Three years ago, Ian McDermott was looking after a 10,000-home portfolio at Aldwyck Housing. This month, he took the helm at the Peabody housing association to oversee a 100,000-home company. A tenfold increase in homes doesn’t faze him. McDermott is at home not only leading a larger organisation, but actually building one.
A housing association veteran of 20 years, McDermott has overseen several high-profile mergers. He led negotiations at Aldwyck when it merged with Catalyst Housing, taking over from Catalyst’s Rod Cahill when he retired in 2019.
Now, as Catalyst and Peabody work through their own merger, McDermott takes the reins from Peabody chief executive Brendan Sarsfield, who announced his retirement last November.
McDermott’s task now is to continue Peabody’s growth. “The basis of the merger was founded in a sense of two organisations with complementary geographies and similar aspirations and a very similar view on how they saw the world and wanted to respond to some of the changes,” says McDermott.
Where many housing associations have reduced development as a result of high remediation, Peabody and Catalyst have charged on, the former leaning to large-scale brownfield regeneration in outer London and the latter typically via joint ventures in more central locations.
“Brendan and I were moving our own organisations in the same direction anyway, in that sense of getting close to the customer, making services as responsive as we can,” McDermott says. “We have invested, not just in property, but in people and communities.”
Last year, Sarsfield slimmed down Peabody’s short-term delivery targets, arguing the Covid-19 crisis response and need for local contact during the pandemic had forced him to rethink the business. But the team continued to add large, long-term regeneration projects to the pipeline.
“The bigger picture is that we probably want to be something different longer term following this,” Sarsfield told EG at the time. Then, the chief executive didn’t know what that would look like. Now, it will be down to McDermott to sharpen the vision.
Going local
The Peabody Trust, founded in 1862 by George Peabody, is one of London’s oldest and largest housing associations. It has more than 67,000 homes and over 155,000 residents.
Catalyst has around 37,000 homes around London and the South East. Like Peabody, and most other housing associations, it has expanded through adding smaller companies as subsidiaries.
In 2020-21, Catalyst reported a £67m operating surplus against Peabody’s £195m, with £3bn in assets against Peabody’s £8.6bn. When their merger completes in April, the new company will be the second-largest housing association in the country, boasting assets of more than £11.6bn and 4,000 employees.
“The merger is a challenge, but it is an opportunity to rebase the organisation,” says McDermott. “It is a reason to refocus the culture.”
Reflecting on his previous experiences, he adds: “I can predict people will want to put their narrative on it. It will be [described as] a takeover, or a reverse takeover. But provided you are clear about what it is you are doing, that you demonstrate you are acting fairly and consistently, you’ll get the majority of people on board.”
Over the next few months, McDermott will focus on getting to know Peabody. He has experience of larger companies – he was chief operating officer of the 67,000-home Sanctuary Housing. Returning to a larger organisation, he relishes the luxury of greater resources, but hopes to retain the agility of a smaller company.
“An organisation of that scale, you can’t get your arms around in one go,” he says. “It is about breaking it down to a human scale. We talked about going local and creating more locally focused elements to the organisation.” But what does local look like for an organisation that really only operates in one city? “Maybe the best way of illustrating it is to think about Thamesmead.”
Town of the future
When Sarsfield first initiated discussions of a merger, the 250-acre Thamesmead Waterfront regeneration was a major draw for McDermott. Development has always been a passion for him; he first entered the sector as development director leading the 900-home regeneration of Stonebridge Park estate.
Peabody’s £8bn Thamesmead project will see 22,000 homes in a new town built over 30 years. Executive director John Lewis has taken McDermott on two tours now, one prior to the associations’ merger talks and a second in his new position.
Housing associations have to be more than landlords.We have to have the commercial acumen to… bring very sharp private sector organisations in
Going local at Thamesmead means recognising the different priorities of that project within the wider organisation. McDermott continues: “Thamesmead has an identity within Peabody, but it also has a separate identity. It does try and understand what is going on in that community and respond accordingly with a solution that is bespoke for that area.”
That solution will bring together the three strands of Peabody’s business: the housing association, the commercial operation with Lendlease and the community development.
“With this devolved structure, what we are trying to really create is people with authority and power to do what the local area needs,” says McDermott. With a “strong engine at the heart of the organisation”, that will continue at some of the other larger regeneration projects in the pipeline from Dagenham Docks to central London.
Doing deals
While Peabody boasts partnerships with Lendlease and London Square, Catalyst has some of London’s biggest landowners and developers, including the Greater London Authority, Transport for London and Mount Anvil.
“Housing associations have to be more than landlords,” McDermott says. “We have to have the commercial acumen to do deals like that to bring very sharp private sector organisations in. You have to be able to go toe-to-toe with them and make sure you are getting the deal.”
Those partnerships come as reduced grant funding has forced housing associations to become more self-sufficient, creating their own cross-subsidy to finance social housing. “That commerciality has strengthened us as a consequence,” says McDermott.
Faced with the rising costs of remediation, some housing associations have also looked to sell portfolios to the private sector. “There is a lot of patient capital out there that wants to come into the sector, that sees there is a way of doing that. It will be interesting to see whether that patient capital is quite as patient as we think it is and whether it gets itchy feet,” he adds.
While he supports the general trend of private funding and partnerships, there is still an element of controversy and wariness in the sector, particularly when it comes to offloading existing social stock. But McDermott says it all comes down to motivation of housing associations: “If you are motivated by creating more social housing then, provided you are confident the ethics of the organisation remain strong, absolutely it is something that should be looked at. If your motivation is simply to raise cash, then that is more problematic.”
For McDermott, the motivation is the charitable endeavour to deliver housing layered with commerciality of the business. Now, at Peabody, he is doing this at real scale. If everything Peabody owned was moved to private rents it would cost an extra £477m a year. “That’s effectively a subsidy every year of nearly half a billion pounds, that’s an amazing legacy,” he says. Add Catalyst’s portfolio and it will be even larger. “That issue of affordability to our customers has always been at the heart of what Peabody does. That will continue.”
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