Bovis: another “poor” developer upping dividends

“The City gave the thumbs-up to new boss Greg Fitzgerald’s “small is beautiful” turnaround plans for struggling Bovis Homes on Thursday, marking the shares up 8% despite a slump in first-half profits.

Bovis sacked its previous chief executive David Ritchie in January after profit warnings and controversy over “bribes” for buyers to move into barely finished homes — triggering opportunisitic takeover bids from rivals Redrow and Galliford Try.

Fitzgerald’s medicine involves rebuilding the business’s scarred reputation with customers and scaling back its growth plans, now aiming to sell 4000 homes a year instead of 6000 by 2020.

The firm has also shed 120 jobs to cut costs by merging two of its regional businesses.

But the payouts are getting bigger, with investors in line for £180 million in special dividends, funded by cutting exposure and investment on its larger sites, and selling some developments.

The ordinary dividend is jacked up 5% this year, with the promise of an extra 20% in 2018.

Shares jumped 8% or 85.7p to 1140p despite a 31% slide in profits to £42.7 million in the first half of the year.

The ex-Galliford boss, who took over in April, said the housebuilder’s woes were “very fixable”.

He said: “I’ve got a great hand of cards, we’ve just got to play that hand of cards better than we have in the past.

“Our strategy represents the minimal risk for the maximum shareholder return. Where Bovis is at the moment, that’s the right thing to do instead of charging on to get to 10,000 units. We’re well on the way to fixing Bovis but it is going to take more than a day.”

Jefferies analyst Anthony Codling called the strategy a “new dawn” and upgraded his estimates for the firm’s annual profits.”

https://www.standard.co.uk/business/new-bovis-chief-whets-city-appetite-for-turnaround-with-divi-bonanza-a3629156.html

Government and developers creating NIMBYs

“The biggest housebuilders are creating growing numbers of nimbys by trampling over communities and building ugly, unaffordable homes, the head of a homelessness charity has warned.

Polly Neate, the chief executive of Shelter, said that developers were putting profits before people and ignoring concerns about the quality and price of new homes.

She blamed the builders for “a huge loss of public faith in our housebuilding system” and called for reforms to planning laws to put people’s needs before corporate profits. “Even when communities create detailed plans for housing developments, these developers brush them aside and build unattractive, unaffordable homes,” she said. “This means many [people] choose to oppose new homes rather than go through a long planning process, only to be ignored in the end.”

The three biggest housebuilders, Persimmon, Taylor Wimpey and Barratt Developments, completed more than 46,000 homes last year and shared revenues of more than £11 billion. They made profits of £2.2 billion.

“The government needs to bring in a new way of building homes which listens to local people to build the high quality and genuinely affordable homes they need, along with schools, parks and other amenities,” Ms Neate said. “We once had a proud tradition of housebuilding in this country, as seen in our popular postwar new towns and garden cities, and it is now critical this is revived for the 21st century.”

Her comments came after a survey of more than 3,500 people found that only 13 per cent felt that developers listened to them. Almost 60 per cent said that they would be more inclined to support the building of new homes if they were listened to more keenly. The southeast had the highest proportion of nimbys, at 38 per cent, while the West Midlands had the lowest at 23 per cent.

The Times revealed last month that a consortium of housebuilders behind a new garden town in Devon had watered down its strict design code. The Sherford development on the outskirts of Plymouth was designed by the Prince of Wales’s architects to prove that his model village of Poundbury in Dorset could work on a larger scale.

The Prince’s Foundation for Building Community said that the builders, Bovis Homes, Linden Homes and Taylor Wimpey, used arcane planning laws to renege on their commitments to quality. Ben Bolgar, the foundation’s director, said they were determined to build a “normal, rubbish housing estate” instead. The consortium said the quality of the homes would not be affected.

Stewart Baseley, chairman of the Home Builders Federation, an industry body, insisted that his members “work closely with councils and residents to ensure the homes being built are what communities need”.

“Housebuilders have dramatically increased output to provide desperately needed homes,” he added. “Constructive debate is needed to develop policies that allow more homes to be built as opposed to baseless claims.”

Source: The Times (pay wall)

Developer Bovis too poor to finish Axminster estate – and “steep slopes” came as a surprise (and Owl says ‘I told you’!)

Owl predicted problems with this development LONG ago:
https://eastdevonwatch.org/2016/04/04/axminster-regeneration/

Recall the site was acquired below market value when Axminster Carpets got into difficulty.

And it seems that Bovis has its own troubles:
https://eastdevonwatch.org/2017/04/30/bovis-slow-down-will-hit-east-devon-hard/

Although again Owl drew attention to another problem affecting house sales on the site:
https://eastdevonwatch.org/2016/12/23/axminster-and-cranbrook-slums-of-the-future-says-councillor-hull-whilst-councillor-moulding-says-nothing/

So, it’s hardly surprising we find that Bovis blames everyone but themselves for their so- called plight – though its directors are probably not too worried about their bonuses:
http://www.constructionenquirer.com/2017/06/21/new-bovis-homes-boss-buys-extra-2m-shares/

“HOUSE building on the Bovis Homes Cloakham Lawn estate could cease unless planning conditions are removed or eased.

Bovis Homes says the scheme is in the process of stalling and, unless it can be brought back into viability, the company will have “no option but to cease work and mothball the development”.

But Axminster Town Council feels it is an attempt by the developer “to wriggle out of its commitments”, with district councillor Ian Hall saying: “‘Trying it on’ comes to mind.”

Bovis Homes has submitted a planning application to East Devon District Council (EDDC) to vary the Section 106 agreement (a set level of affordable housing and contributions towards the local infrastructure and facilities).

The development includes permission for up to 400 dwellings, and the company celebrated the second anniversary of its on-site sales office in September last year.

But a summary of an independent viability assessment, produced by chartered surveyor Belvedere Vantage Ltd, says: “The local market in Axminster has proved very difficult, with interest in the first phase of the development having slowed significantly, resulting in a large number of completed unsold ‘standing units’.”

The summary also referred to a number of physical constraints at the site, and “potential abnormal costs” associated with the constraints, which started to become clear during detailed site investigations after outline planning permission had been given.

Constraints include areas with very steep slopes, a flood plain boundary, two distinct drainage catchments, a watercourse running through the site, the need to maintain access to existing leisure facilities.

The negative impacts, including an inability to plan the scheme effectively, of a tree preservation order are also mentioned.

Axminster Rural district councillor Ian Hall, having declared an interest as he is the chairman of Cloakham Lawn Sports Centre (a Bovis Homes tenant), said in a formal response: “I have absolutely no sympathy.

“This land was purchased by Bovis for £2.9m cheaper than the market price when the failing Axminster Carpets Ltd was winding up.

“Bovis representatives (who were the strong arm of Bovis during the purchase of the land) were very aware of the agreements and were more than happy to proceed with the bargain of the decade.

“I am not one to make unnecessary fuss, although, on this issue, I will not compromise.

“ ‘Trying it on’ comes to mind.”

The independent viability assessment is confidential because it contains commercially sensible information, which is not included in the publicly available summary.

Axminster Town Council has requested more detailed confidential information and, in its formal response to EDDC, said: “The town council objects to this application, which appears to be an attempt by the developer to wriggle out of its commitments.

“There is insufficient information on which to make a well-reasoned response.”

The town council requested a meeting with EDDC and the developer so that it would be able to “respond in the light of more detailed, commercially confidential information”.

The town council also requested a site meeting in the company of a planning officer.

Town clerk Hilary Kirkcaldie said EDDC replied it could not share confidential information, but had appointed an independent viability consultant.

EDDC also expressed a willingness to host a site visit, which is yet to be arranged.

In her formal response to the application, EDDC housing strategy officer Melissa Wall said: “We are disappointed that the applicants have not approached the council before submitting their application to vary the S106 contributions to discuss their viability concerns.

“We are open to suggestions regarding changing the tenure and numbers of affordable units in order to assist viability.

“We are hopeful that agreement can be reached between the council and the applicant to ensure that the development can support some form of affordable housing.”

Bovis Homes would not say how many houses have been built and how many are under construction – nor would the company comment on Councillor Hall’s claims.

A spokesperson said: “We cannot comment on live viability applications but we will continue to work closely with the local authorities to deliver the new development at Axm- inster, which is providing much-needed new homes as well as an economic boost and jobs for the area.”

https://www.viewnews.co.uk/housing-development-axminster-stop/

Prince Charles gets his own (beautiful?) way with his new south-west town

Owl says: bet this wouldn’t happen in the Republic of East Devon! And wonders if a “zombie town” of which they speak might be on our own doorstep!

Jerome Starkey
http://www.thetimes.co.uk

“Three of Britain’s biggest housebuilders have lost an attempt to change the plans for a garden town designed by Prince Charles’s architects, amid claims that the builders’ proposals would have created a “zombie town”.

The Sherford Valley, on the outskirts of Plymouth, had been earmarked for 5,500 new homes and was designed by the Prince’s Foundation to create an eco-friendly pedestrian community like Poundbury in Dorset.

Bovis Homes, Linden Homes and Taylor Wimpey, which bought the site in 2014, had applied to Plymouth council to water down the design rules and change Prince Charles’s plan so that they could build cheaper homes more quickly.
Councillors said that the move would have created a “zombie town” with “years of planning thrown out of the window” and rejected their application.
The builders had built fewer than 300 of the homes when they applied to amend the town code and master plan.

“Instead of having the highest standard of new homes, we will instead have a rather large housing estate,” Vivien Pengelly, a councillor, said.
The housebuilders said that they were asking for minor changes that would not have affected the quality of homes. However, Ben Bolgar, a director of the Prince’s Foundation, said that they were trying to strip out commitments to quality.

He said that Sherford was designed to prove that Prince Charles’s model village of Poundbury, near Dorchester, could work on a larger scale but that the builders were determined to “build their normal boxes”.

The design code meant that the builders had to produce a range of houses, built from local materials, which were not more than 500m from the shops. Cars had to be parked in hidden courtyards rather than on the street to encourage people to walk.

Mr Bolgar said that the builders’ plans would have transformed Sherford into a “rubbish housing estate”.

Jonny Morris, a councillor, said that he did not want Sherford to end up like the sort of place you would see “in the aftermath of a zombie apocalypse”.

Housing companies applied to ditch a town code drawn up 13 years ago and replace it with a set of “fundamental principles” which they said allowed them greater flexibility over materials and construction methods.

“This is simply far too premature to take such a radical act, disregarding all those measures that allowed permission to be granted in the first place,” Nick Kelly, the deputy lord mayor, said. “We want development but everybody thinks, ‘This is what we’re going to get’, and at the stroke of a pen years of planning and assurances go out of the window.”

Lord Taylor of Goss Moor, who wrote a report in 2015 calling for dozens of new garden villages, said that Sherford had an excellent town plan and was “overwhelmingly supported by the local community” because of its commitment to quality. “The housebuilders knew what they were signing up to. There should really be no question about what will be delivered,” he said.”

Times (paywall)

“Builders gag buyers over shoddy work”

Buyers of substandard new homes are being asked to sign gagging orders to keep the faults secret and are routinely refused access to technical plans that show how their properties should have been constructed.

Some owners are then locked out of their homes during repairs, an investigation by The Sunday Times has found.

The research reveals how builders wield power over buyers at every stage of the new-build market, allowing quality to slip as the government spends £43bn on stimulating private housebuilding to try to hit a target of 1.5m new homes by 2022. …”

Sunday Times, page 4 (paywall)

The article talks of builders forcing people to sign non-disclosure agreements and are forced out of their homes so they cannot see what work has been done before remedial work is carried out so neighbours and press cannot find out.

Bellway, Taylor Wimpey, Strata, Barratt and Bovis mentioned for various alleged transgressions.

Nationwide refuses to grant mortgages on new leasehold houses and flats in ground rent scandal

Overnight, Nationwide building society has made hundreds, and possibly thousands, of new-build flats and houses almost unsaleable – and they should be roundly applauded for doing so.

In a surprise intervention into the scandal of leasehold flats and houses sold with spiralling ground rents, the society said that from this Thursday it will stop lending against any new-build leasehold flat or house where the ground rent is more than 0.1% of the value of the property. It will also refuse loans on new flats with lease lengths of less than 125 years or new houses with less than 250 years. Developers will now be forced, if other lenders adopt the same policy, to slash the absurd ground rents or find that they simply can’t get any buyers.

Take, for example, Berkeley’s 60-acre development south of Reading called Kennet Island. Prices for the remaining leasehold flats start at £249,950, but when we rang the sales office it told us the ground rent was £350 and would increase with RPI. That’s more than 0.1% of the value of the property – which means buyers won’t now qualify for a Nationwide mortgage. Either Berkeley cuts the ground rent or finds that buyers will melt away, unable to find a loan.

Coming so soon after Taylor Wimpey said it had set aside £130m to compensate buyers caught in the ground rent trap, it’s another small victory in the battle against leasehold abuse.

Robert Stevens of Nationwide said: “As a mutual building society that looks to protect its members, we have decided to make changes to the way we value new-build properties on a leasehold basis. We are doing this to address the practice of using leasehold tenure where this is unnecessary, particularly for new-build houses, and to ensure that onerous leasehold terms, including ground rents, are properly considered and controlled in order to safeguard our mortgage members.

“Nationwide is taking a proactive, leading position on this issue to address a significant risk facing our members and to challenge what we believe to be poor practice in the new-build market.”

The society is one of the biggest lenders in the UK, and hopefully this will now set a benchmark for other providers to follow.

Remember, we are not talking about service charges here. When leaseholders pay a service charge, at least they get something in return – such as the maintenance of the common parts of the building. When leaseholders pay a ground rent they receive absolutely nothing in return. It is little more than a medieval tax and should have been outlawed decades if not centuries ago. An ugly industry has built up among financiers who snap up leaseholds with ground rents, because in an era of a 0.25% base rate a stream of income guaranteed to go up by RPI – or double every 10 years in some cases – is an extremely valuable commodity.

The big developers reassure unsuspecting young buyers that the 999-year lease is “almost the same as freehold”, but then they sell it on, typically for 15-20 times the ground rent. It’s a lovely little earner for the developers but spells misery for the flat dwellers.

It’s great that Nationwide has set a new benchmark, but we need to go further. There is no reason why a ground rent should be any more than a peppercorn – say £5 a year. That would kill off this grubby trade overnight. Developers who trapped buyers in ground rents that double every 10 years should be forced to buy them out in the way that Taylor Wimpey has agreed to compensate its buyers.

Amazingly, giant builders such as Persimmon are still knocking out new-build estates where houses are being sold as leasehold, for which there can be no justification. Meanwhile, apartments should only be sold on a commonhold, not leasehold, basis. The legal structure is already in place – it just needs political will to force it on the developers.”

https://www.theguardian.com/money/2017/may/06/nationwide-housebuilders-leasehold-new-builds

Bovis slow down will hit East Devon hard

“… Bovis faces the humiliation of being the only major housebuilder to report falling volumes this year as it attempts to recover from a series of blunders and a major profit warning … a 15% drop in completions … dividend cut … damaged reputation …”

Sunday Telegraph Business section

This will have a major knock on effect for East Devon, where the company is heavily involved in Axminster, Seaton and Cranbrook. Bad news, too, for the Local Plan, which similarly relies on the company to boost its numbers.