08/05/2007 - 22:00

Investors eye aged-care opportunities

08/05/2007 - 22:00

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Aged-care living is attracting the attention of major investors as increasing numbers of baby boomers prepare to move into retirement housing.

Investors eye aged-care opportunities

Aged-care living is attracting the attention of major investors as increasing numbers of baby boomers prepare to move into retirement housing.

In the years ahead, long-established retirement villages face expensive refurbishments or redevelopments if they are to meet the expectations of the next generation of retirees, and institutional investors such as ING, Macquarie Bank and Babcock & Brown are increasing their involvement.   

These new challenges have led to a marked increase in consolidation activity during the past three years, with a number of Western Australian properties exchanging hands.

The latest deal involves ING Real Estate Community Living Group, which last month acquired the Settlers Lifestyle Villages portfolio for $47 million, comprising properties in Ridgewood, Meadow Springs and Ravenswood in WA, and a fourth village in Mount Warren Park, Queensland.

ING already owns Country Club Villages, Oak Tree, Sunny Cove and Village Life portfolios, the latter, bought in 2005, which includes villages in Swan View, Armadale, Mandurah, Bunbury and Albany.

The Settlers’ portfolio comes with 463 existing units and a development pipeline of 244 units under or pending construction, which ING will roll out through to June 2010.

ING Real Estate Community Living Group chief executive Ian Muir said consolidation within the Australian market had been increasing over the past three years with smaller retirement village owners selling to large property development and investment groups.

“The market is divided by private and not-for-profit groups and at the moment there are around 12 to 15 major players holding 20 per cent of the retirement living market in Australia,” Mr Muir told WA Business News.

“There’s lots of consolidation happening because the smaller owners are finding it difficult to gain ready access to capital for upgrades or acquisitions…many are just throwing their hands up.”

Jones Lang LaSalle national director of healthcare and aged services, Peter McMullen, said institutional investors were paying very high prices to secure retirement village and aged-care properties, and had re-weighted the investment risk profile of the sector.

Macquarie Bank led the charge in July of 2005 when it bought 14 centres from the Salvation Army, he said.

“Five to 10 years ago the retirement living sector was considered fairly high risk based on the level of returns…since the institutions have come in, the risk profile is less. The increase in demand for new stock has also provided opportunities to increase the bottom line though development,” Mr McMullen said

Despite the emergence of larger, more spacious units with ensuite bathrooms, open-plan living areas and garages, the latest addition of new stock to the market is not expected to have the same economic life-span as those homes built more than 40 years ago, due to the ever-changing needs of buyers.

Mr McMullen said changing expectations would create even more capacity constraints for owners of retirement living properties going forward, and he predicted the private sector would start to take a larger market share resulting in more opportunities for management groups.

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