New mode of retirement living a magnet for capital

An evolving model of retirement living in Australia has become a magnet for global and domestic investors

June 27, 2019

An evolving model of retirement living in Australia that incorporates independent living and aged care has become a magnet for global and domestic investors.

With demand for so-called ‘ageing in place’ facilities rising fast amid Australia’s ageing population, investors are encouraged by the steady, long-term investment prospects and relatively low compliance barriers.

Local superannuation funds, as well as private equity and pension funds from North America, Asia and to a lesser extent Europe, are key players while sovereign funds from Asia are also showing interest, says David Bruce-Clarke, senior director, JLL Alternative Investments Valuation and Advisory Services.

“Everyone is looking at the ageing-in-place model to see how it works, and most agree that this is where the market is going,” says Bruce-Clarke.

“Through providing independent living and aged care services on one site, it is easier for operators to find tenants and therefore retain revenues, making it a positive investment consideration.”

Pioneering real estate

Until recently, elderly Australians who became ill had little choice but to move into an aged care facility, often relocating to a new neighbourhood away from friends and family.

But increasingly there has been a growing interest in ‘ageing in place’ – a style of housing pioneered by Dutch aged-care organisation Humanitas with its ‘Apartments For Life’ complexes.

The purpose-built flats are integrated with care services, a model the company says has helped keep people in good health and reduced the proportion of residents needing high-level care from 40 percent to five percent.

This living model caught the attention of interested Australian parties about a decade ago. Recent investor activity points to a future of retirement living as an amalgam of independent living and aged care, even with hospitals on hand.

Compliance and investment

One advantage of having separate retirement residential and aged-care sectors is the first is governed by state legislation, the second by federal, and keeping the two apart has meant simpler compliance, according to JLL’s Bruce-Clarke.

“The aged-care business has had a challenging few years, with the Royal Commission [into Aged Care] and legislative changes; some investors have seen a decrease in the value of those businesses because of a reduction in revenue.”

This hasn’t frightened off investors, says Geoff Grady, chief executive of Australia’s biggest retirement village operator Aveo.

“We are not seeing any direct impact at this point,” he says of Aveo’s 94 communities, of which four are aged-care facilities.”

Although the integrated model will pose challenges for investors in complying with two lots of legislation, it might help raise standards of care across the industry, he adds.

Increasing investor activity

The purchase of retirement village The Landings, in Sydney’s Turramurra, by a 50/50 venture between Australian sector specialist LDK Healthcare and Australian real estate investment trust Cromwell Property Group is the latest deal underscoring the trend of ageing-in-place facilities in Australia

The village will incorporate nursing facilities to allow residents to stay at home under LDK’s “One Move Promise”.

Aveo acquired the Freedom aged-care group in 2016 with a similar ambition. New Zealand operator Ryman is also testing its ageing-in-place model in Australia.

Aveo’s Grady points to the group’s A$250 million Newstead retirement facility, in Brisbane as an exemplar of life-long care. Newstead has 144 retirement dwellings and 154 aged-care beds and apartments. All can be fitted to the resident’s specifications for Google Home automation and tech support.

“Within Aveo Newstead, new residents can live completely independently and have their care needs fully met for the rest of their lives,” says Grady. The idea is that residents are able “to move seamlessly into higher levels of care” as the need arises.