May 29, 2024

Legal and General explains why it is investing in Inspired Villages, and wants reforms to the sector

Ben Rosewell, Legal and General, Head of Investment Later Living Business (Inspired Villages), addresses the All Party Parliamentary Group on leasehold and commonhold reform on 27 March 2023 and explains why Legal and General is investing in this sector, and why it wants to see changes

We entered into the senior housing space in 2017 when we established a group called inspired villages. That today currently comprises eight operational villages across the UK, with about a thousand units.

We have four village under construction and another 16 sites in the pipeline, some with planning consent, and we’re looking to grow that platform to about 35 villages. Our co-invest is NatWest pension fund.

Why did we invest into that space? It’s no surprise. Retirees are at the heart of Legal and General’s wider business.

Before we made investment into the sector we had a long look at it and, as has already been clearly articulated today, there’s two different aspects to this.

There’s development model and an operational model, and we very quickly set it on an operational model.

This is because our focus is on the long-term relationship and management of the schemes. It’s not just about the real estate, it’s about the communities that we build and everything is associated with the community …

We currently using utilizing leasehold structure as when we acquired the group we had six legacy villages, which are all leasehold and they have some legacy ground rents in them. But ut we immediately made the decision to have no ground rents going forward. So the seventh village, which we opened last year, has no ground rents …

“But we’ve seen the headlines around falling unit prices on resale. And our focus is on trying to provide the residents with as much safety and security as possible. So we have amended the leases so that we, the operator, takes on the capex and liability of the units going forward. So all the worry and concern about that now sits with us in return for a deferred management fee.

“In New Zealnd a Retirement Villages Act was introduced in 2003, and as a result this is a very established sector. Compared with the UK it is booming, with most villages operating in a similar way. It is a very regulated sector, with a different form of tenure to leasehold that creates a lot more flexibility.

“The interests of the resident and the operator are very much aligned and this enables operators to adjust and suit services to the resident.

“You have to remember that inside our schemes we have communal clubhouses, a restaurant bar, swimming pool and so on. There could be a cinema. These are significant pieces of real estate that would require a lot up-front to build and then, over the long term, they will require significant capex.

“We are also looking into taking on the internal refurbishment of residents’ apartments, because a key point in the resales as that a unit needs to be refurbished and put back to its original condition.

And we then ensure that units in the village are not suffering from falling unit prices, which will impact the next unit. So we take control of the resale of the units to ensure that the units going up in price, they’ll be put back the best position and unit values are being held and maintained.

On leasehold reform we wholeheartedly support it. We’re all about greater disclosure and customer protection, which are the center of all that we do. We are trying to create the best life for those residents for the last years of their life.

And that’s very difficult under the current regulations.

  • Inspired Villages charges a 10-20 per cent deferred management fee on resale