Football supremo Steve Morgan is a man on top of his game, bringing regional housebuilder Redrow bounding into London, while turning around the fortunes of his company
Steve Morgan is nothing if not honest, open, and frank. He slams politicians as “idiots” and “ignorant”, the Help-to-Buy scheme as a great “stimulus” and “terrific”, and the idea of a housing bubble in London essential, but boom and bust prices in the country as a whole “the worst thing for our industry”.
Opinionated, yes. But, it shows how passionate the chief executive of housebuilder Redrow and chairman of Wolverhampton Wanderers FC feels about the housing market – particularly the UK’s complicated and cumbersome planning system.
In a stream of consciousness, he says: “The number of [housing] outlets across the industry is going down… The latest figure was 2.5% below where we were last year. It is an issue and we can’t respond. Idiotic politicians who talk about builders landbanking quite frankly shows you how ignorant they are of the true process and what is happening on the ground – they really should shut-up and stop making fools of themselves.
“They are talking absolute rubbish – we just need to get this speed of planning sorted out.”
Morgan, who admits: “I know I’m well known for jumping on the back of planners,” does concede that “informed politicians do understand”. He adds: “You would think that with Help to Buy [see below] and the stronger market, sites would be going up and planning permissions would be going up, but there are lies, damned lies, and statistics. The statistics say planning permissions are going up but the reality is implementable permissions are not going up – so with Help to Buy all the builders are selling more per outlet than they were, which means sites are finishing quicker.
“When [sites] finish quicker, you need to increase the supply of new sites, not only just to stand still, but if the country wants to increase output then it needs to give the permissions to encourage the builders to get on more sites.
“I would love to be building on more sites, and we have been quite aggressive with land in terms of expansion on a steeper trend than most, but we struggle to get the sort of output we want just to get it through the system.”
Only last month Redrow added to the company’s portfolio by buying a 17-acre plot in affluent Tytherington, Cheshire, with consent for 162 new homes, for just over £13m. Ainscough Strategic Land is selling the site, which it bought in May 2012 as a development site from Allied Irish Bank for £4.5m.
Morgan talks from a position of long experience. He founded Redrow in 1974, floated the company in 1994, and stepped down as chairman in 2000. After the business struggled, he retook the helm in 2009 and turned the company’s fortunes around.
“[When] I got back to business five years ago the first thing to do was to stop the ship from sinking. Then, having done that, it was a strategic review, and that review meant we took the decision to sell Scotland, which we did and put more emphasis not only on London, but the South East.” Redrow sold its Scotland operation in 2011 to Springfield Properties.
The tactic is paying off. In February, the company announced an interim dividend of 1p per share for the first time in six years after revenues rose by 41% on a 30% increase in legal completions. The company generated £363m in the six months to the end of 2013, with average sales prices up by 9% to £232,000. Margins climbed by 1.7% to 20.3% as the company sold more houses built on land bought since the crash.
Two prominent sites are in London – Commercial Street, E1, and Kingston Riverside. While they signify the company’s push in to the capital’s booming housing market, Morgan insists: “We are not aiming to be the next Berkeley.”
Perhaps not Berkeley, but Morgan’s intention is for London to be up to 25% of Redrow’s business. “It’s nowhere near that yet,” he admits. “We are only three years into London – the first two financial years were feeding in/pumping money in with very little return – this year we have substantial completions at Kingston Riverside and Commercial Street, so we swing from carrying the London business to the London business contributing fairly significantly this year.”
The amount of London deals in the past few months hammers home how serious Redrow is about London. As reported in EG in January, it has been selected to regenerate the Metropolitan Police’s Peel Centre site, NW4, into a mixed-use scheme of more than 1,650 homes. It bought , for residential conversion and agreed terms with the Met on sites in Highgate, N6, and Maida Vale, W9, which together are expected to be converted into circa 160 homes.
Redrow London ended 2013 with the acquisition of a site in Harrow, Middlesex, with consent for 287 homes. The deals add a significant number of potential new homes to Redrow London’s pipeline – on top of the 728 it had in its landbank at its year-end in June.
So, clearly talk of a housing bubble and London’s over-inflated market is not bothering Morgan. In fact, the opposite. “[London] has got to sustain this growth because if you look at the targets for London, even if all the sites have been sold together, we are nowhere near the kind of growth London needs.”
Planning permissions may be tricky and sites harder to come by, but returns are not. “Are our margins are being squeezed? The answer is no. We can still buy the land that give us good margins. There are instances where sites have gone for silly money, particularly in London, but when you look behind that it is foreign funds that have been buying – there is no evidence of the mainstream housebuilders doing stupid things in London.”
He adds: “Malaysian and Chinese funds have different criteria that they are looking for – interestingly, they will not have come across our planning system before – in China/Malaysia you buy land, know the right people and you’re on site building and the return on capital is quick – it will be very interesting to see how they cope with our planning system, which is not very forgiving. I am not too worried about the foreign invasion of purchasers of these sites.”
Growth in London is positive, but Morgan is wary of prices skyrocketing in the rest of the country. “We are seeing price movement in the provinces. It is important we don’t have a boom in prices. It’s the worst thing that could happen for our industry. We couldn’t on a sustainable level lift the output if we have this boom/bust cycle.”
It may be obvious for a housebuilder to say, but Morgan believes that everyone wants to own their own home – despite the tough financial times and strong rental market. “No, I don’t think we are becoming a nation of renters. The old saying that an Englishman’s – or a Welshman’s or a Scotsman’s – home is his castle still applies. As a nation we want to own our own home, without any doubt about it.”
From his lofty height looking down on London’s Commercial Street, Morgan is certainly striving to provide just that, not only in London but the country as a whole.
Morgan on government stimulus
“Help to Buy, launched in November 2013, has been a terrific boost to the industry. Help to Buy has provided the market with a huge stimulus. At Redrow I haven’t got the number of homes we’re building in 2013, but around 110,000 to 120,000. But we are a long, long, long, long way from getting the homes that the country needs.
“It has got the industry moving and lifted it to new levels of output.
“Now the main thing the government could do is keep stability in the marketplace – at some point Help to Buy will be phased out, but not too soon because the market could fall back too soon. When it does get to an end [I hope] it’s phased out and not suddenly dropped.”
noella.pio.kivlehan@estatesgazette.com
