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Lendlease shakes up retirement industry (April 2018)

Retirement village operator Lendlease is preparing to shake up the industry with three new payment options for residents, in addition to the traditional “deferred management fee”.

It follows on from the unflattering light shone on the retirement industry’s complex financial contracts that prompt-ed other operators, like Aveo, to simplify payment methods. 

Stockland also introduced an alternative payment method for retirement village residents, but Lendlease has gone further by offering a prepaid plan, a refundable contribution option or a pay-as-you-go scheme. 

Tony Randello, managing director of retirement living, said the move would put Lendlease in a strong position to capture the baby-boomers market. 

“Baby boomers want choice; they have different financial circumstances and while we’ve had a property boom, we also had superannuation introduced in the early 1990s,” Mr Randello said. 

“People are retiring with more super than they had previously, they’re more investment savvy than they used to be and may even choose effectively to invest some of their money and pay less.” 

He said the prepaid option gave residents the choice of paying full price for their retirement village accommodation, and then pocket the full sale price, including the capital gain, when they sold up and left. 

“It’s really pitched at someone who has an investor psyche, who wants to come into a village and not necessarily end up with less than what they paid when they moved in,” Mr Randello said. 

The refundable contribution involved paying upfront the price of accommodation plus an additional 30 per cent, and a 3 per cent establishment fee. 

“When they move out, whether it’s after six months or 15 years, we give them back the total amount within 60 days of them leaving,” Mr Randello said.

“They’re designed for people who want something simple and want the sense of security of what they’re going to end up with when they move out, and there’s no deferred fee.” 

Pay-as-you-go was essentially a rental scheme, where residents paid rent of about $600 a week on accommodation that would normally sell for $500,000. 

“Pay-as-you-go means you can keep the family home and rent it out, and use that to fund your retirement living accommodation," Mr Randello said. 

“It’s really targeted at those who can afford to buy (into a retirement village) but don’t want to sell their home.” 

Despite the suite of new payment options, Mr Randello said he expected the deferred management fee to remain the most popular. “There’s still very much a sense of having now, paying later, but we think having a choice of a prepaid plan, a refundable contribution or pay as you go, will have more market appeal,” he added. 

Residents of six Lendlease villages in NSW and Victoria have now been offered the new payment options, with another nine villages coming on board in Queensland, WA and the ACT in the next two months.

 


 

Lendlease moves on retirement village contracts (April 2018)

Lendlease is breaking ranks with the other big retirement village operators to introduce payment options with no exit fees. Lendlease, Aveo and Stockland – the three biggest operators of retirement villages – have traditionally cleaved to a model whereby the resident pays less up front but the operator claws back a hefty “deferred management fee” when they leave.

The issue of deferred management fees came under scrutiny last year in the Walkley-award winning investigation into Aveo by Fairfax journalists Adele Ferguson, Sarah Danckert and Klaus Toft. The investigation exposed questionable business practices at Aveo, including churning of residents, excessive fees and charges, high exit fees and exorbitant refurbishment costs.

Lendlease has now introduced a choice of four financial models at 15 of its 71 retirement villages, with plans to extend them across the board after market feedback. Lendlease would still offer its existing contract, whereby a person buys a unit then pays a deferred management fee at the end. The three new options include a pre-paid plan, a refundable contribution and a pay-as-you-go model.

Tony Randello, managing director of retirement living at Lendlease, said the industry had not changed for decades, but research suggested Baby Boomers had different expectations to previous generations. “We spent a lot of time talking to rejecters – people who were interested, and maybe even paid a deposit, but then said no,” Mr Randello said. “The reasons weren’t always financial but for the ones that were, they said they didn’t need to defer their payment and they’re concerned about what they leave behind for their children.”

Mr Randello said greater choice would broaden the market opportunity since only one in 20 Australians over the age of 65 lived in a retirement village – low penetration in comparison to similar countries. He declined to predict how much he expected sales to increase.

Under the pre-paid plan, the resident would pay the management fee up front and retain the full capital gain or loss on the property. The exit fees would then be about 1-2 per cent in sales commission and $10,000-$15,000 in refurbishment costs, according to Lendlease.

“It fits the investor psyche – people are selling their homes for a lot more money because of the property boom and they can afford to pay more up front and they’re interested in what gets left behind at the end,” Mr Randello said. “If they’re an investor and want to leave behind an inheritance to their children, they’re most likely to choose this kind of product.”

Under the refundable contribution option, the resident pays a higher price up front and receives it back in full when they leave, with no exit fees. There is also a 3 per cent establishment fee payable upfront, which is not refundable. This model means the resident loses out on capital gains and even inflation, but they have full certainty and an easy transition to aged care if needed.

The final option is a PAYG model, similar to renting. This would benefit retirees who wanted to let the family home to tenants so they could retain it for their estate, then fund their own accommodation cost out of the rental income. It could also work for retirees who sold the family home and invested the proceeds or contributed it to super, then lived off the income.

Aged Care Gurus principal Rachel Lane, who was paid for some of the research used by Lendlease, said she’d been arguing for years that operators should offer options without a deferred management fee.

“What they’re doing is not brand, shiny new because a number of community and church-run providers already offer different options,” Ms Lane said. “The reason it’s going to shake up the market is that Lendlease has got 70-odd retirement villages.”

Lendlease has about 9 per cent share of the retirement village market, according to Grant Thornton research. The sector is highly fragmented, with the five biggest companies controlling about 28 per cent of the market between them, while many villages are run by a single owner-operator rather than being part of a chain.

“It helps consumers from the point of view that [currently] if you don’t like the pricing structure they then negotiate it with you but it’s ad hoc and it comes down to your ability to negotiate a good deal or even know what a good deal is,” Ms Lane said. “It’s more transparent to be able to see what the options are.”

However, Pam Graudenz, resident of a village and vice-president and village liaison officer from the Retirement Villages Residents Association – ACT, said she was concerned whether people entering villages on different contracts would be contributing fairly to maintenance costs. She also said anyone on a PAYG contract was in effect renting and should be governed under the Tenancy Act.

“Offering more choice is inevitable because of the lack of low-cost housing for older people in the ACT and other places but I have serious concerns about it and I don’t think the people going in understand what their rights are,” Ms Graudenz said. “The proliferation of these contracts is a matter for government – we have no control over them and nobody else does either. I think it’s a serious concern.”

It’s unclear how competitors might respond to Lendlease’s move. Stockland offers two contract options, one with a set exit fee and one that gives residents the ability to share in capital gains and offset it against the deferred management fee.

Under pressure from regulators and facing a NSW government inquiry, Aveo in August said it would simplify contracts within the next year and provide money-back guarantees and shortened buyback periods to its residents. The change was not expected to benefit about 9000 elderly residents locked into older, potentially more onerous contracts.

Stockland was contacted for comment.

 


 

Lendlease sells 25% of its Retirement Living business to APG Asset Management (October 2017)

In one of the largest transactions in the retirement living sector in Australia, Lendlease today announced the sale of 25% of its Retirement Living business to Dutch pension asset manager APG Asset Management N.V. (“APG”) as a founding investor, with Lendlease retaining the remaining 75%. The transaction represents APG’s first foray into the retirement living sector in Asia Pacific.

Lendlease’s Retirement Living business is the largest operator of retirement villages in Australia. The portfolio comprises more than 12,500 units across 71 retirement villages that are home to 16,500 residents.

The transaction covers all components of the Retirement Living business, including ownership of the established retirement village portfolio, the operating platform which manages the portfolio, the business’s development capabilities and associated development pipeline.

Lendlease Group Chief Executive Officer and Managing Director Steve McCann said, “Our strategy for the retirement living business has always been to bring on an investment partner who is both aligned to our values and attuned to the future growth potential of the sector. Lendlease holds an industry leading position through the strength of the team running the business and the quality of our customer base. We are delighted to be partnering with APG, an existing Lendlease investment partner, as they have an outstanding track record of investment excellence.

In a statement announcing the transaction, Patrick Kanters, Managing Director and Global Head of Real Assets for APG said, “This investment is in line with APG’s strategy of gaining meaningful exposure to sectors underpinned by mega-trends such as ageing demographics. We believe this is an opportune time to enter the retirement living sector in Australia by acquiring a stake in a business with a portfolio of significant scale and a best-in-class operating team while being well placed for future growth. We are also delighted to further expand our strategic relationship with Lendlease in Australia.”

Lendlease will continue to manage the business under the Lendlease brand, with no change to its management team.

Tony Randello, the Managing Director of Lendlease’s Retirement Living business said, “This deal reflects the strong progress and momentum the Lendlease Retirement Living business has enjoyed in recent years. Australia’s population is ageing and increasingly looking for high-quality independent retirement living options. With the APG investment, we can further strengthen our offerings to our retirement living customers and support future growth plans.”

The transaction is at a small premium to the carrying value as at 30 June 2017. The transaction remains subject to conditions precedent that we anticipate to be satisfied by 31 December 2017.

 


 

Retirement village, The Grove Ngunnawal, opens the doors to its much-anticipated Clubhouse (May 2017)

The residents of The Grove Ngunnawal today celebrated the launch of their brand-new Clubhouse, which looks set to become the social hub of this vibrant community.

The $3.9 million Clubhouse is designed to become an integral part of life for the residents, promoting health and wellbeing with a focus on leading a socially active lifestyle.

The resort style amenities include an indoor swimming pool, gymnasium, outdoor bowling green, men’s shed, arts & crafts room, library and lounge.

Fran Gannon, the first resident to move into The Grove Ngunnawal when it opened in April 2015, said she absolutely loved living at The Grove Ngunnawal.

“I had a gorgeous home and gardens, but maintaining it was starting to get too difficult and I had to ask for help from family and friends which I was really loathe to do as I felt I was losing my independence. The moment I visited the display home for The Grove Ngunnawal, it was love at first sight.

“The opening of the Clubhouse is a great opportunity for the residents to become even more socially engaged and to meet new people. I’m especially looking forward to the water activities and the gym, as exercise is so important for maintaining good health.

“The Clubhouse will also enable us to come up and have a cup of coffee, choose if we want to socialise or simply have quiet time reading, all the while being surrounded by other people. A great sense of community is what I’m looking forward to enjoying,” said Ms Gannon.

Head of Development for Lendlease’s Retirement Living business, Simon Militano, said that a key focus for modern retirement living was having lifestyle amenities that catered to active and social living that customers of today are seeking.

“Staying active, both physically and mentally, is of utmost importance to all our residents so it’s great to open these dynamic and cultural amenities at The Grove Ngunnawal that cater to the needs of our customers,” said Mr Militano.

Residents were greeted with a unique array of vintage cars leading up to the Clubhouse entrance. A cartoonist was onsite sketching bespoke drawings of residents for keepsake purposes while a photo booth and memory book helped to mark the official opening and commemorate this special occasion.

The Grove Ngunnawal is currently home to 76 residents and the community is continuing to grow.

The latest stage is currently under construction.

If you have any questions about this arrangement or would like to visit one of the villages, you can contact us on 1800 550 550.

 


 

Lendlease is proud to announce the addition of Trebartha Apartments to our portfolio (June 2015)

Lendlease continues to build strength and capability through the purchase of Trebartha Apartments from St Luke’s Care. Located in Elizabeth Bay NSW, Trebartha Apartments is a medium rise village consisting of 57 independent living units.

This acquisition enhances our current product offering and highlights our ability to capitalise on market opportunities.

Retirement Living Managing Director, Michael Eggington said: “We’re really excited to welcome the employees and residents of Trebartha Apartments to our group. Trebartha Apartments is in a great location, offering residents a cosmopolitan lifestyle close to the harbour and city centre. This acquisition expands our portfolio to 78 villages and further enhances our value within the market.”

If you have any questions about this arrangement or would like to visit one of the villages, you can contact us on 1800 550 550. 

 


 

Lendlease Buys Waterbrook Retirement Resorts (Jan 2015)

Lendlease is delighted to announce we are the new owners of the Waterbrook Greenwich and Yowie Bay resorts. It’s a proud moment for Lendlease as we add two exclusive villages to our premium property offering.

The Lendlease team is fully committed to continuing the high level of service to ensure the comfort of Waterbrook residents is maintained. We will work closely with all stakeholders to ensure a smooth transition with minimal impact on residents and staff. There will be no changes to village staff, facilities, activities or services – our priority is ensuring all Waterbrook residents and staff feel welcomed into the Lendlease family.

If you have any questions about this arrangement or would like to visit one of the villages, you can contact us on 1800 550 550. 

 


 

Lendlease welcomes Retirement Alliance villages to the family (Dec 2014)

In an exciting move for Lendlease, on 29 December 2014, Lendlease became the new owner of the five Retirement Alliance resorts:

  • Classic Residences Brighton, Victoria
  • Dee Why Gardens, New South Wales
  • Waverley Country Club, Victoria
  • Menzies Malvern, Victoria
  • Woodstock West, Western Australia.

To ensure a smooth transition of ownership and management at all five Retirement Alliance resorts, we will be working closely with Retirement Alliance Group staff in coming months. Our priority is ensuring Retirement Alliance staff and residents’ feel welcomed into the Lendlease family at every interaction.

With 78 retirement communities across Australia and New Zealand, Lendlease is Australasia’s leading owner and operator of retirement living communities, and has an established record of delivering quality services that will extend to our newest residents.

If you have any questions about this arrangement or would like to visit one of the villages, you can contact us on 1800 550 550.  

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