductions in health and care costs to the elderly through prevention and avoidance; we see this housing sector as one of the most underserved in the UK and look forward to the Government engaging in positive public policy changes that help to support us in addressing this need.”
What L&G failed to sufficiently factor in to their business plan was the local anger that their land site acquisitions and planning proposals would cost them. We have covered recently here on Country Squire Magazine how furious locals in Torbay are at the prospect of the construction of a care village on a site in beautiful Maidencombe, called Sladnor Park. Their opposition is well organised and some of the opponents have impressive connections and deep pockets. Many of these angered residents are L&G customers. The locality is home to thousands of L&G customers.
Furthermore, the average selling price of the Sladnor Park apartments needs to be £425K to recover the build costs and could be as much as £500K to cover ancillary costs, but the average house price in Torbay is £225K, so local people can’t afford them. This is evidenced by the very slow sales of the Renaissance Villages and other similar apartments in Torbay.
Moreover, L&G are taking a huge risk entering a sector which is increasingly seen as a con. Similar models have been tried and are now suffering public backlash in the US and Australia. The maths is increasingly well-known to be less alluring than village salespeople claim:
The BBC have recently done an excellent job on highlighting the care village rip-offs which have blighted their presence in the UK:
BBC Radio 4 Money Box 9th Sept 2017: http://www.bbc.co.uk/programmes/b09309h5
BBC Radio 4 Money Box 16th Sept 2017: http://www.bbc.co.uk/programmes/b093hv5w
BBC Radio 4 Money Box 20th Sept 2017: http://www.bbc.co.uk/programmes/b093hwd2
BBC Radio 4 Money Box 7th Oct 2017: http://www.bbc.co.uk/programmes/b097794z
Each year thousands of older people consider a move to specialist retirement properties. These homes are almost always sold on a leasehold rather than freehold basis. Many of these leases require the owner to pay a fee on certain events – such as sale, sub-letting or change of occupancy. These are known as “event fees”. In 2013, the Office of Fair Trading investigated the use of transfer fees (a type of event fee). They found that terms in leases imposing this type of event fee were potentially unfair. As a result, in 2014, the Department for Communities and Local Government asked the Law Commission to investigate. The Law Commission received an interim response last year but awaits a final response.
In the case of the Maidencombe project there are huge question marks over social care and health provision in an area with insufficient staff cover already, as well as unanswered questions over design and access problems associated with the plans that have gone public so far. Sladnor Park is well outside the suggested proximity in the Local Plan, is so steep that residents will have difficulty moving from one building to the next due to the steepness of the site, and there is nowhere to walk (with no pavements and hills that are in part as steep as 1 in 5, or 1 in 6). The local bus route is only rural – running once an hour at best (even then, not late at night for those that may have wished to have an evening out). Visitors will have nowhere to park and residents will be forced to make purchases from the site shop at likely captive market prices as residents cannot walk to alternative shops. The nearest doctor’s surgery, shops and other facilities is over 2.5 miles away.
In addition, Sladnor Park is in an area of exceptional natural beauty which is enjoyed by the small local community, tourists and rare wildlife alike. Destroying this tranquillity with an inappropriate and unnecessary development that would only serve to benefit the developer and anger local residents is a fundamentally wrong and flawed business model.
In fact, this is a hornet’s nest of Ratner proportions should L&G’s empathy fail, and they get things wrong. Against the backcloth of their net income of almost £2B in 2017, one wonders why L&G would bother taking the risk.
Nick Granger is a Country Squire Guest Writer. Nick retired after a thirty year career from the Met Police in 2011.