Scott Marinchek: Those investors who like long term stable cash flows have opportunities to get that. Those investors who are very comfortable with operating risk have that. Those investors who like development risk and want to take pieces of land and turn them into things can take those opportunities as well.
You could see a situation where you could build a facility and have an embedded supermarket on the ground floor of that facility, thereby giving you rental stream and a captive market for the supermarket. There’s a project in French’s Forest, which has only thus far had preliminary discussion, where the very substantial kitchen of the retirement village could be used for Meals-on-Wheels and a variety other community services on a commercial basis.
Very interesting from our perspective to see hybrids of different models come in where commercial operators and investors can have certain types of exposure that they’re comfortable with, and not have other exposures.
Matina Papathanasiou: Going back to Sam’s model. I would have thought a rental approach rather than having to hand over your assets would be a better model and you’re more aligned with your customer base. Instead of handing over your home to the operator, you invest it in Hostplus, and they take the rental out of your pension, effectively.
And that way the person who’s selling their home – say they only lived for a year afterward, if there is anything left it can be distributed as they wished. They’ve paid for the service they’ve received during that year. Now the question is, if basically all the money gets used – they’re still alive after 20 years and at the end there’s no money left in the Hostplus allocated pension for them, does the government step in with a subsidy to bridge the gap at the end?
Sam Sicilia: This is why that concept of a longevity bond basically says, ‘I don’t know how long I’m going to live so if I give you $100,000 will you give me $20,000 a year for the rest of my life?’ Now if you think I’m only going to live four years, but I live 20, then you’re out of pocket.
But the group risk is spread and you should be able to make it viable. The model I was advocating never requires anyone to sell their home. If they’ve been in the super fund for their entire life they ought to have a nest egg at the end that can pay the rental stream in a retirement village