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Retirement village contract terminology is our downfall, says LASA

Leading Age Services Australia (LASA) is lobbying state governments reviewing their retirement village acts to use standardised terms to help prospective residents understand their contracts.

‘Hallelujah’ I hear you cry!

LASA’s Principal Living & Seniors Housing, Paul Murphy, says the current contract terminology is harming retirement villages and surely he has a valid point.

“Terms such as ‘ingoing contribution’, ‘exit entitlement’, ‘premium’ and ‘deferred management fee’ are not terms that clearly articulate their intent,” he said.

“The Deferred Management Fee is also foreign to prospective residents. It is not really a fee. It is the lease payment for tenure in the village.”

He published a graphic (pictured above) which seeks to standardise the contract terminology across the nation.

Would you prefer talking to prospective residents about a “bond”, “bond refund” or “lease payment”?

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Key things to help you everyday Latest industry developments

The state looking to cut exit entitlement timeframe

The Queensland Government is seeking your feedback after an independent review recommends reducing the time frame to pay exit entitlements to 12 months of a resident’s departure.

In addition, the independent review recommends the operator only be given a further six months to withhold the exit entitlement and to broaden the grounds on which the extension can be granted.

“It is important to get this right, so we are seeking feedback from those who are engaged with retirement villages in any way, about the benefits, costs and implementation challenges of the recommendations,” said Communities and Housing Minister Leeanne Enoch (pictured).

The recommendations if implemented would have a marked effect on budget forecasts and village improvements over the short term.

To provide feedback on the Government response, click here.

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Mirvac the latest residential developer to jump on the land lease bandwagon, could they be your next employer?

Mirvac CEO Susan Lloyd-Hurwitz said the country’s largest diversified developer is looking to “press the button” and follow Stockland, Ingenia Communities, Lifestyle Communities, Aspen Group, Palm Lake Resort, Serenitas and Hometown Australia into land lease developments.

“It’s a very compelling investment proposition and a very good customer proposition,” Susan told The Australian Financial Review after Mirvac announced a net profit of $565 million for the six months ended 31 December.

“We clearly have all the skills in-house to be able to design the right product at the right price point, experience in building community, and we have the land.”

https://www.theweeklysource.com.au/mirvac-the-latest-residential-developer-to-jump-on-land-lease-bandwagon/

One of the pilots will probably be at Smiths Lane, a 240-hectare master planned community at Clyde North in Melbourne’s outer south-eastern suburbs.

“Over the last year, we’ve gone ‘No, why would we do that… to let’s do that ourselves’,” Susan said.

Susan said Mirvac had no intention of buying established operators, but would look to build up its portfolio of assets, as it has done in office, industrial and build-to-rent.

“We have all the ingredients that we need – there are things we have to learn, probably, but I think we have most of the ingredients.”

Perhaps one of the key ingredients Mirvac may need will be skilled professionals that have the experience and aptitude to be able to hit the ground running when it comes to community management.

Mirvac was recognised as a HRD Employer of Choice for 2020. This accolade was received due to their ongoing commitment to gender equality, a mentoring program that focuses on career development and their purpose and values which are deeply embedded in the way their teams function.

At Mirvac their values include: 

  • Putting people first
  • Being passionate about quality and legacy
  • Collaboration
  • Being curious and bold
  • How we work is as important as what we do
  • Being genuine and doing the right thing
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After 20 years of trying, the third biggest retirement village operator, Stockland, sells out of the sector

Tarun Gupta, Stockland CEO (pictured), announced that its entire Retirement Living business, that’s 58 villages and 10 development projects underway, has been sold to Swedish investment firm EQT Infrastructure (EQT) for $987 million.

All 300 Stockland staff will transfer to EQT.

Not enough profit; want care

Stockland has had its village business for sale for seven years.

Mr Gupta has given two reasons for the sale – the village business was only making 3% cash profit, and the continued growth of village customers wanting care to be delivered.

He is quoted in the Financial Review newspaper: “They’re living longer, and average age in our retirement villages today is around 82 years,” he says.

“So, they need much more care. The sector’s moving into more what you would call healthcare with co-location of aged care capabilities.”

Year upon year Stockland has stated it was building the profit rate (Return on Investment) with a goal of 8%. They reached 6% in 2017 but then the famous Four Corners program went to air titled “Bleed Them Dry Until They Die”, referring to the DMF, and sales crashed – for three years – and Stockland sunk back to 3%.

The same occurred at Lendlease where Tarun Gupta was then a senior executive. He led the sale of 50% of Lendlease Retirement to investment funds there as well.

Good news for VMs

The Stockland sale is likely good news for village management and residents because the new owner understands the lower return and is seriously wealthy, with funds available to reinvest in villages to make them attractive to tomorrow’s customers.

And they understand that increased health support needs to be made available in villages, and has the time and patience to invest in providing it.

For village staff this means more upskilling and respect by management. The managers on the ground are the new owners’ biggest asset, protecting their $987 million investment.

A good place to be.

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Latest industry developments Things to watch Village Operator

New retirement village regulations in every state: operational and compliance costs to rise in 2022

NSW:

Asset management plans will continue to be the dominant regulatory issue for village operators with July set down as the start date of penalties for operators that fail to meet their AMP requirements.

As we have reported, the legislation – a by-product of the Greiner inquiry – requires operators to prepare and keep up-to-date a 10-year asset management plan for the village’s major items of capital (including items shared with other villages or aged care businesses) plus a three -year report for the maintenance of major items of capital to be made available to current and prospective residents.

Even larger operators are expected to be challenged to locate and record their villages’ assets within the required timeframe.

And while the NSW State election is not scheduled until March 2023, retirement village legislation is likely to be back on the political agenda by the end of the year after playing a key role in the Liberals’ campaign last time around.

Victoria:

Victorian operators will also face significant anxiety this year following the Victorian Government’s release of an Options Paper on the review of its Retirement Villages Act in November 2021.

As we covered here, the Retirement Living Council expressed concerns that many of the changes would lead to increased costs for residents and operators.

While Victoria already has mandated buybacks and the Aged Care Rule in place, operators have voiced worries about Victoria following NSW on AMPs and a potential requirements for village managers to be trained with an RTO-style certification, similar to a property manager.

The key issue however are the operational costs of this added compliance – such as renewing contracts and updating policies and procedures – and the time required for staff to manage compliance.

With a State election scheduled for November 2022, there may also be some ‘grand-standing’ by both the Liberals and Labor to attract the older vote as they look to secure office.

South Australia:

South Australian operators are also looking at a considerable increase in compliance and its associated costs following the SA Government’s tabling in Parliament of a report on the outcomes of the latest Review of the Retirement Villages Act.

The report contains 60 recommendations and the SA regulator has indicated around three-quarters of the measures are expected to be implemented in some form.

While exit entitlements are not a focus of the report, the recommendations will again lead to an increased level of compliance for operators, including around contracts and policies and procedures.

The State election is also set to be held around May 2022 – the same time as the Federal election – which could see the current Liberal Government look to implement greater consumer protections sooner rather than later in a push for votes.

Western Australia:

After releasing the fourth and final consultation paper in its village legislation reform process in mid-2021, West Australian operators will be waiting with trepidation for the release of Consumer Protection’s Decision Regulatory Impact Statement (DRIS) which will make recommendations to the State Government on the reform proposals.

Despite plans for 12-month buybacks being booted off the Minister’s table in December 2020, mandated buybacks remain the primary concern for village operators.

If the Government accepts the reforms, a draft Bill will need to be introduced into Parliament – meaning that any changes are not likely to come through until 2023.

However, the WA Government may choose to enact retrospective legislation, like Queensland did when it mandated buybacks with a six-month retrospective date.

Queensland:

Queensland operators are likely to face less turmoil this year with a review of its buyback regulations recently released and a State election not due until October 2024.

However, a new consumer website to feature village disclosure documents will mean operators will have to stay on the ball.

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Latest industry developments Things to watch Village Operator

GROWTH, OPPORTUNITY & CHOICE the next decade in retirement living!

The village sector since inception has progressed and reshaped it’s offering nearly every decade.  

  • Pre-1950’s Retirement housing was typically small pockets of Senior citizens flats for the vulnerable. 
     
  • 1960-70’s these flats were increasingly co-located with Nursing Homes. 
     
  • 1980’s saw broad acre villages with large communal hubs and often serviced apartments. 
     
  • 1990’s saw the commencement of the lifestyle villages with tennis courts & pools.
     
  • 2000’s has seen the introduction of high-end villages, an increase in apartment models and of course we can’t ignore the emerging land lease communities. Now Community Apartment Projects (CAPs) are growing in popularity plus there is growing interest in the build to rent option for older Australians. 

Pictured above is a 26 storey retirement village, aged care and health hub by Not For Profit Bolton Clarke as an example.

This is just the infrastructure changes, not to mention the various cycles of contracts and financial model changes, with service provision revisions. 

2021 and Beyond

https://www.theweeklysource.com.au/bolton-clarke-wants-to-increase-height-of-its-26-storey-high-tower-on-qlds-gold-coast/

In 2021 and beyond, we will have a sector much like the hotel sector; the choice and ranges, from simple, affordable villages all the way along the spectrum to high-end villages with all the bells and whistles, inclusive of aged care services.

The picture above is a CAPs boutique development in Terrigal on the NSW Central Coast.

The fact is older Australians have never been more wealthy as the 50 to 70 age group inherits the wealth of the 75+ who include the family home in the handover. Retirees can afford a far more sophisticated product.

https://www.theweeklysource.com.au/bolton-clarke-wants-to-increase-height-of-its-26-storey-high-tower-on-qlds-gold-coast/
https://www.theweeklysource.com.au/bolton-clarke-wants-to-increase-height-of-its-26-storey-high-tower-on-qlds-gold-coast/

Village professionals, like yourselves, will have the greatest OPPORTUNITY & CHOICE to consider just where you may channel your energies to make the most of the GROWTH opportunities ahead. 

Property still needs community

In my experience, regardless of the infrastructure, model, financial structure or services, what has always been key to a successful village is the building of the village community! 

That has not changed in seven decades and I cannot see it changing anytime soon.  

In my time I have witnessed many amazing, dedicated village professionals that have developed an innate knowing of what makes a community thrive! 

I would love to share that there is a secret silver bullet in how to build community, but if there is anything I have learnt, it’s not just one!

I know it starts with integrity, trust, hard work, empathy, collaboration, consistency, and serving, but it is also requires knowledge, tools, and resources.

This is what we are daily building for Members of the DCM Institute.

This is an exciting time to be a part of the change and play a pivotal role in shaping the next evolution of the industry. 

We know from experience that much of that transformation starts with those on the frontline, village professionals, key leaders like yourselves delivering the services, implementing the strategies, working with communities, and driving the change.

What OPPORTUNITY or CHOICE will you make in 2022? 

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Another alternative for customers is build to rent – a new challenge to retirement villages

In Europe and America the concept of really long-term rental leases is common.

Very simply, a renter can rent their apartment home for, say, 50 years in the lease.

Unlike Australia, where most leases are a maximum of three years, with the 50-year lease you can settle down knowing that your apartment is your home for as long as you want it to be.
 

Build to rent in Australia

Over the past 24 months, there has been a significant jump in the developers and financiers committing to the build-to-rent model here in Australia.

They are all medium to high-rise apartment developments in key city or suburban locations, next to shops, medical services and transport.

Same but different to retirement villages

The appeal for ageing Australians is they can sell the family home and keep all the cash as a lump sum, which they draw down slowly, paying the monthly rent.

They get a new home in a vibrant community. In most cases the developer commits to provide a building manager – who acts like a concierge. Sounds like a retirement village.

However, it is different because the residents don’t have all the protections provided by the Retirement Villages Act, which has very real benefits.

But there is no escaping that build-to-rent adds choice, and the number of homes coming to the market is big.

Last week, Macquarie Bank announced it was creating a new division called Local. Over the next five years, it intends to build 15 to 20 build-to-rent buildings with more than 4000 rental units – and these are just some of many coming to the market.

Your skills in demand

We are already seeing build-to-rent developers looking for community managers. Your skills will be in high demand. Watch this space.

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Future of retirement living with care – ‘Never Move Again’ 9 penthouses size 437 m²/ $5 million

Sydney has briefly held the record for the most expensive retirement village home, at $4.7 million in beachside Cronulla – the vertical village Sage By Moran.

But this record will be short lived, thanks to the in-construction 2×19-storey village Odyssey Chevron, on Chevron Island just behind Surfers Paradise.

This is an extraordinary development, and gives village managers an insight into where careers can take you.

Odyssey Lifestyle Care Communities has been created by veteran village operator Phil Usher, who in 2002 created Tall Trees, among the very first private aged care operations working under the Retirement Villages Act.

His concept is simple: Odyssey will provide care into your village home right up to palliative care stage. And it is popular.

Phil’s first new development is Odyssey Robina Stage 1. A medium rise village, it sold out, and work has begun on Stage 2 with a record of five to seven apartments being sold each month. 

https://issuu.com/the_weekly_source/docs/private_aged_care_goes_big_2

Odyssey Chevron takes Phil’s vision to a completely new level.It’s afive-star hotel-style development including specialist disability accommodation, and has a section for allied health clinics. The top three floors will house nine penthouses at 437sqm each with panoramic views over the Gold Coast, and are anticipated to sell up to $5million. 

Most importantly, though, there will be a dementia level, where couples can live together as long as they possibly can by creating a secure area on the same level.

https://www.odysseycommunities.com.au/news/odyssey-on-the-today-show/

We recently came across this video of the residents enjoying a staycation through COVID lockdowns, which we thought you may like.

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Rental Villages on the Rise: Eureka – A Case Study

Last week, in our sister publication- SATURDAY, we covered the subject of Rental villages and how this sector is fast becoming an area to watch, with some interesting initiatives.

Cameron Taylor, Group Chief Operating Officer of Eureka Villages shares they are being driven by a new ‘Resident First’ approach across their 40 rental villages nationally – achieving 98% occupancy

https://www.eurekavillages.com.au/

They are focused on residents feeling safe, secure and engaged in a village that is now genuinely their home. He points out to do this, every decision they make has to come back to make the residents time in the village the best it can be.

The average time a resident stays in a rental village is now 3.3 years.

Results have spoken for themselves, with the business growing their underlying profit before tax by 31% to $7.36 million and a total revenue of $27.5 million.

Move to permanent employed Village Managers key

Central to the strategy has been a shift from a contractor Village Manager to an employee Village Manager.  Other key changes that have been implemented:

  • Village chefs have taken on a second in command role and maintenance staff have been brought in-house to act as support staff.
     
  • Village Managers can therefore look after the residents and the support staff look after the Village Manager

Kitchen Club Initiative

Another key initiative is the Kitchen Club – this is where their cooks and chefs have a platform to showcase meal ideas, menus and food presentation to raise the standards among each other.  It has become a real talking point and a brilliant outcome for the residents. 

https://thedcminstitute.com.au/industry-news

They have also found it to be a real art to find kitchen staff who enjoy being around older people.

Home Care

With the average tenure at their villages is currently 3.3 years and average age is 78 to 80.  Similar to Retirement Villages, they are finding if care isn’t offered, they are losing residents sooner to residential care options. 

Following a recent survey 59% of their residents are on care plans and it is definitely an area for them moving forward.

More rental villages is the future

With expansion plans in the immediate future, so are plans of re-designing the product – whilst still keeping building costs low.  Their current project in Wynnum, Brisbanefeatured in the picture above, has been designed with higher ceilings to 2.6m, natural lighting and full size kitchen and appliances.

To read the full story please click HERE.

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Latest industry developments Things to watch

Are Community Apartment Projects (CAPS) the Villages of the future?

As reported in last week’s SOURCE we have created a new name to describe apartment developments that target Baby Boomers with a community support offering – CAPs, or Community Apartment Projects.

We are seeing increasingly more developers like Bolton Clarke, Platino and Frasers Property who have realised that providing ‘community’ plus concierge support is a winning value proposition to seniors who are 65-75 ‘young’. 

They look and act like retirement villages but for a younger market and outside the Retirement Village legislation.

As Village Professionals this is an important step for your future career growth to upskill in managing these multi million-dollar developments. 

In Brisbane we have Traders In Purple engaging the well-known community group Burnie Brae to deliver ‘community’ to their apartment development. The Full article is here

In Sydney a large proposed CAPs campus is being developed by Platino. They will providean onsite concierge, access to a full suite of home-care services, and the ability to change and/or increase the levels of care if necessary – all while staying in your own home which allows the resident to live independently. The full article is here

Baby Boomers are a different customer and new styles of villages are emerging. Your skills will be increasingly in demand – which is healthy!