‘Customers tell me we have transformed their lives’
The boss of retirement homes developer McCarthy & Stone is bullish about how it coped with the crisis, finds Rachel Millard ‘We help address a lot of the issues around loneliness, and we help friends and family know their mothers and fathers are being loo
It wasn’t the 18th birthday celebration that either imagined. But when John Tonkiss took his daughter to a drive-through McDonald’s for her big day in mid-June, it marked a sliver of normality after the height of the crisis. “It’s strange how much you can look forward to something like that,” says Tonkiss, flashing a Ronald McDonaldworthy grin over Zoom.
As chief executive of McCarthy & Stone, the UK’s leading retirement housing developer, he has had both his business and its thousands of residents to worry about. Things could have gone a lot worse.
“We were struggling with PPE in the early part of Easter, but broke the back of that,” he says. Staff from parts of the business whose work had dropped off helped check on residents and deliver medical supplies.
Overall, the company’s homeowners had lower rates of coronavirus cases and deaths than in the general population, Tonkiss says, and far lower than in care homes. He is encouraged by signs of demand as the company restarts building sites and viewings, with customers on the order book wanting to proceed quickly.
“In some regards the pandemic has amplified their desire to get on and get into one of our retirement communities,” he says. The crisis may end up being of longer-term help to McCarthy in its mission to make customers out of the UK’s ageing population – a 43pc rise in over-65 year-olds to 17.4m by 2043 is predicted by the Office for National Statistics.
The UK hasn’t embraced retirement communities in quite the same way as some parts of the US and Australia, with retirees here more likely to stay in their own homes unless needing the high levels of support in a care home. Tonkiss, 52, is determined to convince more of the British public of the merits of a “third way”, as offered by his developments, where homes sell for an average £308,000. The FTSE 250 company has built 58,000 retirement properties since the Seventies.
“Independent living with support on hand is really quite unique and special,” he says.
“We help address a lot of the issues around loneliness, we bring communities together, and we help friends and family know their mothers and fathers are being looked after.”
An engineer by training, he spent his early professional years in the Midlands’ automotive industry. His interest in home-building grew when he joined student accommodation giant Unite Group in the early 2000s.
He joined McCarthy in early 2014, and was promoted to chief executive in September 2018. It has been a difficult few years for the company amid Brexit uncertainty and a slowdown in the secondary housing market. Profits fell 25pc to £43.4m during 2019. Even before coronavirus, shares had slumped below 2015 float levels. They closed on Friday at 72.2p, valuing the company at £388m.
Tonkiss is trying to diversify by offering more care and management services and allowing customers to rent rather than buy – the latter going “fantastically well”, he says. As the pandemic broke, McCarthy was in “11th-hour talks” with a “large institutional investor” over developing a £300m investment fund to develop rental properties. A pension-backed rental income stream is catnip for many investors. “It’s another way of attracting private capital to help build the homes we need,” he adds.
Tonkiss also has a job on his hands maintaining trust in the industry which has faced criticism over service charges, ground rents, and low resale values. McCarthy now manages its developments built after 2010 – covering about 20,000 homeowners – giving it greater control over those matters. It has also set up its own resales team, which is achieving better resale prices, and has extended leases. “Resales have been an issue for us; we have done a lot to tackle it,” says Tonkiss. He is unmovable on the need to charge ground rents (about £400£500 per year in his developments) to fund the communal areas. Anyway, he insists, buying a McCarthy home is about more than just the bottom line. “There is a danger that sometimes it gets narrowed down to ‘I bought it for this and sold it for that’. But you also get the peace of mind and support. What price do you put on that, really? I very rarely meet customers that don’t say ‘this has transformed my life’.”
He is speaking as Black Lives Matter protests are filling London’s streets and prompting questions about ethnic diversity in business. How is McCarthy’s record?
“Not good enough,” says Tonkiss, though he doesn’t have a figure to hand. The company is setting up a group to address the problem. “I think there is a danger that we take our own hearts to work with us – we think we are doing the right things, but you have to see the world through other people’s eyes.”
Tonkiss believes the Government has “done a sterling job” supporting businesses during the crisis, but now needs to stimulate demand to get the economy moving.
Cuts to stamp duty are high on his list of ways to do so.
“The danger is we end up with 12 months of economic slowdown and a lot of redundancies.” He is clear-eyed about his own company’s prospects on that front. “We are taking stock. My general spirit will be to protect as much of our employment base as we can – but there’s no point in any business leader having people on the payroll that we don’t have work for.”
As he gears up to steer the company through the recession, it’s worth remembering that his interest in its strength goes beyond his own job; it might be his landlord during his own retirement. His wife has already “bagsied” a home on a forthcoming McCarthy development in Lichfield. “We haven’t put any money down,” he notes, “but she said, ‘I’d like to live there.’ ”
John Tonkiss, McCarthy & Stone chief, believes that the retirement homes’ sector is now showing signs of recovery