The largest driver of investment return for most retirement villages is the growth in value of the individual units within the village. The value of the units is in turn subject to the movements of the growth of the broader residential market, the level of demand, resident turnover and the operations available within the village itself. For example, a village with a nursing home near or close by will be usually be more expensive than a similar village without one as demand for such a village is higher.

This is possibly because couples want to be close to each other if one is in a home, or people don’t like to leave their local area when requiring more assisted living. Marinchek says he finds deferred management fee structures inappropriate because of the way the fees are used – fees paid out at the end of a resident’s tenure are not always justified as the amount spent on the property’s upkeep – and also because of the mentality they encourage. “If the DMF fee were used as a sinking fund – reinvested in the premises – then maybe it would be fair,” he says.

Marinchek is also uncomfortable with the idea of an investment fund receiving revenue each time a resident dies, or moves into a nursing home, or leaves simply because they didn’t like the place. “We’re suggesting going forward that there are going to be ways to fund aged care in a way that is sustainable, that creates quality product that is priced fairly for residents, and is obviously effective – providing investors with appropriate returns – where the investors are aligned with the residents: that they live as long as possible in their own home and have as much care as is required with the homes being accessible in terms of their configuration and economically affordable,” he says.

Marinchek says there are other ways of pricing and structuring the ownership of retirement village units in a way that will appeal to super fund investors. “They don’t want to benefit when their members die, when their members have to move out, or their members don’t have sufficient care. They’ve told us the opportunity to make money needs to be aligned with the interests of their stakeholders,” he says. “Investors have a choice where they put their money and they should fully understand what the underlying management teams are doing, what the properties look like, what the quality of care is, whether it encourages people to age in place or pushes them to move out: and whether it is wealth deterioration or wealth preservation for the underlying residents.”

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