Retirement Communities Business Case Background

1. Retirement Communities Business Case Background January 2016

2. Executive Summary The product suite appears to generate attractive RoS and ROCE on the basis of the two example sites tested within this business case. However further work is required to test that the product suite would sell well, and more importantly to test that the product suite could generate attractive land values that would result in site vendors selling the sites to Keepmoat throughout the areas we are active in. The required net investment to form and grow this business to deliver 1,300 homes pa by 2020 is forecast to be £76 million. At this level of investment, the annual addition to the Keepmoat EBITDA would be c.£47m pa. The proposal is that we would deliver this product in traditional Keepmoat areas (ie lower land values and lower house prices). In some of these lower value areas the apartment model is unlikely to generate competitive land values. The proposal is that Keepmoat could provide some or all of the ongoing management services post completion of each development. The product would sit well alongside our existing homes products, is something our public sector land selling partners are likely to support and could help us to grow the Keepmoat business at a quicker pace than through other current growth routes. However, if this is to be an area that we move into, we need to learn from the failings of the other housebuilders that have examined this area - a dedicated and knowledgeable team should be established to finesse the commercials that are set out in this business case and to lead the implementation of this business stream. The retirement housing market is a specialist housebuilding market catering for the needs of older households. While the planning system characterises this marketplace as ‘over 55s’, generally the market is for much older households. Various sources of data identify a significant need for more older persons housing to be built, but there is a lack of new supply being delivered by the marketplace. To enter the marketplace to develop specialist retirement housing, there is a need for land, design, construction, sales and marketing skills and an understanding of the needs of older people, both as purchasers and as residents of completed schemes. Keepmoat currently has these skills and resources or could acquire them relatively easily – therefore the barriers to market entry are considered to be low. Purchasers in this marketplace look for a variety of housing types; a safe attractive environment, access to local facilities and will generally move close to family members. Household sizes are 1 and 2 persons generally and households want at least 1 bedroom more than their household size requires. A product suite has been developed which could be applied to a variety of sites. Further work is required to test the sizes and cost of these homes.

3. Consumer Research Forget ‘downsizing’, think ‘rightsizing’ to meet older people’s housing needs and aspirations - Tony Watts OBE, Chair the English Forums on Ageing and the South West Housing Champion So what do older people want? • Many want to remain local to existing communities and support network • Inclusive design is good for everyone – not just older people • All homes should be built to lifetime standards that allows them to be still used by everyone when their mobility reduces and so age in place • Housing isn’t just about bricks and mortar – but communities. We need to design communities, places, not just new houses • Housing is a major determinant of health – and thus should be considered alongside health and social care, to avoid silo thinking • We don’t want to live in shoeboxes… we need two bedrooms, we may want access to a garden and we often want to keep our pets • To save on falls and hospital admissions, grants and adaptations are vital • We need more choice to rent privately as well as part own [note – little evidence of demand in this area currently] • Older people’s housing should be integrated into local communities so we can play a fuller part socially and economically • Our homes are our key capital asset, but we need more choice on how we tap into that asset to enjoy a more comfortable retirement. As currently being investigated by the All Party Parliamentary Group on Housing and Care for Older People inquiry chaired by Lord Best (HAPPI3 - Making retirement housing a positive choice), more thought, more options, more supply and better design are needed if we are to make downsizing to dedicated housing more popular. That way the move becomes an aspirational one. (Source; Housing LIN viewpoint Dec 2015) Many research pieces produced by the Joseph Rowntree Foundation, Elderly Accommodation Council, Savills, Laing & Buisson, PSSRU University of Kent and numerous others make reference to consultation with older people and their aspirations and expectations of housing in later life. From this research and from intel and experience through consultation with focus groups, local residents and communities, there is significant insight into what older people want and what is important to them as they age. Choice of house-type (bungalows in high demand) housing/property services support, security, independence/control, access on site and or locally to care services, engagement with like minded people, to live within their social network, close to family, part of a community with access to facilities and amenities. As part of the Walton scheme development and supported by Care & Repair England, we held a formal consultation with nine independent older people from various backgrounds and local older persons forums including single home owners and RP tenants, couples in owner occupies and rented housing who actively promote the voice of older people across Yorkshire. The group were split and then rotated in two workshops to look at the housing types and the environment and the session was captured on video to advise us and influence our offer.

4. Keepmoat Retirement Offer In response to consulting with older persons groups and analyzing national research we have developed the following product. Keepmoat Retirement Solutions

5. Product Suite The product suite has evolved from developing retirement community proposals on two secured sites: • Rural: village of Walton, Wakefield adjacent to the Waterton Park Hotel & Spa and Walton Hall Golf club • Urban: regeneration site in Southport adjacent to the main local hospital. A range of property types have been developed to respond to the surrounding local housing markets. These include: All Retirement communities will incorporate design features which can support people with a range of needs, including: • Visual – Hearing – Mobility - Cognitive impairment To offer aspirational ‘Life Long’ homes, Keepmoat Retirement Community properties will offer: • Traditional or contemporary open plan layouts With a choice of: • Optional bolt on packs to offer: • Technology Pack – assistive technology/telecare/telehealth equipment • Accessibility Pack – mobility aids and adaptations Retirement Communities Rural and Urban The Retirement communities product suite will provide a number of standard property types which are suitable for older and vulnerable people with the physical form and capability to support people to age well in their own home. The Rural offer will provide a lower density design comprising bungalows, houses and apartments within a landscaped setting and a central ‘Hub’ which houses the managers office and communal space for activities, events and socialising. The Urban offer provides for predominantly apartment living alongside an attached Hub (if possible and applicable to the location) which houses the managers office and communal space for activities, events and socialising. Although the urban schemes are likely to be stand alone blocks ranging from 40-80 units nestled within a mixed community or town/village centre, location and local demand may provide opportunity for a core and cluster urban approach providing individual properties from the suite surrounding the apartment block. The objective of the products developed to date is to offer older people housing choice appropriate to their needs and long term expectation to live in their own home. Research and advice from the Retirement Solutions Director has provided the brief for the standard design and extras which customers will be able to purchase at point of reservation. The design adheres to all minimum requirements, e.g. Lifetime Homes standards, HAPPI principles and offer over and above minimum requirements to provide aspirational homes to our target market.

6. Product – Design & Facilities • Traditional Layout Contemporary Layout “Rural” Retirement Offer The rural retirement communities offer is a lower density design comprising bungalows, houses and apartments within a landscaped setting and a central ‘Hub’ which houses the warden office and communal space for reading, events and socialising. Bungalows (1 & 2 Bed) – 71 to 103 sqm Houses (2 & 3 Bed) – 78 to 82 sqm Apartments (1 & 2 Bed) – 59 to 66 sqm The product aims to offer appropriate choice to attract customers to downsize. Scheme size will be 70-140 homes. The design will adhere minimum requirements, eg, that space standards should not drop below Lifetime Homes standards, (over and above minimum requirements). Retirement communities will incorporate design features which can support people with a range of needs, including: • Visual impairment. • Hearing impairment.• Mobility impairment.• Cognitive impairment. Retirement Communities properties will offer; Traditional and Open Plan layouts Optional extra packs include: Technology Pack – Assistive technology/telecare/telehealth equipment Accessibility Pack – Mobility aids and adaptations Homes will be purchased on a long leasehold basis with service charges covering property and estate management (including Hub operating costs) Type G – 2 Bedroom Bungalow (71sqm)

7. Product – Design & Facilities 1 Bed (flexi) apartment 70 sqm “Urban” Retirement Offer The “Urban” design provides apartment living alongside a separate Hub building (if possible) which houses the warden office and communal space for reading, events and socialising. Flexible Living Apartments within a serviced building: Central Communal Hub bespoke to local needs 1 Bed (Av. 70 sqm) 2 Bed (Av. 85 sqm) Schemes likely to be stand alone blocks ranging from 40-80+ units or apartments nestled within a mixed community (including a selection of the rural property types if possible) to create appropriate choice to attract customers to downsize and secure favourable planning consent in inner city or town locations. As with rural communities the design will adhere to the same minimum requirements, eg, space standards at Lifetime Homes standards. Retirement communities need to incorporate design features which can support people with a range of needs including:• Visual impairment. • Hearing impairment.• Mobility impairment.• Cognitive impairment. Keepmoat Retirement properties will offer; Traditional and Open Plan layouts Optional extra packs include: Technology Pack – Assistive technology/telecare/telehealth equipment Accessibility Pack – Mobility aids and adaptations Homes will be purchased on a long leasehold basis with service charges covering property and estate management (including Hub operating costs) 2 Bed apartment 85 sqm

8. Walton Masterplan – a mix of apartments, houses and bungalows in an attractive landscaped setting Community Hub and Environment The provision of the Hub will differentiate the offer from just age restricted or purpose built housing to a lifestyle choice and investment. On smaller developments, the Hub will be a residents lounge. The Hub offers security, support and opportunity for residents which enhances the offer and increases the value: Housing management, advice and advocacy Handyperson, repairs, home improvements, gardening and caretaking Activity and function space (which can be used by the residents and by outside organisations where there is benefit to the residents). A standard design of the hub will assist efficiency and the capital cost will be included in the infrastructure and management cost covered by service charges (note images are indicative). Each development will be planned appropriate to its locality, relationship with the local authority and other stakeholders to ensure the hub is benefits local need. For example there may be instances to provide housing /property services from existing facilities, therefore we would exclude the new build hub and there may be opportunity to attract funding to extend the services of the hub to include such as; library services, health and well being facilities etc, Hub Entrance • The design of the site will provide an environment which focuses on maximising resident and visitor well being and the hub will provide facilities and services to support ageing well by: • Level access and outdoor seating • Outdoor recreational space exercise and gardening • Access to public transport and local amenities • Opportunity for neighbourhood support structures and independent services • Connectivity to the local community and social networks Hub Lounge

9. Location Identified top ten locations within the Keepmoat existing land pipeline McCarthy and Stone adopt a rule of thumb of a retirement development per 10,000 homes – this revolves around demand coming from the local area and being a function of the elderly population relocating from existing housing. The Keepmoat proposition is at a lower price point than the McCarthy and Stone offer, so this rule of thumb may be flexed. However, other requirements of a site are as follows:• A generally level site • Close to bus stop/public transport• Close proximity within 1-2 mileto retail/leisure facilities/places of worship accessible by bus• Links to existing services for older people, activity groups, library, day centres etc.• Access to GP/Hospital and other community health and social care services.• Low crime/low risk neighbourhood. The following should be considered alongside the site selection and influence the design and property type;• Planning requirements and site constraints.• Potential market for mixed tenure Our partnerships with Local Authorities could provide opportunity for retirement communities to be developed as a replacement to out of date/hard to let stock, in which case the following should also be considered - Whether an existing scheme will be refurbished or land used for new build. • Northumberland • Scarborough • Harrogate • Leeds • Walton • Southport • Wigan • Scunthorpe • Doncaster • East Sussex Within the existing Homes land pipeline there are sites with c.4,600 plots which could potentially be suitable for the retirement communities offer. However if this initiative is adopted we would actively target suitable land to build the retirement communities product, and would particularly favour those sites where the retirement communities offer can be delivered alongside the more traditional Keepmoat open market homes.

10. Marketing Retirement Communities message; • ‘Life long homes – lifestyle choice – well being and enabling environment.’ In quality property and with excellent services transforming lives later in life. Marketing the Retirement Communities schemes is based on our ‘one brand’ strategy with Retirement Communities schemes sitting under the Keepmoat brand and not a stand alone identity. We will be using our present group marketing structure and process, with a planned additional resource to implement, should the business growth foresee the requirement for extra resource. Each site will be clearly marketed as a Keepmoat Retirement Community scheme but is likely to have a location specific brand (eg The Waltons), as the brand already provides the springboard for a strong visual identity, established tone of voice and messaging. This will enable clear differentiation from our Homes offer while building on the Keepmoat brand. Target: 55+… however, need to understand the purchasing drivers in later life and local demand, targeting messaging through insight. We will carry out thorough local analysis for each scheme as our target is audience is varied. Moving into a life long home and planning for older age – this can happen at various stages.

11. Keepmoat Retirement Offer Our Retirement Solutions will provide to a variance in purchasing drivers in later life – 55 to 85.

12. Sales The existing Keepmoat 16 stage sales process: The implementation of the sales process and resource will follow the existing Keepmoat Homes model. Sales responsibility for each Retirement Communities scheme will lie with the Regional Sales Director and appointment of a nominated sales executive, supported by group marketing. Sales processes and monitoring will build on the successful process already in place and the skill set within the business. Due to the differences in the customer base, their drivers for moving and decision making process, sales executives will be new appointments as will specialist services around care and support. We need to understand and establish relationships/alliances with influential partnerssuch as the following to provide to our customers with added value: The Senior Move Management company (For the North Yorkshire Move Managers) – a reliable and expert partner to older people looking to move home, their families and professionals who work with them (hand holding, advice and advocacy) Registered Care manager services with CQC (Care Quality Commission) – to provide assessment, advice and liaison with care and support services to comply with planning restrictions on occupation where applicable. A £6k per plot for sales, marketing and legals has been factored in to take account of these variances (Homes allowance is c.£4k per plot).

13. Conclusion and Next Steps On the basis of the conclusions above, the following next steps are recommended: • A commercial team be established to review and finesse the product, its costing and pricing and to test the costing and pricing across a number of sites within our portfolio to test that the products deliver attractive land vales and an attractive return on sales • The Walton scheme be progressed as a pilot ‘exemplar’ scheme ASAP • Further work be undertaken to identify the best 10 sites to deliver the first wave of schemes post Walton – selected on the best cash generators to help deliver cash flow to fund this new business stream • Subject to a positive outcome from (1) a specific team be established to progress the wave 1 retirement housing projects. • The timeframe to complete (1) should be no later than the end of March 2015. The analysis in this business case indicates the following: There is a need for more retirement housing to be built in the UK There are few builders of retirement housing – and even fewer that build in lower value areas The barriers to entry into the delivery of retirement housing are not significant given the current Keepmoat business activities There is a strong public sector need for more choice in this marketplace and our business is strongly aligned with meeting the needs o four public sector partners Based on the two example sites, a product can be delivered which appears to meet customers needs and can generate land values at levels comparable with open market housing. However The costs per unit seem high relating to the competitors in the marketplace and there is further analysis needed to confirm the following: That the product options designs are the correct size and specification That they will meet customer demand and sell well, That they can be built cost effectively, and That they generate a competitive land value and an attractive return on capital employed.