Howard Phillips is on a mission to change the world.
Inspired by a generation who were in their 20s in the swinging ’60s, the chief executive of retirement home developer PegasusLife is convinced that now, grey and in retirement, they, and the generations following them, have high aspirations for their later years.
Phillips, a former chief executive of retirement home specialist McCarthy & Stone, believes anyone who buys one of his homes, offering “retirement living but not as you know it”, will never look back. But to achieve his dream he admits the brand he is trying to position as the John Lewis of retirement homes will have to overcome a big image problem first.
“In many cases the form of housing does not look great and the language that is used to describe it conjures up the wrong impression in people’s minds,” says Phillips. “There is a legacy of local authority sheltered housing and care homes, and when people hear the phrase ‘retirement home’ I suspect that is what often springs to mind.”
The walls of the boardroom at PegasusLife’s HQ in Winchester, Hampshire, however, showcase the firm’s attempts to displace that image. They are filled with glamorous examples of the lifestyles pensioners could be living – swimming pools, gyms, pet care, cinemas, clubs, spa treatments.
Additional support is offered for those who need it, with medication administration, convalescent support, or around-the-clock care from a specialist provider. Sound appealing? Well, friends and family can stay in guest rooms too.
Investors have already backed the vision. Oaktree Capital has invested £300m, and AIG has granted a debt facility of up to £455m.
Seventeen sites are under construction, with five granted planning and another seven acquired. The search for a further 20 sites is also fully funded.
Phillips has five land acquisition directors looking for sites in the right demographic areas and with unique selling points that would give people a reason to move there – “anything that just makes the site special”, he says.
And there is good reason for this investment in retirement housing. By 2025, 20% of the UK population will be aged over 65, with increasing life expectancies. There is a growing imbalance between the supply and demand of retirement housing. A far lower percentage of people in the UK live in retirement homes (1%) than in other Western nations – the US has 17%, Canada 9%.
The right reputation
Phillips says: “My simple proposition and what the ambition of PegasusLife is, is just great housing where anybody would want to live. It just so happens you have to be over 60.”
So that’s the physical image fixed. But another obstacle to persuading pensioners to buy has been 99 or 125-year leases. PegasusLife offers a virtual freehold with 1,000-year leases and no exit fee.
The poor perception of many management companies also lays heavy on Phillips’ mind. The sector has seen companies charging £50 to change a lightbulb, for example.
Phillips has a plan to avoid being tarnished with that reputation – a not-for-profit management company with open books.
He says: “Everybody who buys a PegasusLife apartment becomes a shareholder in the management company. That was primarily a very easy way of cutting through all the noise that can exist around buying property in retirement. They can see the service charges, what has been spent on what. It is all very clean and very transparent.”
Added extras
With a transparent management system in place, the next steps in persuading the older generation to part with their cash are location and design. “This is not a cookie-cutter one-size-fits-all approach,” says Phillips. “The advantage is we can look at any really great development site and there should be something we can do there.”
At its site at Wilderness House in Sevenoaks, Kent, that was finding trees planted for one of Henry VIII’s weddings. At Dawlish in Devon, it was uncovering a footpath to a private beach. And these added extras do not necessarily have to come at a price.
In Lichfield, Staffordshire, PegasusLife is selling flats at £425 per sq ft – and it hopes to be able to offer even lower prices. A Westminster scheme will cost around £2,000 per sq ft, however.
The company has also watched the rise of the private rented sector and wants in. Phillips says: “We are about to trial at Tetbury a rental offering pepper-potted across the site. We will probably also have it at our Portishead site, which is starting soon. If successful, we have another site we might deliver as a build-to rent scheme. Build-to-rent as a proposition is something we are actively looking at.”
Another site in Sutton Coldfield, West Midlands, capable of providing between 200 and 250 flats could also be offered as a combination of for sale and rent.
Over the next 12 months PegasusLife hopes to add 20 sites to its pipeline. At first it earmarked London, buying four sites, but it has not bought in central London for the past 18 months because “the market got very silly”. Outside the M25, Cambridge, Oxford, the Cheshire belt and the “golden triangle” in Yorkshire have also been targets, as well as the South West.
“We are not looking for just one specific type of site. We are looking for great development sites of any size and scale,” says Phillips. “We are out there competing for land. Ideally we want land where we have conditional contracts or if we put money up front, then it is down to the quality of the deal.”
There is a lot to do, but a new chief operating officer, Mark Shirburne-Davies, has been brought in to focus on delivering the developments across different price points.
Phillips says: “The frustration always with property development is that it takes so long. I want it to be out there, I want to be walking around these schemes showing them what we have done and how it is different.”
Pipeline
• 32 sites (including two developed) £1.2bn GDV
• On track to deliver business plan to 2019
• Revenue forecast to grow x18 in the next two financial years
• Operating margins to top 20% by 2018
• Credit facility with AIG of £455m and investment of £300m from Oaktree Capital
Sites acquired
View PegasusLife acquired sites in a full screen map
• Banstead, Surrey
• Bath
• Bournemouth, Dorset
• Bristol x2,
• Brockenhurst, Hampshire
• Bude, Cornwall
• Canford Hills, Dorset
• Chigwell, Essex
• Clifton, Bristol
• Cheltenham, Gloucestershire, x2
• Dawlish, Devon
• Falmouth, Cornwall
• Guildford, Surrey
• Hampstead, London, x2
• Horsell, Surrey
• Lyndhurst, Hampshire
• Poole, Dorset
• Portishead, Somerset
• Purley, Surrey
• Sandbanks, Dorset, x2
• Seaford, East Sussex
• Sevenoaks, Kent
• Sidmouth, Devon
• Lichfield, Staffordshire
• Tetbury, Gloucestershire
• Westminster
• Wilmslow, Cheshire
• Windlesham, Surrey
• Woodbridge, Suffolk
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