June 28, 2017

Will hedge-funders clean up in £500 million float for McCarthy and Stone?

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McCarthy&StonefloatBoth the FT and the Sunday Times are suggesting that the hedge-funders who took on the debt at McCarthy and Stone could be in for a killing if it floats next year for £500 million.

Both papers report that says hedge fund owners pumped £367 million of equity and a five-year loan to slash borrowings.

FTMcCarthyandStoneThe Sunday Times claims reports that “in the six months to February, 659 properties were sold, up 30% on a year earlier, with underlying earnings more than doubling and the company swinging back into pre-tax profit”.

The FT, on Friday, is more cautious.

“All options are being considered”, including going public “but an IPO is not an immediate leading preference at the moment, the source said”.

The FT also points out that an IPO failed to materialise in 2012.

McCarthy and Stone was taken off the stock market in 2006 in a controversial deal worth £1.1 billion brokered by disgraced banker Peter Cumming, of HBOS. It was seen as the highpoint of property/banking fecklessness.

John McCarthy, the firm’s founder, commented sourly in his amusing and frank autobiography Building a Billion:

“Sure enough Peter Cumming’s over-lending on property brought HBOS down and his ill-judged legacy was passed to Lloyds.

“His advice was not to be relied on by his investors. Some very bad decisions were made and buying at the top of the overheated market was simply crazy.”

After a debt-for-equity swap in 2009, Lloyds was left with a 25 per cent stake, which it later sold to Goldman Sachs and the private equity firm TPG.

After last year’s cash injection, says the Sunday Times, McCarthy & Stone’s biggest shareholders are Goldman, TPG and the hedge funds Alchemy, Anchorage Capital and Strategic Value Partners.

Together they hold more than 50%.

The Sunday Times cites an unnamed source “close to one of the shareholders” saying that a listing was the likeliest outcome and that it would probably happen in the first half of next year.

We will have to wait and see.

Comments

  1. McCarthy & Stone has built more than 45,000 pensioner flats over the past 35 years.

    BRITAIN’S biggest retirement homes builder has begun sounding out investment banks about an autumn refinancing that could lay the ground for a £500m-plus return to the stock market next year.

    McCarthy & Stone, which sold more than 1,500 properties last year, is expected to appoint an adviser in the next few weeks to help deal with £92m of outstanding debt.

    Chas Says,

    What about the over priced apartments/flats sold by MC&ST and the unexpected loss on these developments. To my knowledge in 2005, to date where up to 46% of the value is lost to the elderly resident who just wanted to retire and then allow the increase in value to cascade down, (so said by Tony Blair when he wanted your vote) ???

    The children who are named in Wills are in for a shock, so please readers speak to family members and inform them that paying for apartments/flats when they are over priced does, not help any persons bank balance, other than the original builder, who sells at extortionate sale prices.

    The company was founded by John McCarthy and Bill Stone in 1963 to build houses, shops and offices. It began to specialise in retirement homes in 1977. From this beginning Peverel was born and we know the results?

  2. Michael Epstein says:

    Will hedge fund managers make a killing? The answer is NO!
    If a close look behind the Mcarthy & Stone accounts is taken, it becomes clear that the New (new)( New) Mcarthy &Stone was funded by an injection of capital plus refinancing on a longer term of pressing debts. Thus more than £500m including the refinancing has been utilised by Mcartthy &Stone.
    At best if all goes well in any sell off the new owners might break even.
    That said, if the company was doing so well, why would the new owners want to sell and miss out on future profits? If the new owners(with all their financial experience) are keen to sell, why would anyone else want to buy Mcarthy And Stone?
    The housing market is already overheated, and property values are expected to fall in the near future. Banks are over exposed to lending aainst over valued assets currently. Why would they want to take further risks?
    Imagine what could happen if during the selling process further publicity concerning the pitfulls of retirement development living were to be constantly in the media?
    Incidentally, it does appear, that whilst Mcarthy & Stone increased sales, their accounts appear to show a post tax loss of £14.8m.

  3. A Reviewer says:

    Too much money floating around …

    Massive inflation is required ro make all this money worthless …

    Perhaps a “Nouveau Euro” is required ?

    Happy Banking ..

  4. I think Carlex should invite Oliver Shah , reporter for Sunday Times to write a follow up about how the M& S customers are being exploited under the M&S Leases and being hit by loss of premium value due to initial over-pricing and later by excessive service charge fees and excessive skimming on transfers after death.

    • What are the exploitative elements in the current McCarthy and Stone leases?

      The leases do not include exit fees (since Jan 2009, or possibly Oct 2008), nor do those of any mainstream commercial retirement house builder.

      It is important to distinguish between historic and current practices.

      The issue we have with current leases concerns the one per cent of purchase price/ market value payment into the contingency fund on subletting.These can be punitive to families needing every penny to pay for a relative’s further care.

      We are also anxious about the sale of freeholds.

      Some freeholders do monetise with charges at point of re-sale of a flat, but that is widespread in leasehold and possibly not a flaw of these leases.

  5. Michael Epstein says:

    Mcarthy & Stone (the new one) have the power to change the fundamental problems with the retirement living sector, if they are brave enough and have enough confidence in their product.
    Anyone purchasing a Mcarthy & Stone retirement apartment should be offered a guaranteed buy back price if sold within 2 years of purchase. Such an action will mitigate against the catastrophic fall in values of these properties.
    .

    • Michael Hollands says:

      Michael Epstein’s Buy Back Scheme is the best idea I have heard in years.
      I would like to develop it a bit further.
      The residents or their heirs should receive from the Developer 95% of the purchase price with no Exit Fees, in the following circumstances.
      1 This should apply for the first 5 years of the development
      2 The Resident or their heirs will be given three months to sell before this comes into operation.
      3 If the house price index has fallen since first sell then this would be taken into account and the amount the
      Developer pays would be reduced accordingly.
      4 if the house price index has increased the Developer would not pay more but in this case the property
      would most likely be sold easily.
      5 The 5% penalty would enable the Developer to bring the property up to mint standard for resale.
      6 Operation of this system would encourage better management and treatment of residents as the
      Developer would be aware that it is he that has got to resell the property and no management fees would
      be forthcoming until he does so.
      Can Carlex please put this idea to M&S, Churchill, Retirement Villages, etc.

  6. [REDACTED …] McCarthy & Stone the builders who constructed our building Arkle Court only 14 years ago in 2000.since then we have had nothing but structural faults and problems!
    These faults where so bad and had been attended to that often over the period of the first 4 years that residents paid out of their own funds for an independent surveyor to survey the roof and produce a report on its condition structural problems and faults.

    In 2005 M&S where presented with this report of the facts accepted responsibility employed contractors to erect scaffolding and supposedly correct all roofing faults and problems over roughly a period of between 6 – 8 weeks.
    McCarthy & Stone informed residents over this period of 5 years there was no guarantee residents could claim back from for repairs previously made.
    M&S also refused to reimburse all residents lay out costing thousands of pounds to prove these faults and problems found and documented by the independant surveyor and equipment hired cherry picker.

    Since then in 2005 we have had several more faults and problems with the roof and 2 major problems needing scaffolding 1 in 2012 costing several thousands of pounds.

    [REDACTED …]

    The 2nd going on at present costing over £40,000 remember this roof is only 14 years old and built in 2000 we have been and still are completely encaged in scaffolding and have been for about 10 weeks and service managers Peverel inform we must pay the charges but they kept the best and funniest quote for the local media they informed them anything over £38,000 for the original roofing estimate would be paid by the contingency fund not the Residents to help them out and save worry and anxiety ha ha .

    Readers who read the article and keep stopping me in the street and informing me the contingency fund is the residents money I think Peverel believe it is theirs to spend!

    In my opinion as a owner and paying resident of service charges of a property that has devalued at least £10000 over 10 years yet house managers flat rental increased thousands plus the loss of guest room allowance because I had the audacity to challenge Fairhold Homes no4 through the LVT.

    I find McCarthy & Stone [REDACTED …] do not forefill their promises and Peverel as service managers and Fairhold Homes their accomplacies that hoodwink and feed of pensioners and their savings.

    Yes I did buy my property with my eyes open but I did not read the small print or realise these 3 companies where in bed together.

    Example I don’t own the outside of my front door the frame or outside of my windows the roof but I have to pay for any maintenance or work to these areas.!!!!

    I keep requesting Peverel produce all charges and costs made out to Arkle Court roof from 2000 to and including present days estimate plus the estimate of McCarthy & Stones 2005 charge without success !!!!

    GLW